The California Supreme Court Rules that Individuals Are Not Liable for Retaliation

April 2008

By Lauren J. Katunich

In a contentious 4-3 decision, the California Supreme Court in Jones v. The Lodge at Torry Pines Partnership, et al., 42 Cal. 4th 1158 (2008) recently ruled that, except in narrow circumstances, non-employer individuals (e.g., supervisors) are not personally liable for claims of retaliation brought under California's Fair Employment and Housing Act ("FEHA"). The case resolves a long standing unsettled question brought to prominence nearly ten years earlier by the California Supreme Court's holding in Reno v. Baird, 18 Cal. 4th 640 (1998). In Baird, the Court held that non-employer individuals cannot be held personally liable for management decisions that were later found to constitute discrimination under the FEHA because discrimination arises "out of the performance of necessary personnel management duties" that are "an inherent and unavoidable part of the supervisory function." By contrast, and consistent with the plain language of the FEHA, non-employer individuals can be held personally liable for harassment, which "consists of a type of conduct not necessary for performance of a supervisory job" and is "presumably engaged in for personal gratification" or due to "meanness, bigotry, or for other personal motives."

Following Baird, courts have rendered conflicting opinions with respect to whether the rationale stated in Baird extended to retaliation claims brought against individual supervisors. At issue in each case was the interpretation of the applicable language of the FEHA, California Government Code Section 12940(h), which makes it unlawful for "any employer, labor organization, employment agency, or person to discharge, expel, or otherwise discriminate against any person because that person has filed a complaint, testified, or assisted in any proceeding" under FEHA. Prior to Jones, two California courts of appeal and the Ninth Circuit had held that this language is unambiguous and means what it says: an individual may not retaliate against a person who exercises FEHA rights, and can be held personally liable if he or she does. Taylor v. City of Los Angeles Dept. of Water & Power, 144 Cal. App. 4th 1216 (2006); Walrath v. Sprinkel, 99 Cal. App. 4th 1237 (2002); Winarto v. Toshiba America Electronics Components, 274 F.3d 1276 (9th Cir. 2001).

The California Supreme Court's four member majority, on the other hand, found the language of Section 12940(h) to be ambiguous, thereby requiring the Court to assign it meaning. According to the Court, the use of the term "person" in the statute had no plain meaning because it could refer either to a "person" in their individual capacity or to a "person" as an agent or employee of the employer. Unlike the harassment provision in the FEHA which specifically provides that an employee "is personally liable for any harassment prohibited by this section that is perpetrated by the employee," the Court reasoned that no such definitive statement is found within section 12940(h) as applied to retaliation claims. Indeed, a thorough review of the FEHA's legislative history did not support the interpretation of "person" as indicating individual liability.

In sum, the majority of the Court found that all of the reasons for not imposing individual liability for discrimination as articulated in Baird applied equally to retaliation. In this regard, the Court reasoned that Section 12940(h) should not permit individual liability because retaliation, like discrimination, requires "adverse employment actions" which arise out of the performance of necessary personnel management duties. While supervisors can clearly avoid harassment claims by monitoring their own conduct, they cannot always avoid making decisions that might be perceived as discriminatory or retaliatory. The Court acknowledged that if an employee gains a reputation as a complainer, supervisors might be particularly afraid to impose discipline on that employee or make other lawful personnel decisions out of fear the employee might claim that the action was retaliatory. It is thus fundamentally unsound public policy to subject supervisors to the threat of a lawsuit every time they make a personnel decision.

The Jones decision is good news for employers as it removes one more costly aspect of defending retaliation claims, namely, employers will not have to worry about the attorneys' fees and energies devoted to offering a separate defense to an individually-named supervisor. The decision also has the more practical effect of allowing for the removal of cases to federal court that could not have otherwise been removed. This is because a common plaintiffs' counsel strategy is to name an individual defendant in order to prevent federal court "diversity" jurisdiction. And, of course, the Jones case should prevent any "chilling effect" on supervisory decisions that might have otherwise occurred had Jones followed prior court precedent.

The Jones decision should not, however, be seen as a carte blanche for supervisors to retaliate against employees who have raised legitimate workplace concerns. This is especially true considering that in a footnote of the decision the majority explicitly declined to consider whether a supervisor who is personally liable for harassment can also be personally liable for retaliating against someone who reports or opposes that harassment. Further, an employer may seek indemnity from a supervisor that engages in intentional misconduct. As always, employers are cautioned to minimize the possibility of these claims by periodically training supervisory personnel on discrimination as well as harassment.

If you have any questions regarding this bulletin, please contact Kelly O. Scott, Editor of this publication and Head of ECJ's Employment Law Department at (310) 281-6348 or kscott@ecjlaw.com; or Lauren Katunich at (310) 281-6370 or lkatunich@ecjlaw.com. If one of your colleagues would like to be a part of the Employment Law Reporter mailing list, or if you would like to receive copies electronically, please contact Marlena Chumo at (310) 281-6328, or mchumo@ecjlaw.com.