Wilke Fleury is pleased to announce that Sarah Scott and Stacy Hunter have joined the firm as associates. Ms. Scott and Ms. Hunter are both 2010 graduates of the University of California Davis School of Law (King Hall), and join Wilke Fleury following successful clerkships with the firm during the summer of 2009. While at King Hall, Ms. Scott served on the Law Students Association (the student governing body), worked as a faculty research assistant and teaching assistant for first-year law students, volunteered at the Employment Law Clinic of Sacramento’s Voluntary Legal Services Program, participated in the Prison Law Clinic, and interned for Prisoner Legal Services in the San Francisco jails. Ms. Scott also acted as the student liaison for the Sacramento County Bar Association, Civil Rights and Constitutional Law Section. Among her law school accomplishments, Ms. Hunter served as Associate Articles Editor for the U.C. Davis Law Review and copy editor for the Journal of Juvenile Law and Policy. She was also a member of the Jewish Law Students Association, and interned for the California Building Industry Association. We are excited to welcome Sarah and Stacy aboard!

On Friday, October 22, a federal jury in Sacramento returned a punitive damages award of over $10,000,000 in a case brought by Wilke Fleury on behalf of plaintiffs Brian Dawe, Gary Harkins, and Flat Iron Mountain Associates. That award was in addition to the same jury’s October 18 award of $2.58 million in compensatory damages.

Represented by Wilke Fleury partner Dan Baxter, the plaintiffs sued the California Correctional Peace Officers’ Association, Corrections USA, and two individual defendants for breach of contract and defamation—among other claims—stemming from a campaign of misconduct perpetrated by the defendants in 2006 and 2007. After a three-month trial, the jury found in favor of Dawe, Harkins, and Flat Iron on their claims, as well as on an assortment of counterclaims made by Corrections USA. Of the total damages awarded to plaintiffs, over $12 million was against CCPOA, the largest correctional officers’ union in the country and a powerful force in California politics.

Continuing its long tradition of community involvement and support, Wilke Fleury is sponsoring the Down Syndrome Information Alliance’s 6th Annual fundraising walk, the 2010 Step Up for Down Syndrome, at William Land Park on Sunday, October 17. The DSIA is a local non-profit organization that promotes Down Syndrome awareness and inclusivity, and offers support and community to people with Down Syndrome and their families. Wilke Fleury partner Trevor Stapleton, along with associate attorneys Latika Sharma and Natalie Johnson, will be participating in the event as well as staffing the Wilke Fleury informational booth. Please be sure to stop by and meet our attorneys and enter the drawing for a festive Fall gift basket.

For more information on the event, click here.

The midterm elections have changed the political landscape in Washington, with Republicans winning control of the House of Representatives and picking up seats in the Senate. Even so, it is still too early to know exactly how this will affect the array of open tax issues for 2010 and 2011.

Of particular importance, Congress must decide whether to extend any of the Bush-era tax rules that will otherwise expire at the end of 2010. Without Congressional action, individuals will face higher tax rates on their income, including capital gains. Consequently, it may be beneficial to conclude any sales in 2010 to benefit from the lower capital gains rates.

Also, unless Congress changes the rules, the estate tax will return next year with an exemption level of only one million dollars and a 55% top estate tax rate. As such, estates that were under the estate tax exemption level of $3.5 million over the last several years may now be taxable, and estate tax planning steps may therefore be advisable.

In short, year-end planning—which always involves some educated guesswork—is a bigger challenge this year than in past years.

If you have questions about year end tax planning, contact us as soon as possible so that if action is advisable, there will be time to complete the steps before 2011.

A primary planning tool for a person with a disability is a carefully drafted trust that prevents the assets of the trust from disqualifying the person from receiving public benefits.

1. Is a Trust Necessary? 
A trust can be a beneficial planning tool to preserve assets for the benefit of a person with a disability. If an individual’s only public benefits are entitlement programs such as Social Security Disability Insurance and Medicare, a trust may not be necessary. If, however, a person with a disability is receiving need-based benefits such as SSI or Medi-Cal or may reasonably be expected to need such programs in the future, a trust is the primary means to preserve the public benefits and allow for additional assets to be held and used for the individual’s future needs. Otherwise, the individual may become ineligible for public benefits until the additional assets are spent or given away (which would also cause a period of ineligibility). Other than placing assets in a trust, the other alternative is to purchase assets that are not counted for purposes of need-based benefit requirements. However, this does not provide additional funds to supplement public benefits. In addition, if funds are needed and the exempt assets are sold, the proceeds could again trigger benefit ineligibility until spent.

2. Trusts For People With Disabilities.
Trusts for people with disabilities fall into two basic categories: (1) first party trusts; and (2) third party trusts. Although within each category there are variations, the basic structure is that assets are transferred into trust for the benefit of a beneficiary with a disability. A third party serves as trustee and the beneficiary has no control over disbursements from the trust. The distinction between a first party trust and a third party trust is where the assets to fund the trust originate.

A.  The first party trust is a trust that allows a person with a disability to transfer his or her own assets into the trust without being penalized under need-based public benefit programs. The most prominent feature of this type of trust is the requirement that the State be reimbursed from the trust’s remaining assets on the beneficiary’s death. The State must “receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan.” The reimbursement requirement applies only to Medi-Cal benefits paid, not to SSI benefits.

B.  A third party trust is established with the assets of someone other than the person with a disability. Unlike the first party trust, there is no reimbursement requirement. The third party trust also has the advantages of allowing the person setting up the trust (the “settlor”) a great deal of flexibility in structuring the trust including:

• Providing for distributions to or for the benefit of multiple beneficiaries, including beneficiaries without disabilities;
• Establishing an advisory committee to oversee and make recommendations regarding the care of the beneficiary with a disability;
• The ability to use trust funds to hire caregivers, case managers, advocates and attorneys for the beneficiary with a disability; and
• Controlling the final distribution of any assets remaining after the death of the beneficiary with a disability.

The key to a third party trust is ensuring that the trust assets are not includible as assets or income of the beneficiary. A carefully drafted third party trust can allow a parent or relative to provide for the lifetime care and advocacy of a person with a disability without causing him or her to lose public benefits.

3. What kinds of benefits can be provided by a third party trust for a beneficiary with a disability?
The trustee is generally directed to make expenditures to maintain the beneficiary’s good health, safety, and welfare when these are not being provided by any public agency. This commonly includes basic living needs such as dental care, medical care, custodial care, support services, and similar care not provided by public benefit programs. In addition, distributions are also commonly authorized for goods and services such as:

• Clothing, bedding, and furniture;
• Telephone, Internet, and cable or satellite television;
• Audio, video and computer equipment;
• Newer or more effective medications than allowed by Medi-Cal;
• More sophisticated medical or dental or diagnostic work or treatment for which funds are not otherwise available;
• “Nonessential” medical procedures (such as massage therapy or acupuncture);
• Periodic outings and vacations; and
• Any other items to enhance the beneficiary’s quality of life, self-esteem, or situation. If set up correctly, a trust can provide additional comfort and care to enhance the quality of life of a person with a disability, without causing a loss of public benefits.

If you would like further information about a trust for a person with a disability, please contact us at (916) 441-2430.

1. What is a conservatorship? 
A conservatorship is a court proceeding through which a responsible person (called a conservator) is appointed by the court to care for another adult who cannot care for him/herself or his/her finances (called a conservatee).

2. What is a Limited Conservatorship?
A “Limited Conservatorship” is a special type of conservatorship intended specifically for a person with a “developmental disability.” The goal is to encourage the limited conservatee’s maximum self-reliance and independence. As such, the limited conservator is generally only granted those powers that are necessary to aid the limited conservatee in those areas in which the limited conservatee needs assistance.

3. Who determines if a person has a “developmental disability”?
Generally, the Regional Center will determine if a person is developmentally disabled. If the person is a client of the Regional Center, then he or she automatically qualifies. Otherwise, the Regional Center will assess the individual to determine if he or she has a developmental disability.

4. What kinds of powers can a limited conservator be granted?
People with developmental disabilities can usually do many things on their own. As such, the limited conservator is only granted powers to do things the limited conservatee cannot do without help. The powers that the limited conservator may be granted are generally limited to the powers to:

Fix the residence or specific dwelling of the limited conservatee;

 Access confidential records and papers of the limited conservatee;

 Consent or withhold consent to the marriage of, or the entrance into a registered domestic partnership by, the limited conservatee;

 Contract on behalf of the limited conservatee;

 Give or withhold medical consent on behalf of the limited conservatee;

 Control social and sexual contacts and relationships of the limited conservatee; and

 Make decisions concerning the education of the limited conservatee.

However, because the court will only grant those powers that are necessary to aid the limited conservatee, not all these powers are granted in every case. For example, it is uncommon for the court to grant the limited conservator the power to control relationships of the limited conservatee unless the limited conservatee has shown that he or she makes poor choices that put him or her in danger, such as being in abusive relationships.

5. Who can be appointed as limited conservator?
Although any responsible adult can act as a limited conservator, limited conservators are usually parents or siblings of the person with the disability. It is also possible to appoint more than one person as limited conservator at the same time. In fact, it is a good idea to have at least one parent and a sibling or other relative act as co-limited conservators. That way, if one co-limited conservator dies or becomes incapacitated, there is still a limited conservator in place. Otherwise, a new limited conservator would have to be appointed through court proceedings.

6. Can I avoid court proceedings by naming a limited conservator for my child in my Will or living trust ?
No. Only the court can appoint a limited conservator.

7. What if I decide not to establish a limited conservatorship?
In most cases, adults with development disabilities are not able to give informed consent for medical treatment or to sign contracts. As such, if a limited conservatorship is not established, the director of the Regional Center has the authority to make most of the decisions for the adult with development disabilities. including decisions regarding residence, medical care, and contracting for services.

8. When should I apply for limited conservatorship?
If you are trying to establish a limited conservatorship for someone who will soon be 18, it is a good idea to start the process more than 3 months before his or her 18th birthday. A limited conservatorship is a court proceeding and it takes time to gather reports and hold court hearings before the limited conservator is actually appointed.

9. If I am a limited conservator, do I also need a conservatorship of the estate?
Generally, you do not need a conservatorship of the estate if the limited conservatee gets only public assistance, like Supplemental Security Income (SSI) or Social Security (SSA) but has no other assets. But, you will need a conservatorship of the estate if the limited conservatee has other assets, like an inheritance or a settlement from a lawsuit that is not in a trust for a person with a disability.

10. Does the court supervise the limited conservator?
Yes. Generally, a court investigator will review the case one year after the conservatorship is granted, then every 2 years after that. The review will include discussion with the limited conservator and a visit with the limited conservatee. If a conservatorship of the estate is established, the conservator will be required to file an annual report with the court to show how the money in the conservatorship is being managed and spent.

If you would like further information about limited conservatorships, please contact us at (916) 441-2430.

Although the Americans with Disabilities Act (ADA) recently celebrated its 20th anniversary, many employers still have difficulty understanding the scope of the ADA’s requirement to provide reasonable accommodations for employees with disabilities. A recent decision by the Ninth Circuit Court of Appeals highlights the importance of communication between the employer and employee when determining the appropriate reasonable accommodation for a disabled employee, as well as the continuing nature of the employer’s obligation.

An Example of Ineffective Accommodation: EEOC v. UPS Supply Chains Solutions 

Facts
In 2001, UPS hired Maricio Centeno as a junior clerk in the accounts payable division. Centeno was born deaf, his native language was American Sign Language (ASL) and he could only read and write English at the fourth or fifth grade level. Centeno was able to complete his job responsibilities without the assistance of an ASL interpreter, but required reasonable accommodations to fully enjoy certain benefits and privileges of his position.

UPS held mandatory weekly and monthly accounts payable meetings, but due to his disability, Centeno was unable to understand what was being said during these meetings. In 2002, Centeno requested an ASL interpreter at the meetings. UPS chose to accommodate Centeno by requiring him to attend the meetings and then providing him with written summaries of the meetings after they were concluded. Centeno was unhappy with this accommodation because he received the information at a later time than the rest of the employees, he was unable to voice his opinions or ideas during the meetings, and he frequently did not understand the summaries. Centeno expressed these concerns to UPS and in 2004, UPS responded by having another employee sit with Centeno and take notes for him during the meetings. This accommodation was also ineffective because Centeno could not understand the notes. In 2005, UPS began providing an ASL interpreter for the monthly meetings but not for the weekly meetings.

UPS had similar difficulties providing Centeno with reasonable accommodation regarding other aspects of his job, including assistance with an Excel training program, understanding a written warning regarding a violation of UPS’s anti-harassment policy and understanding and completing a questionnaire on harassment awareness.

The Court’s Decision
Initially, the lower court held in favor of UPS, finding that the accommodations that UPS provided for Centeno were reasonable. The EEOC then appealed to the Ninth Circuit. The issue before the Ninth Circuit was whether UPS provided Centeno with reasonable accommodations under the ADA that would allow him to enjoy the benefits and privileges of his position, including required meetings, job training, understanding the contents of written warnings and comprehending UPS’s harassment awareness questionnaire. UPS argued that it reasonably accommodated Centeno because its modifications were effective.

The Ninth Circuit explained that a reasonable accommodation must allow an employee with a disability to enjoy the same benefits and privileges of employment as are enjoyed by other similarly situated employees without disabilities. The employer is required to engage in an “interactive process” with the employee to determine what accommodation is most appropriate. This interactive process requires “(1) direct communication between the employer and employee to explore in good faith the possible accommodations; (2) consideration of the employee’s request; and (3) offering an accommodation that is reasonable and effective”. Furthermore, an accommodation is ineffective when it does not fully accommodate a disabled individual’s limitations. The Ninth Circuit determined that a jury should decide whether the accommodations UPS implemented were effective, because the issue was not so clear cut that it could be decided by a court. The court noted that an employer is not required to provide an employee with the exact accommodation that he requests, but continuing to utilize an ineffective accommodation is not reasonable.

Lessons for Employers
1. Employers must not only provide reasonable accommodations to disabled employees to ensure they can perform their essential job responsibilities, but also that they are able to fully enjoy the benefits and privileges of their employment.

2. Employers implementing a reasonable accommodation for a disabled employee must engage in an interactive process with the employee to determine if the accommodation is effective.

3. If the employee complains that the accommodations offered are ineffective after trying them, further discussions regarding other alternatives must take place to determine whether an effective accommodation exists.

California’s Workers’ Compensation Act, the Fair Employment and Housing Act (FEHA), and the federal Americans with Disabilities Act (ADA), all offer distinct procedures and remedies for claims made by disabled employees in the workplace. While many aspects of workers’ compensation claims are handled by the employer’s insurer, FEHA and ADA claims trigger an obligation for the employer to engage in an interactive process with the employee to determine if a reasonable accommodation can be provided that would allow the employee to perform the essential functions of the job. Since many workers’ compensation claims ultimately lead to FEHA or ADA disputes, it is important to understand the subtle distinctions between the various legislative schemes and how they interact. Below are some common questions from employers about how to navigate the potential overlap between workers’ compensation laws, the FEHA and the ADA.

Q: Why are there so many laws covering disability discrimination in the workplace? What are the important differences? 

A: Understanding the history of the various laws helps to answer this question. California’s workers’ compensation laws have existed, in one form or another, for almost 100 years. They were designed to strike a bargain between employees who were vulnerable to injury and their employers, who were potentially subject to devastating liability. Under the compromise, employers assumed liability for workplace injury regardless of their fault, and in return, employees gave up their right to sue in court. The ultimate goal of workers’ compensation laws (and one that is particularly important in times of high unemployment) is to return the employee to work. The FEHA and ADA, by contrast, are civil rights laws that were enacted specifically to combat discrimination. (The FEHA predates the ADA and is slightly broader in scope, as discussed below.) As such, each law provides its own remedies, corresponding to the policy behind the legislation.

Historically, workers’ compensation claims were an employee’s exclusive remedy for disability discrimination. Section 132a of the California Labor Code specifically prohibits discrimination against an employee for filing a workers’ compensation claim. In 1998, however, the California Supreme Court ruled that disabled workers may pursue any and all remedies available to them under the law, including those provided for in the FEHA and ADA. This is important because these statutes can offer very broad remedies not available under the workers’ compensation laws, including front pay, unlimited compensatory damages, attorney fees, and, potentially, punitive damages. Of course, employees can’t get “double recovery” under both workers’ compensation and the FEHA or ADA. However, settlement of a workers’ compensation claim does not prevent the employee from bringing a later FEHA claim – so an employer can’t assume it has exhausted its liability just because it settled a workers’ compensation claim.

Q: What employers are covered under the various laws? 

A: California’s workers’ compensation laws apply broadly to all employers within the state. The FEHA applies only to entities with at least five employees, and the ADA applies only to entities with at least 15 employees. If you are a small employer, be sure you are clear on who counts as an “employee” – anyone owning a share of the organization or exercising significant control over it may not qualify as an employee for purposes of ADA or FEHA coverage.

Q: What is the definition of a “disability”? 

A: This is a surprisingly complicated question. “Disability” has distinct meanings under workers’ compensation laws, the FEHA, and the ADA. Under workers’ compensation, a “disabled” employee is any employee who has suffered a workplace injury that restricts the worker’s ability to perform the job. The FEHA, by contrast, specifically defines disability as an “impairment that limits an individual’s ability to participate in a major life activity,” which California courts construe broadly to include anything that makes achievement of job functions difficult. The ADA defines the term more rigidly as an impairment that “substantially limits” a major life activity. As a result, a condition that constitutes a disability under workers’ compensation may not necessarily qualify as one under the FEHA or the ADA. For example, an employee might be able to file a workers’ compensation claim for even a relatively minor workplace injury (and for any discrimination resulting from it), but unless the injury limited a major life activity, relief under the FEHA or ADA would be unavailable.

Q: What is a “major life activity”? 

A: The ADA states that major life activities “include, but are not limited to, caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working.” However, this list is not meant to be exhaustive and there has been extensive litigation over what qualifies as a major life activity.

Q: What are some examples of reasonable accommodations? 

A: California employers have an obligation to provide reasonable accommodation to an employee with a disability, unless the employer can demonstrate that an undue hardship precludes it from doing so. The accommodation must allow the employee to perform the job effectively. Common examples of accommodations include remodeling the workplace to make it accessible to the employee, limiting the employee’s working hours and/or providing more breaks, restructuring the job, providing an extended leave of absence or, if necessary, transferring the employee to another (vacant) position within the organization where the disability will not interfere with the job functions.

Of course, what is “reasonable” and what constitutes an “undue hardship” will vary depending on the employer and the nature and extent of the disability at issue. “Undue hardship” is defined ambiguously as requiring “significant difficulty or expense.” Courts look to an employer’s size, resources, field and structure to determine whether the employer has met its obligations under the FEHA or ADA. Smaller employers may be expected to respond to an employee’s request more quickly, but larger employers will be presumed to have more financial flexibility.

Q: What is required of employers and employees in the interactive process? 

A: Once an employer has notice of a disability that may be impacting the employee’s ability to perform the job, the employer has a legal obligation to engage in an informal interactive process with the employee to determine if an accommodation exists that will allow the employee to perform the essential functions of the job. This process generally begins with a simple dialogue between employer and employee, which must be meaningful and in good faith. The employee has an obligation to communicate all relevant medical information, and may not hold out for a preferred accommodation if the employer offers a reasonable alternative. Ultimately, the choice of accommodation is at the employer’s, not the employee’s, discretion.

The biggest pitfall for employers is allowing communication to break down. First-line supervisors may be dismissive of the employee’s initial complaints and fail to escalate the dialogue to Human Resources. Training on this issue is important, as a supervisor’s failure in this regard will be imputed to the employer. However, even Human Resources professionals are not immune to dropping the ball when it comes to the interactive process. An employer’s obligations are onerous and the employer should ensure that it continues its efforts to communicate with the employee until a reasonable accommodation is reached or it is determined that no reasonable accommodation is possible.

It should also be remembered that the interactive process need not be conducted in person. The process can, and often should, start when the employee is out on leave and can be accomplished through phone calls or e-mail. If the employee has retained an attorney, employers may comply with the interactive process by communicating with the attorney rather than with the employee directly. Employers would also be wise to document the entire interactive process –all documentation relating to the employee’s request for accommodation, relevant medical information, work restrictions, discussions regarding accommodation, and all communication with the employee should be retained. Where possible, have the employee acknowledge this documentation in writing.

Q: What are some proactive steps an employer can take to avoid liability relating to future workers’ compensation, FEHA, or ADA claims? 

A: Before a disability issue arises, the employer should ensure that each employee is provided with a job description containing the essential job functions. This allows for transparency and minimizes confusion over the critical functions of the job once a disability is at issue.

Training supervisors on how to deal with disabilities in the workplace is also key. Once the employee brings the issue to the supervisor’s attention, the supervisor should determine whether an injury occurred at work and ask what accommodation the employee requires. If the supervisor notices a performance problem that could reasonably be attributed to an employee’s disability but the employee has not yet notified the employer, the supervisor should (delicately) raise the issue with the employee. The employer has an affirmative duty to investigate whether a disabled employee may be reasonably accommodated. Once these preliminary steps have been taken, the supervisor should immediately report the situation to Human Resources so that the appropriate paperwork can be completed and the interactive process can be continued and effectively documented. Supervisors should not be charged with completing the interactive process on their own. Where appropriate, guidance from a legal professional should be obtained.

Finally, do not make the mistake of thinking that complying with your obligations under the workers’ compensation laws is synonymous with complying with your obligations under the FEHA or the ADA. As an employer, it is important to understand that your obligations under each of these of these statutory schemes are different and that satisfying your obligations under one may still leave you subject to significant liability under another.

California’s Workers’ Compensation Act, the Fair Employment and Housing Act (FEHA), and the federal Americans with Disabilities Act (ADA), all offer distinct procedures and remedies for claims made by disabled employees in the workplace. While many aspects of workers’ compensation claims are handled by the employer’s insurer, FEHA and ADA claims trigger an obligation for the employer to engage in an interactive process with the employee to determine if a reasonable accommodation can be provided that would allow the employee to perform the essential functions of the job. Since many workers’ compensation claims ultimately lead to FEHA or ADA disputes, it is important to understand the subtle distinctions between the various legislative schemes and how they interact. Below are some common questions from employers about how to navigate the potential overlap between workers’ compensation laws, the FEHA and the ADA.

Q: Why are there so many laws covering disability discrimination in the workplace? What are the important differences? 

A: Understanding the history of the various laws helps to answer this question. California’s workers’ compensation laws have existed, in one form or another, for almost 100 years. They were designed to strike a bargain between employees who were vulnerable to injury and their employers, who were potentially subject to devastating liability. Under the compromise, employers assumed liability for workplace injury regardless of their fault, and in return, employees gave up their right to sue in court. The ultimate goal of workers’ compensation laws (and one that is particularly important in times of high unemployment) is to return the employee to work. The FEHA and ADA, by contrast, are civil rights laws that were enacted specifically to combat discrimination. (The FEHA predates the ADA and is slightly broader in scope, as discussed below.) As such, each law provides its own remedies, corresponding to the policy behind the legislation.

Historically, workers’ compensation claims were an employee’s exclusive remedy for disability discrimination. Section 132a of the California Labor Code specifically prohibits discrimination against an employee for filing a workers’ compensation claim. In 1998, however, the California Supreme Court ruled that disabled workers may pursue any and all remedies available to them under the law, including those provided for in the FEHA and ADA. This is important because these statutes can offer very broad remedies not available under the workers’ compensation laws, including front pay, unlimited compensatory damages, attorney fees, and, potentially, punitive damages. Of course, employees can’t get “double recovery” under both workers’ compensation and the FEHA or ADA. However, settlement of a workers’ compensation claim does not prevent the employee from bringing a later FEHA claim – so an employer can’t assume it has exhausted its liability just because it settled a workers’ compensation claim.

Q: What employers are covered under the various laws? 

A: California’s workers’ compensation laws apply broadly to all employers within the state. The FEHA applies only to entities with at least five employees, and the ADA applies only to entities with at least 15 employees. If you are a small employer, be sure you are clear on who counts as an “employee” – anyone owning a share of the organization or exercising significant control over it may not qualify as an employee for purposes of ADA or FEHA coverage.

Q: What is the definition of a “disability”? 

A: This is a surprisingly complicated question. “Disability” has distinct meanings under workers’ compensation laws, the FEHA, and the ADA. Under workers’ compensation, a “disabled” employee is any employee who has suffered a workplace injury that restricts the worker’s ability to perform the job. The FEHA, by contrast, specifically defines disability as an “impairment that limits an individual’s ability to participate in a major life activity,” which California courts construe broadly to include anything that makes achievement of job functions difficult. The ADA defines the term more rigidly as an impairment that “substantially limits” a major life activity. As a result, a condition that constitutes a disability under workers’ compensation may not necessarily qualify as one under the FEHA or the ADA. For example, an employee might be able to file a workers’ compensation claim for even a relatively minor workplace injury (and for any discrimination resulting from it), but unless the injury limited a major life activity, relief under the FEHA or ADA would be unavailable.

Q: What is a “major life activity”? 

A: The ADA states that major life activities “include, but are not limited to, caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working.” However, this list is not meant to be exhaustive and there has been extensive litigation over what qualifies as a major life activity.

Q: What are some examples of reasonable accommodations? 

A: California employers have an obligation to provide reasonable accommodation to an employee with a disability, unless the employer can demonstrate that an undue hardship precludes it from doing so. The accommodation must allow the employee to perform the job effectively. Common examples of accommodations include remodeling the workplace to make it accessible to the employee, limiting the employee’s working hours and/or providing more breaks, restructuring the job, providing an extended leave of absence or, if necessary, transferring the employee to another (vacant) position within the organization where the disability will not interfere with the job functions.

Of course, what is “reasonable” and what constitutes an “undue hardship” will vary depending on the employer and the nature and extent of the disability at issue. “Undue hardship” is defined ambiguously as requiring “significant difficulty or expense.” Courts look to an employer’s size, resources, field and structure to determine whether the employer has met its obligations under the FEHA or ADA. Smaller employers may be expected to respond to an employee’s request more quickly, but larger employers will be presumed to have more financial flexibility.

Q: What is required of employers and employees in the interactive process? 

A: Once an employer has notice of a disability that may be impacting the employee’s ability to perform the job, the employer has a legal obligation to engage in an informal interactive process with the employee to determine if an accommodation exists that will allow the employee to perform the essential functions of the job. This process generally begins with a simple dialogue between employer and employee, which must be meaningful and in good faith. The employee has an obligation to communicate all relevant medical information, and may not hold out for a preferred accommodation if the employer offers a reasonable alternative. Ultimately, the choice of accommodation is at the employer’s, not the employee’s, discretion.

The biggest pitfall for employers is allowing communication to break down. First-line supervisors may be dismissive of the employee’s initial complaints and fail to escalate the dialogue to Human Resources. Training on this issue is important, as a supervisor’s failure in this regard will be imputed to the employer. However, even Human Resources professionals are not immune to dropping the ball when it comes to the interactive process. An employer’s obligations are onerous and the employer should ensure that it continues its efforts to communicate with the employee until a reasonable accommodation is reached or it is determined that no reasonable accommodation is possible.

It should also be remembered that the interactive process need not be conducted in person. The process can, and often should, start when the employee is out on leave and can be accomplished through phone calls or e-mail. If the employee has retained an attorney, employers may comply with the interactive process by communicating with the attorney rather than with the employee directly. Employers would also be wise to document the entire interactive process –all documentation relating to the employee’s request for accommodation, relevant medical information, work restrictions, discussions regarding accommodation, and all communication with the employee should be retained. Where possible, have the employee acknowledge this documentation in writing.

Q: What are some proactive steps an employer can take to avoid liability relating to future workers’ compensation, FEHA, or ADA claims? 

A: Before a disability issue arises, the employer should ensure that each employee is provided with a job description containing the essential job functions. This allows for transparency and minimizes confusion over the critical functions of the job once a disability is at issue.

Training supervisors on how to deal with disabilities in the workplace is also key. Once the employee brings the issue to the supervisor’s attention, the supervisor should determine whether an injury occurred at work and ask what accommodation the employee requires. If the supervisor notices a performance problem that could reasonably be attributed to an employee’s disability but the employee has not yet notified the employer, the supervisor should (delicately) raise the issue with the employee. The employer has an affirmative duty to investigate whether a disabled employee may be reasonably accommodated. Once these preliminary steps have been taken, the supervisor should immediately report the situation to Human Resources so that the appropriate paperwork can be completed and the interactive process can be continued and effectively documented. Supervisors should not be charged with completing the interactive process on their own. Where appropriate, guidance from a legal professional should be obtained.

Finally, do not make the mistake of thinking that complying with your obligations under the workers’ compensation laws is synonymous with complying with your obligations under the FEHA or the ADA. As an employer, it is important to understand that your obligations under each of these of these statutory schemes are different and that satisfying your obligations under one may still leave you subject to significant liability under another.

Wilke Fleury partner Daniel Egan recently spoke at the 2010 CALAFCO Annual Conference on the topic of municipal and public entity bankruptcy and dissolution. Mr. Egan explained the procedures, as well as the advantages and disadvantages, of bankruptcy and dissolution for public entities facing financial distress.

CALAFCO is an organization dedicated to assisting member LAFCOs (Local Agency Formation Commissions) with educational and technical resources.

Wilke Fleury partner, David A. Frenznick, successfully negotiated the settlement of one of the longest running construction defect cases in Northern California history. Filed in 2003, the case involved the design and construction of a multi-unit co-housing project located in Chico. Wilke Fleury combined forces with another local attorney to represent the Valley Oaks Village Homeowners’ Association against the general contractor and multiple subcontractors, all of whom constructed the project in 1996. The case was weeks away from trial when a Butte County judge erroneously ordered its dismissal. The Third District Court of Appeal ultimately reversed the trial judge’s order and reinstated the case.

“The case focused on the design and construction of roofs, balconies and other structural elements. The bottom line was that each and every unit leaked badly and mold developed in many of them,” Frenznick said. “Ultimately our client received sufficient settlement funds to make repairs. Unfortunately, it took much too long for that to happen.”

Wilke Fleury associates Samson R. Elsbernd and Natalie A. Johnston have recently been admitted to the Milton L. Schwartz/David F. Levi American Inn of Court. The Schwartz/Levi Inn is designed to improve the skills, professionalism and ethics of the bench and bar, and is affiliated with the American Inns of Court. The Inn meets monthly in Davis, California, and is made up of members from the Sacramento and Yolo County legal communities. Samson and Natalie are among the most recent additions to the Inn, which includes area judges, lawyers, legal scholars, and law students.

Investigators are frequently called upon to conduct investigations of complaints that involve a particular statute, such as California’s Fair Employment and Housing Act, the Family and Medical Leave Act, California’s Whistleblower Protection Act, or Labor Code section 1102.5. A recent Court of Appeal decision highlights the care that must be taken by the investigator who is conducting such an investigation to thoroughly understand the legal requirements of the statutory scheme, including the definition of terms used within the statute at issue, and to appropriately apply those requirements. A failure to do so may invalidate the investigator’s findings and leave the client who relies upon the investigation open to liability.

The Facts and Findings of Ohton
Ohton v. Board of Trustees of the California State University (2010) 180 Cal.App.4th 1402 involved a trainer who worked for the San Diego State University Athletic Department. In February, 2003, Ohton responded to an Athletic Department audit by submitting a confidential report asserting that members of the Athletic Department had violated National Collegiate Athletic Association rules and engaged in other inappropriate conduct. Among his allegations were that he had heard rumors that the head football coach had gotten seriously drunk before one away game and had been seen walking out of a strip club at 1:00 a.m. the morning of another game.

In August, 2003, Ohton filed an internal complaint with the school, claiming that the football coach and other members of the Athletic Department had retaliated against him because of his report in violation of California’s Whistleblower Protection Act. He claimed the football coach obtained a copy of his confidential report and circulated it to other members of the Department. Ohton claimed he had been retaliated against when the Interim Athletic Director informed him that the football coach wanted a different strengthening and conditioning coach. He was thereafter relieved of all responsibilities for the football team, and his schedule was changed.

CSU retained an attorney to investigate Ohton’s complaints. The investigator concluded that Ohton was removed from the football program because he reported “personal and program-related” improprieties, not because he reported NCAA violations. As to the schedule change, the investigator concluded that the change was punitive and was made because of Ohton’s perceived antagonism towards the current football program, as illustrated by some of the allegations and accusations in Ohton’s report. However, with respect to Ohton’s allegation regarding the football coach’s public drunkenness, the investigator concluded that, while the allegation was arguably one of gross misconduct or incompetence, the evidence relied upon by Ohton was hearsay and was fully refuted. Moreover, the investigator noted that the accusation appeared in only two sentences on the 98th page of a 103 page document. Based on this, the investigator concluded that the accusation was not intended to “blow the whistle” on specific conduct and was not a “protected disclosure” as is required to support a claim for whistleblower retaliation.

CSU forwarded the investigator’s report to Ohton and he responded to it. The investigator was then given an opportunity to comment on Ohton’s response, which he did, as follows:

Regardless of [Ohton’s] subjective intent, the statute requires a finding of “good faith” disclosure. The comments that contributed to Ohton’s reassignment and hour restrictions were not good faith disclosures; rather, they were personal attacks based on faulty or incomplete information, improper assumptions or innuendo, and/or were accusations that did not involve improper governmental activities. [¶] It is my opinion that Ohton’s accusation that Head Coach Tom Craft was intoxicated in public was a factor in the timing of and the decision to remove Ohton as the Strength and Conditioning Coach, and that such accusation was not made in good faith.

Finally, the investigator noted that a separate investigation had been conducted by another investigator regarding the allegation of public drunkenness by the coach. During that investigation, Ohton claimed that he heard the allegation from one Booster, who had in turn heard it from two others. The “two others” were interviewed and denied the incident had occurred, as did the coach. Ohton’s source did not confirm it either. The investigator concluded that Ohton had related the very serious accusation due to disrespect for the coach and that Ohton’s false assertions of purported fact were not made in good faith.

CSU sent Ohton a final letter of determination resolving his complaint, in which it stated that it disagreed with the finding of the investigator that Ohton’s written report was not a protected disclosure. However, CSU concluded that the particular disclosure relating to the coach’s public drunkenness was not a protected disclosure because it was not made in good faith. CSU agreed with the investigator that the accusation was false and was motivated by Ohton’s personal and vindictive agenda against the coach. CSU concluded that Ohton was removed from the football program for independent legitimate, non-retaliatory reasons but that the restriction of Ohton’s hours was retaliatory. As a result, CSU rescinded the instructions regarding the limitation of Ohton’s work hours.

Ohton filed a petition for writ of mandate, requesting a determination of whether CSU had satisfactorily addressed his internal complaint within the meaning of Government Code section 8547.12. The Court of Appeal concluded that CSU had applied an incorrect definition of good faith and that the result it reached was contrary to law.

The Court first analyzed the determination that Ohton did not act in good faith in reporting the football coach’s alleged public drunkenness, because that determination led to the finding that his disclosure was not protected. The Court determined that CSU had applied an incorrect definition of good faith and had, therefore, reached a result that was contrary to law. Specifically, the Court noted that Government Code section 8547.2 defines “protected disclosure” to mean “any good faith communication . . . that discloses or demonstrates an intention to disclose information that may evidence (1) an improper governmental activity or (2) any condition that may significantly threaten the health or safety of employees or the public if the disclosure or intention to disclose was made for the purpose of remedying that condition.” While “good faith communication” is not defined, the Court noted that an employee may file a written internal complaint only with a sworn statement that the contents of the complaint are true, or are believed by the affiant to be true under penalty of perjury. Accordingly, a finding of good faith, or its absence, involves a factual inquiry into the complainant’s subjective state of mind. Did he/she believe the action was valid? What was his/her intent or purpose in pursuing it? The Court noted that a subjective state of mind will rarely be susceptible of direct proof; usually it will be inferred it from circumstantial evidence. However, “the phrase ‘good faith’ in common usage has a well-defined and generally understood meaning, being ordinarily used to describe that state of mind denoting honesty of purpose, freedom from intention to defraud, and, generally speaking, means being faithful to one’s duty or obligation.” The Court noted that, although the investigator questioned Ohton’s motive for disclosing the allegation that the coach was seen drunk in public, the investigator did not conclude that Ohton had been knowingly dishonest. Furthermore, CSU did not dispute the investigator’s finding in that regard.

The Court went on to criticize the good faith analysis on other fronts as well. Specifically, the investigator had concluded that Ohton did not act in good faith because his disclosure was based on hearsay and was fully refuted. The Court disagreed that a whistleblower’s reliance on hearsay precluded a finding that the complaint was a good faith protected disclosure, noting that improper governmental activity is frequently difficult to uncover and whistleblowers will often need to rely on hearsay evidence. The Court also concluded that it could not be the case that a lack of good faith could be imputed simply because an investigation ultimately concluded the allegation was false. Whether the disclosure is made in good faith, the Court noted, is properly determined based on whether the complainant believed it was true or had reason to believe it was true at the time it was made. It is then the investigator’s role to ascertain the truth or falsity of the complaint. A post-investigation conclusion that the complaint was unfounded does not necessarily mean the complaint was made in bad faith.

Finally, the Court noted that, even if Ohton’s report had been motivated because of a personal and vindictive agenda against the coach, it did not follow that the complaint was made in bad faith. Government Code section 8547 does not require the impossibly high standard that the complainant’s motives be pure and untainted. Rather, the statute merely requires an honest belief in the truth of the allegations. The Court further criticized the fact that, even though one Booster identified by Ohton acknowledged seeing the football coach drunk in New Mexico, that fact was omitted from CSU’s final determination letter because the Booster stated he did not wish to be involved. The Court found that the omission of that fact undermined the conclusion that Ohton did not make a good faith report.

Lessons from Ohton
Ohton provides several valuable lessons to workplace investigators. First, if you are conducting an investigation that involves a particular statutory scheme, it is imperative that you understand the legal terms used in the statute. Achieving such understanding may involve conducting legal research or otherwise assuring yourself that you are applying the appropriate legal standard. This is particularly important where terms used within a statute may be subject to a lay understanding which is different from that imposed by law. It was unclear in Ohton how the investigator came to his definition of “good faith.” There is no suggestion in the Court’s opinion, however, that the investigator defined how he was using the term, or that he cited to any authority for the definition of good faith he used. In the event a legal term is central to your finding, as was the case in Ohton, it may be appropriate to not only research the proper definition of the term, but also to cite your sources when referencing that term. In Ohton, the employer’s entire determination ultimately unraveled because of an incorrect standard applied by the investigator.

The Court in Ohton also pointed out another error: selective omission of contradictory information. Specifically, one Booster identified by Ohton as a source of information confirmed that he had seen the coach drunk in New Mexico. However, that Booster said he did not want to be involved in the investigation. CSU excluded that information from its determination letter, undermining its conclusion that Ohton’s report was not made in good faith. Although it is unclear from the decision whether that omission was made by CSU or the investigator, the lesson to be drawn is clear. Where an investigator comes across information which refutes one of the investigator’s findings, it is important to address that information head on and explain why the conclusion stands in spite of the information. Disregarding the information implies either a sloppy report or an inability to reconcile the findings with the contradictory information. In either event, should your investigative report be relied upon by your client and litigation results, you can be sure you will be vigorously cross-examined on any omission of or failure to account for information that contradicts your findings.

Finally, be clear in your findings. In Ohton, the investigator questioned Ohton’s motive for disclosing the allegation that the coach was seen drunk in public, but did not specifically conclude that Ohton had been knowingly dishonest. Given that a finding of dishonesty was a prerequisite to a finding of bad faith, this omission proved critical. While not every investigation requires specific findings of honesty or dishonesty, most investigations do involve conclusions regarding witness credibility. Your determination regarding whether a witness is honest or dishonest will impact the amount of weight you give the information you receive from the witness. If you are going to disregard a witness’ testimony because you believe he is not credible, make sure you include such a statement in your findings. Likewise, if you are giving one witness’ testimony more weight than another’s, explain why that is so. Do not leave your reader guessing as to your conclusions regarding witness credibility where you have, in fact, made such conclusions. Of course, where you have not made such conclusions, you may wish to include a statement to that effect as well. Most importantly, however, where you are conducting an investigation in which the complainant’s good faith (or lack thereof) is central to your findings, make sure you specifically address whether you find the complaint to have been made in good faith or not and explain why you made that finding. You should cite to the specific evidence upon which you have relied so that the basis for your finding will be obvious to anyone reading your report. In the event your client is required to establish that it acted reasonably in relying on your report, your transparency will make that task easier. Your client may not be the only one to benefit, however; in the event litigation ensues and you are called to testify many months or even years later, you will be able to easily refresh your recollection as to the facts you relied on when you made your findings.

Construction law is constantly changing. A savvy contractor keeps abreast of those changes and adapts his or her business methods to conform to new requirements. Here are some recent legislative updates and court decisions that may affect your business.

Economic Loss Doctrine Does Not Bar Contractor’s Claim Against Architect for Tortious Interference with Contract
A Delaware court recently allowed a contractor’s claim to proceed against an architect for intentional interference with contract despite the argument that it violated the economic loss doctrine. In Commonwealth Construction Co. v. Endecon, Inc., 2009 WL 609426 (Del. Super. Ct. 2009), a church hired a contractor to perform renovation work under a contract that provided that in the event of a dispute, the matter would be submitted to the architect, who would then decide the dispute in good faith and without partiality to either party.

A dispute arose concerning payment. Based upon the architect’s advice, the church refused to pay and a mechanics’ lien was filed. Ultimately, a judgment was entered in favor of the contractor, who then sued the architect for tortious interference with contractual relations.

The architect moved to dismiss arguing that the claim was barred by the economic loss doctrine, which bars recovery in tort for damages unrelated to a claim for personal injury or damage to other property.

The court allowed the contractor’s lawsuit to proceed holding that the economic loss doctrine did not apply to claims for intentional torts such as defamation, fraudulent inducement of breach of contract, intentional misrepresentation and intentional interference with contractual relations. While the architect argued that his advice was truthful, honest and within the scope of his duties, the contractor’s complaint alleged the opposite. Ultimately, the court found that early dismissal of the case was improper because the court, in a motion to dismiss, is required to accept the allegations of the complaint as true.

Contractor Cannot Recover Compensation Unless Licensed At All Times During Performance
In Goldstein v. Barak Construction (2008) 164 Cal. App. 4th 845, plaintiff homeowners filed an application for a Right to Attach Order and an Order for Issuance of a Writ of Attachment against a contractor and his business. The court granted the application against the business and ordered the contractor not to sell, encumber, or diminish the value of his residence until further order of the court. The contractor appealed.

The court concluded that the homeowners’ claim against defendants was one on which attachment could issue. The homeowners provided evidence that the defendants were unlicensed at the time a home improvement contract with the homeowners was executed, and performance under the contract commenced while the defendants were still unlicensed. The record also showed it was not until several months afterwards that defendants obtained their license. The Court found that the homeowners presented a prima facie case under Bus. & Prof. Code, § 7031, subd. (b), of the Contractors’ State License Law justifying the issuance of a right to attach order. In addition, because defendants were not licensed at the time performance under the contract commenced, they were not entitled to any recovery for work performed even if they obtained their license during construction. “Extras” undertaken in furtherance of the contract were subject to the licensing requirements. That defendants may have undertaken work for the homeowners not strictly listed within the four corners of the parties’ written contract would not forestall application of the licensing law to such “extras.”

In an effort to streamline or prevent construction defect litigation and with the aim of promoting affordable housing by reducing the cost of such litigation, the California Legislature enacted SB 800 (California Civil Code section 895 et seq.) in 2002. The so-called “Fix-It Bill,” amongst other things, adds notice, repair, and mediation procedures to residential construction defect claims. It must be noted from the outset that in order for a builder to avail itself of the pre-litigation procedures provided by SB 800, it must provide notice of those procedures. To provide effective notice, a builder must record on title a notice of the SB 800 pre-litigation procedures along with a notice that those procedures impact the legal rights of the homeowner. Further, this information must also be included in the original sales documentation and must initialed and acknowledged by both the purchaser and the builder’s sales representative. Failure to provide the required notice eliminates the builder’s right to compel compliance with SB 800 procedures.

Written Notice of Claim Required
The pre-litigation procedures created by SB 800 begin with the homeowner providing written notice to the builder which describes, in reasonable detail, any alleged defects. The builder must acknowledge receipt of the homeowner’s claim within 14 days and it may then conduct an inspection within 14 more days. A second inspection by the builder may be conducted within an additional 40 days. After completion of these inspections, the builder has 30 days in which it may offer to conduct repairs or to make a cash payment in lieu of any repairs.

After receiving the builder’s offer to repair or to make payment, the homeowner then has 30 days to accept the offer, request the names of three additional contractors to conduct the repair, or to request mediation. If mediation is requested, it must occur within 15 days and, unless the homeowner agrees to pay for half of the cost of the mediation, the mediator is chosen and paid for by the builder. If the homeowner chooses to pay for half of the mediation costs, then the mediator is chosen jointly. This mediation is limited to four hours unless extended by the parties. At the end of the mediation, the homeowner and builder either agree to a resolution or the homeowner must allow the repair to be performed. The repairs must be completed as soon as is reasonably possible with every effort made to complete the repair within 120 days. Alternatively, the builder may offer a cash payment in lieu of any repair and it may obtain a reasonable release in exchange for that payment.

Hidden Cost if Homeowner Chooses Alternative Contractor
One hidden cost to builders under SB 800 involves the homeowner’s right to request the names of three alternative contractors to complete the repair work. Often, the original subcontractor is obligated to repair defects without cost to the builder. However, if the homeowner chooses an alternative contractor to complete the repair, then the builder will have to come out-of-pocket for that alternate contractor instead of obtaining the repairs from the original subcontractor without cost.

In any event, after the repair has been completed under SB 800, and if no prior mediation has taken place, then the homeowner must request mediation with the builder if they wish to bring further action. The statute of limitations to bring such further action is generally extended during the repair and mediation process until 100 days after they are completed. If a homeowner ultimately sues under SB 800, then damages are limited to the reasonable value of repairing any SB 800 violation, any damages caused by the original repairs, the cost of removing and replacing any improper repairs completed by the builder, reasonable relocation and storage expense, lost business income if the residence is used as a principal place of business licensed to be operated from the residence, reasonable investigative cost, and all other costs or fees recoverable by contract or statute.

Statutory Defenses Available
If a builder is sued under SB 800, there are a number of defenses available to it pursuant to California Civil Code section 945.5. These defenses include (a) unforeseen acts of nature such as weather and earthquakes and manmade events such as war, terrorism, or vandalism; (b) failure by the homeowner to reasonably minimize or prevent damages including failure to give timely notice of the alleged defect; (c) failure to follow builder’s or manufacturer’s recommendations or commonly accepted maintenance obligations which were provided at the time of sale; (d) ordinary wear and tear, misuse, abuse or neglect; (e) statute of limitations; (f) defects for which the builder obtained a valid release; (g) successful repairs which corrected the defect; and (h) all other available affirmative defenses.

While well intentioned, the “protections” afforded by SB 800 have been a mixed blessing for builders. These protections can lessen the burden of construction defect litigation in the right circumstances, but the cumbersome and rigid mechanism it puts in place is difficult to comply with and can often lead to wasted effort for even the most conscientious builders.

Strict Compliance Required
SB 800 requires strict compliance to both notice and time requirements. Any failure allows the homeowner to immediately bypass the SB 800 procedure and file his or her lawsuit. Because the time limits are so short and the consequences of a mistake so devastating, builders who wish to avail themselves of the pre-litigation protections of SB 800 may want to consider consulting a construction attorney immediately upon receipt of notice of an SB 800 claim.