Recent Developments from Around the States

Appellants, former telesales employees of Los Angeles Times Communications LLC (The L.A. Times), publisher of Los Angeles's leading newspaper, filed a complaint alleging that their employer's practice of contracting with its employees to pay a commission immediately upon the sale of a subscription, subject to a chargeback if the customer did not keep the subscription for at least 28 days was unlawful under the Labor Code. Appellants, whose jobs involved calling potential and existing customers to sell them newspaper subscriptions or to convert their subscriptions into broader ones, had read and signed the L.A. Times Telesales Agreement (the Agreement) when they began employment. The Agreement specified that appellants could only receive a commission on “commissionable orders,” defined as “'a sale that is input into the L.A. Times home delivery computer ' where the customer keeps the paper for a minimum of 28 days without giving a specific stop date.'” The Agreement further stated that “'[e]ven though an order is not commissionable until the customer keeps it 28 days, The Times will pay [the telesales employee] two weeks in advance for the order ' However, if the subscription is rejected by The Times [an 'in-house kill'] or by the customer before 28 days, the amount advanced in respect to the rejected subscription will be deducted from [the telesales employee's] compensation payable subsequent to the date of such rejection based on [the telesales employee's] commission rate for [the] current week and [the telesales employee] hereby authorize[s] such deductions'” (Emphasis added). Appellants were each required to sign an acknowledgement confirming that they understood the Agreement and agreed with its terms before they were allowed to begin making sales.

At the trial court level, the L.A. Times moved for summary judgment and the court orally granted this motion, ruling that “although commissions were earned at the time work was complete, the commissions were subject to a 28-day condition precedent.” The trial court also issued a written order granting the L.A. Times motion, determining that the appellants' cause of action failed because their employer's practice was lawful under the Labor Code.

In affirming the trial court's holding, the California Court of Appeal began by finding that appellants' entitlement to commission was contingent upon the following two conditions: “1)the sale had to be a 'verified' sale, ie, the customer confirmed he or she really wanted the subscription, the customer was not already taking delivery of the product purportedly sold by the salesperson and there was no prior collection problem with the customer; and 2) the customer had to keep the subscription for at least 28 days.” The court found that because the appellants had signed and acknowledged that their commissions were to be based on these terms, the Agreement was controlling. Therefore, the trial court had correctly found that the requirement that a customer keep a subscription for 28 days was a valid condition precedent to appellants' right to receive a commission and that the L.A. Times could lawfully charge back any unearned commissions from appellants' future advances.

Likewise, the court found that while Labor Code, section 221 prohibits an employer from collecting or receiving any part of “wages theretofore” paid an employee, “[a] chargeback on future commission advances does not take back wages 'theretofore paid' or encompass an improper or unfair deduction to an employee's wages.” The practice allowed the employer to decrease the amount of the employee's next advance to account for an earlier advance that never became a commissionable order. Thus, the California Court of Appeal acknowledged that not only was this method of compensating employees common practice among California employers, but it also worked to employees' benefit, in that employees were allowed immediate access to cash rather than having to wait until all contingencies were satisfied, and to employers' benefit by providing employees with an incentive to increase sales.

CONNECTICUT

Court Finds Prima Facie Case for Defamation Where Employer Filed Report Alleging Employee's Theft of Facility Property

The Appellate Court of Connecticut has held that the former employee of a skilled nursing facility made out a prima facie case for defamation against the facility and its administrator where the administrator filed a disciplinary report stating that the employee was terminated for theft of the facility's property. Gambardella v. Apple Health Care, Inc., 86 Conn. App. 842 (Jan. 18).

Plaintiff Laura Gambardella, an admissions coordinator at the Waterbury facility, a skilled nursing facility owned and operated by Apple Health Care, Inc. ('Apple Health' or the 'facility'), was terminated by her supervisor, John Sweeney, for allegedly stealing furniture that was donated to the facility by a resident's family. Plaintiff had interviewed and spent a significant amount of time with a woman named Eleanor O'Sullivan, who had sought to admit her 95-year-old aunt, Fannie Lauro, to the facility. Therefore, when Lauro passed away 3 days after being admitted, O'Sullivan told Plaintiff that she wanted her to have any of Lauro's items that she wanted, and that Plaintiff should offer the staff whichever of Lauro's belongings that she did not care to keep. After Plaintiff's son and friend came to the facility at Plaintiff's request and removed two of Lauro's chairs pursuant to O'Sullivan's offer, Sweeney conducted an investigation. During that investigation, O'Sullivan faxed a latter to Sweeney restating the discussion that she had had with Plaintiff regarding the disposition of Lauro's furniture and other personal belongings. Nevertheless, Sweeney terminated Plaintiff's employment for theft of facility property and recorded the reason for termination in a disciplinary report. At the close of Plaintiff's case at the trial court level, the court granted Apple Health's motion to dismiss finding that Plaintiff had failed to make out a prima facie case of defamation.

Reversing the trial court's judgment, the Appellate Court of Connecticut began by stating that in order to establish a prima facie case of defamation, the plaintiff must demonstrate that: '1) the defendant published a defamatory statement; 2) the defamatory statement identified the plaintiff to a third person; 3) the defamatory statement was published to a third person; and 4) the plaintiff's reputation suffered injury as a result of the statement” (citing Cweklinsky v. Mobil Chemical Co., 267 Conn. 210, 217 (2004). The court found that Plaintiff had presented sufficient evidence, if believed, to maintain that the facility, under Sweeney's authority, had published a defamatory statement to a third person. Because the disciplinary report constituted an accusation of theft, it was considered defamation per se by the court. Likewise, the court determined that intracorporate communication enough to satisfy the element of publication had occurred in that Sweeney's disciplinary report had likely been circulated and that oral statements to the same effect had been communicated among other Apple Health employees. Plaintiff had also presented sufficient evidence that, if believed, would establish that the defamatory statement identified Plaintiff to a third person in that Plaintiff had submitted proof that the disciplinary report was transmitted to the director of human relations and other Apple Health supervisory employees during and subsequent to Plaintiff's termination interview. Lastly, the Appellate Court of Connecticut found that because the disciplinary report was deemed defamation per se, the element of harm to Plaintiff's reputation was satisfied without her having to prove damages.

FLORIDA

Court Finds No Employer Duty-to-Warn About Fellow Employee's Criminal Background

Where Warning Pertains to Employees' Personal Relationship Outside of Work. The District Court of Appeal of Florida, Fourth District, has held that an employment relationship does not place a duty-to-warn upon an employer where the warning involves employees' personal relationships outside of work. K.M. v. Publix Super Markets, Inc., 2005 WL 156790 (Jan 26).

When K.M., a minor, was 7 years old, her mother, an employee of a Publix supermarket, arranged for a fellow employee, Robert Woodlard, to babysit for K.M. during her work shifts. While Publix store manager David Moses was aware that Woodlard was caring for K.M. and also knew, through information provided him by the Department of Corrections, that Woodlard was on parole from a previous conviction for attempted sexual battery on a minor under 12, he did not notify K.M.'s mother of the danger. Therefore, ignorant of Woodlard's criminal background, K.M.'s mother allowed Woodlard to babysit for K.M. over a period of 3 months, during which time Woodlard sexually abused K.M. on at least two occasions. Pursuant to K.M.'s claim that Publix management owed her mother, its employee, a duty-to-warn her of Woodlard's criminal conviction, the trial court granted Publix's motion to dismiss with prejudice and found that Publix did not owe K.M. a duty, common law or otherwise.

On appeal, K.M. argued that this case fell under section 302B of the Restatement (Second) of Torts (1964), which states that an “'omission may be negligent if the actor realizes or should realize that it involves an unreasonable risk of harm to another through the conduct of ' a third person which is intended to cause harm, even though such conduct is criminal.'” In upholding the trial court's decision, the Florida District Court of Appeal found that the duties specified in section 302B only apply where there is “a special relation between the actor and the other which gives rise to the duty.” Thus while the general rule is that no legal duty exists to prevent the misconduct of third persons, Florida recognizes the “special relationship exception.” This special relationship can arise where, “at the time of the injury, the defendant is in actual or constructive control of: 1) the instrumentality; 2) the premises on which the tort was committed; or 3) the tort-feasor” (quoting Daly v. Denny's Inc., 694 So.2d 775, 777 (Fla. 4th DCA 1977). The Florida District Court of Appeal asserted the nonexistence of these factors in this case by stating that the injury to K.M. did not occur on Publix's premises, did not involve an instrumentality, and that Publix did not have the right to control Woodlard's behavior away from work.

The court also recognized that while section 317 of the Restatement involves the duty of a master to control the conduct of a servant, “this duty is limited to acts committed by employees 1) with the employer's chattels or 2) upon the premises of the employer or premises 'upon which the servant is privileged to enter only as' the employer's servant.” Stating that the sexual abuse occurred outside of Publix's premises and did not involve its property, the Florida District Court of Appeal found this section of the Restatement inapplicable to K.M.'s case. Likewise, the court addressed section 319 of the Restatement, “which imposes a duty of care upon one 'who takes charge of a third person whom he knows or should know to be likely to cause bodily harm to others if not controlled,'” by asserting that Publix did not “take charge” of Woodlard so as to fall within this section. In supporting its holding refusing to impose a duty on Publix under the facts of this case, the court found that “[t]o expand employers' liability in this area would have 'broad ramifications,” requiring employers to monitor their employee relationships apart from work, in areas such as commuting and socializing” (See D'Amico v. Christie, 518 N.E.2d 896, 901-02 (N.Y. 1987).

CALIFORNIA

Chargeback of Advanced Commissions Not Deemed Unlawful Repayment of Wages By California Court

The California Court of Appeal, Second District, has held that an employer-newspaper's practice of charging back advanced commissions against its telesales employees' future advances when sold subscriptions were terminated within 28 days was not an illegal agreement for a deduction or “kickback” of earned wages under the California Labor Code (the “Labor Code”). Steinhebel v. Los Angeles Times Communications, 2005 WL 281194 (Feb. 7).

Appellants, former telesales employees of Los Angeles Times Communications LLC (The L.A. Times), publisher of Los Angeles's leading newspaper, filed a complaint alleging that their employer's practice of contracting with its employees to pay a commission immediately upon the sale of a subscription, subject to a chargeback if the customer did not keep the subscription for at least 28 days was unlawful under the Labor Code. Appellants, whose jobs involved calling potential and existing customers to sell them newspaper subscriptions or to convert their subscriptions into broader ones, had read and signed the L.A. Times Telesales Agreement (the Agreement) when they began employment. The Agreement specified that appellants could only receive a commission on “commissionable orders,” defined as “'a sale that is input into the L.A. Times home delivery computer ' where the customer keeps the paper for a minimum of 28 days without giving a specific stop date.'” The Agreement further stated that “'[e]ven though an order is not commissionable until the customer keeps it 28 days, The Times will pay [the telesales employee] two weeks in advance for the order ' However, if the subscription is rejected by The Times [an 'in-house kill'] or by the customer before 28 days, the amount advanced in respect to the rejected subscription will be deducted from [the telesales employee's] compensation payable subsequent to the date of such rejection based on [the telesales employee's] commission rate for [the] current week and [the telesales employee] hereby authorize[s] such deductions'” (Emphasis added). Appellants were each required to sign an acknowledgement confirming that they understood the Agreement and agreed with its terms before they were allowed to begin making sales.

At the trial court level, the L.A. Times moved for summary judgment and the court orally granted this motion, ruling that “although commissions were earned at the time work was complete, the commissions were subject to a 28-day condition precedent.” The trial court also issued a written order granting the L.A. Times motion, determining that the appellants' cause of action failed because their employer's practice was lawful under the Labor Code.

In affirming the trial court's holding, the California Court of Appeal began by finding that appellants' entitlement to commission was contingent upon the following two conditions: “1)the sale had to be a 'verified' sale, ie, the customer confirmed he or she really wanted the subscription, the customer was not already taking delivery of the product purportedly sold by the salesperson and there was no prior collection problem with the customer; and 2) the customer had to keep the subscription for at least 28 days.” The court found that because the appellants had signed and acknowledged that their commissions were to be based on these terms, the Agreement was controlling. Therefore, the trial court had correctly found that the requirement that a customer keep a subscription for 28 days was a valid condition precedent to appellants' right to receive a commission and that the L.A. Times could lawfully charge back any unearned commissions from appellants' future advances.

Likewise, the court found that while Labor Code, section 221 prohibits an employer from collecting or receiving any part of “wages theretofore” paid an employee, “[a] chargeback on future commission advances does not take back wages 'theretofore paid' or encompass an improper or unfair deduction to an employee's wages.” The practice allowed the employer to decrease the amount of the employee's next advance to account for an earlier advance that never became a commissionable order. Thus, the California Court of Appeal acknowledged that not only was this method of compensating employees common practice among California employers, but it also worked to employees' benefit, in that employees were allowed immediate access to cash rather than having to wait until all contingencies were satisfied, and to employers' benefit by providing employees with an incentive to increase sales.

CONNECTICUT

Court Finds Prima Facie Case for Defamation Where Employer Filed Report Alleging Employee's Theft of Facility Property

The Appellate Court of Connecticut has held that the former employee of a skilled nursing facility made out a prima facie case for defamation against the facility and its administrator where the administrator filed a disciplinary report stating that the employee was terminated for theft of the facility's property. Gambardella v. Apple Health Care, Inc., 86 Conn. App. 842 (Jan. 18).

Plaintiff Laura Gambardella, an admissions coordinator at the Waterbury facility, a skilled nursing facility owned and operated by Apple Health Care, Inc. ('Apple Health' or the 'facility'), was terminated by her supervisor, John Sweeney, for allegedly stealing furniture that was donated to the facility by a resident's family. Plaintiff had interviewed and spent a significant amount of time with a woman named Eleanor O'Sullivan, who had sought to admit her 95-year-old aunt, Fannie Lauro, to the facility. Therefore, when Lauro passed away 3 days after being admitted, O'Sullivan told Plaintiff that she wanted her to have any of Lauro's items that she wanted, and that Plaintiff should offer the staff whichever of Lauro's belongings that she did not care to keep. After Plaintiff's son and friend came to the facility at Plaintiff's request and removed two of Lauro's chairs pursuant to O'Sullivan's offer, Sweeney conducted an investigation. During that investigation, O'Sullivan faxed a latter to Sweeney restating the discussion that she had had with Plaintiff regarding the disposition of Lauro's furniture and other personal belongings. Nevertheless, Sweeney terminated Plaintiff's employment for theft of facility property and recorded the reason for termination in a disciplinary report. At the close of Plaintiff's case at the trial court level, the court granted Apple Health's motion to dismiss finding that Plaintiff had failed to make out a prima facie case of defamation.

Reversing the trial court's judgment, the Appellate Court of Connecticut began by stating that in order to establish a prima facie case of defamation, the plaintiff must demonstrate that: '1) the defendant published a defamatory statement; 2) the defamatory statement identified the plaintiff to a third person; 3) the defamatory statement was published to a third person; and 4) the plaintiff's reputation suffered injury as a result of the statement” (citing Cweklinsky v. Mobil Chemical Co., 267 Conn. 210, 217 (2004). The court found that Plaintiff had presented sufficient evidence, if believed, to maintain that the facility, under Sweeney's authority, had published a defamatory statement to a third person. Because the disciplinary report constituted an accusation of theft, it was considered defamation per se by the court. Likewise, the court determined that intracorporate communication enough to satisfy the element of publication had occurred in that Sweeney's disciplinary report had likely been circulated and that oral statements to the same effect had been communicated among other Apple Health employees. Plaintiff had also presented sufficient evidence that, if believed, would establish that the defamatory statement identified Plaintiff to a third person in that Plaintiff had submitted proof that the disciplinary report was transmitted to the director of human relations and other Apple Health supervisory employees during and subsequent to Plaintiff's termination interview. Lastly, the Appellate Court of Connecticut found that because the disciplinary report was deemed defamation per se, the element of harm to Plaintiff's reputation was satisfied without her having to prove damages.

FLORIDA

Court Finds No Employer Duty-to-Warn About Fellow Employee's Criminal Background

Where Warning Pertains to Employees' Personal Relationship Outside of Work. The District Court of Appeal of Florida, Fourth District, has held that an employment relationship does not place a duty-to-warn upon an employer where the warning involves employees' personal relationships outside of work. K.M. v. Publix Super Markets, Inc., 2005 WL 156790 (Jan 26).

When K.M., a minor, was 7 years old, her mother, an employee of a Publix supermarket, arranged for a fellow employee, Robert Woodlard, to babysit for K.M. during her work shifts. While Publix store manager David Moses was aware that Woodlard was caring for K.M. and also knew, through information provided him by the Department of Corrections, that Woodlard was on parole from a previous conviction for attempted sexual battery on a minor under 12, he did not notify K.M.'s mother of the danger. Therefore, ignorant of Woodlard's criminal background, K.M.'s mother allowed Woodlard to babysit for K.M. over a period of 3 months, during which time Woodlard sexually abused K.M. on at least two occasions. Pursuant to K.M.'s claim that Publix management owed her mother, its employee, a duty-to-warn her of Woodlard's criminal conviction, the trial court granted Publix's motion to dismiss with prejudice and found that Publix did not owe K.M. a duty, common law or otherwise.

On appeal, K.M. argued that this case fell under section 302B of the Restatement (Second) of Torts (1964), which states that an “'omission may be negligent if the actor realizes or should realize that it involves an unreasonable risk of harm to another through the conduct of ' a third person which is intended to cause harm, even though such conduct is criminal.'” In upholding the trial court's decision, the Florida District Court of Appeal found that the duties specified in section 302B only apply where there is “a special relation between the actor and the other which gives rise to the duty.” Thus while the general rule is that no legal duty exists to prevent the misconduct of third persons, Florida recognizes the “special relationship exception.” This special relationship can arise where, “at the time of the injury, the defendant is in actual or constructive control of: 1) the instrumentality; 2) the premises on which the tort was committed; or 3) the tort-feasor” (quoting Daly v. Denny's Inc., 694 So.2d 775, 777 (Fla. 4th DCA 1977). The Florida District Court of Appeal asserted the nonexistence of these factors in this case by stating that the injury to K.M. did not occur on Publix's premises, did not involve an instrumentality, and that Publix did not have the right to control Woodlard's behavior away from work.

The court also recognized that while section 317 of the Restatement involves the duty of a master to control the conduct of a servant, “this duty is limited to acts committed by employees 1) with the employer's chattels or 2) upon the premises of the employer or premises 'upon which the servant is privileged to enter only as' the employer's servant.” Stating that the sexual abuse occurred outside of Publix's premises and did not involve its property, the Florida District Court of Appeal found this section of the Restatement inapplicable to K.M.'s case. Likewise, the court addressed section 319 of the Restatement, “which imposes a duty of care upon one 'who takes charge of a third person whom he knows or should know to be likely to cause bodily harm to others if not controlled,'” by asserting that Publix did not “take charge” of Woodlard so as to fall within this section. In supporting its holding refusing to impose a duty on Publix under the facts of this case, the court found that “[t]o expand employers' liability in this area would have 'broad ramifications,” requiring employers to monitor their employee relationships apart from work, in areas such as commuting and socializing” ( See D'Amico v. Christie, 518 N.E.2d 896, 901-02 (N.Y. 1987).