Case Number: BC716847 Hearing Date: June 18, 2019 Dept: 24

Defendant Employment Tax Servicing Corporation’s demurrer to the First Amended Complaint is SUSTAINED with leave to amend as to the second cause of action; and OVERRULED as to the fifth cause of action.

On August 13, 2018, Plaintiff Rachel Moore initiated the instant employment discrimination/retaliation suit against Defendant Employment Tax Servicing Corporation dba Emptech (“Defendant” or “Emptech”) (erroneously sued as Emptech, Employment Tax Servicing Corporation dba Emptech, and Employment Tax Specialists Inc., dba Emptech). The operative First Amended Complaint alleges five causes of action for 1) retaliation; 2) associational disability discrimination; 3) failure to prevent discrimination and retaliation; 4) wrongful termination in violation of public policy; and 5) retaliation.

The FAC alleges that Plaintiff was a management-level employee with Emptech, as Emptech’s Director of Operations. Plaintiff supervised another former employee of Defendant, Ashely Maddock (“Maddock”). Maddock was employed with Emptech beginning in January 2011. Maddock suffered from a serious medical condition. Plaintiff has a close personal relationship with Maddock, and Defendant were aware of this relationship.

In August 2017, Jeffrey Aleixo (“Aleixo”), Emptech’s CEO/President, learned that Maddock had taken time off in July as a result of her medical condition. Aleixo was not happy that Plaintiff had accommodated Maddock’s medical condition. Aleixo and Michelle Moore (“Moore”), Human Resources Director and shareholder, without any prior oral reprimand or oral warning issued a written Employee Warning to Maddock on purported grounds of excessive absenteeism and for an abuse of the Emptech’s sick-leave and attendance policies. Plaintiff informed Alexio and Moore that Maddock was under the care of a physician for her serious medical condition. It was Plaintiff and Maddock’s position that her modified schedule was a reasonable accommodation and did not negatively impact the company or Maddock’s performance. In response, Aleixo instituted a new policy which did not allow for Maddock to work from home or work outside normal business hours despite Maddock’s medical needs.

During the week of October 30, 2017, Maddock requested that to come in late and leave early one day due to her medical condition. On November 2, 2017, Defendant demoted Maddock. Amtech falsely claims that this was due to company re-organization, but this was not the case. On December 4, 2017, Defendant terminated Maddock based on inaccurate accusations. Plaintiff protested this, and Defendant engaged in a campaign of retaliation against Plaintiff and on April 8, 2018, terminated Plaintiff’s employment in retaliation for her complaints and her close association with Maddock.

On March 29, 2019, Defendant demurred to the second and fifth causes of action. On June 5, 2019, Plaintiff filed an opposition. On June 11, 2019, Defendant filed a reply.

Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (CCP §§ 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 [internal citations omitted].)

A special demurrer for uncertainty, CCP section 430.10(f), is disfavored and will only be sustained where the pleading is so bad that defendant cannot reasonably respond—i.e., cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him/her. (Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Ibid.)

Meet and Confer

Before filing a demurrer or motion to strike, the moving party must meet and confer in person or by telephone with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading. (CCP §§ 430.41, 435.5.) Counsel’s declaration satisfies the meet and confer requirement. (Silverstein Decl. ¶¶ 2-7.)

Second Cause of Action – Associational Disability Discrimination

Defendant demurs to the second cause of action, arguing that Plaintiff does not meet the required “association” with Maddock to qualify for protection.

Under the Fair Employment and Housing Act (FEHA), it is unlawful for an employer to discriminate against a person because of the “physical disability” of the person. (Gov. Code §§ 12926(o), 12940(a).) The definition of a “physical disability” embraces “association” with a physically disabled person. (Ibid.) Therefore, when FEHA forbids discrimination based on a disability, it also forbids discrimination based on a person’s “association” with another who has a disability.

No case or statute strictly defines what is meant by association. Rather, an illustrative, non-exhaustive list of the kind of circumstances which might trigger a claim of associational discrimination under FEHA includes adverse personnel action against an employee because (1) a family member has a disability that is costly to the employer because the spouse is covered by the company’s health plan; (2) the employee’s association with a person with a disability indicates that the employee is likely to develop the disability as well; or (3) the employee is somewhat inattentive at work because his spouse or child has a disability that requires his attention. (Castro-Ramirez v. Dependable Highway Express, Inc. (2016) 2 Cal.App.5th 1028 [discrimination claim stated where employer refused to continue schedule that allowed employee to administer daily home dialysis to his disabled son]; see Chen v. County of Orange (2002) 96 Cal.App.4th 926, 943 [discussing, in dictum, unlawful discrimination against white woman because married to African-American man]; Gov’t Code § 12940(a); Cal. Code Regs. tit. 2, § 11009(c).)

Some cases have characterized these illustrations into three categories of discrimination based on (1) expense, (2) disability by association, or (3) distraction. (Rope v. Auto-Chlor System of Washington, Inc. (2013) 220 Cal.App.4th 635, 654.) Rope articulated that these “provided an ‘illustrat[ive],’ rather than an exhaustive, list of the kind of circumstances which might trigger a claim of associational discrimination.” (Ibid.; see Larimer v. International Business Machines Corp. (7th Cir. 2004) 370 F.3d 698 [discussing federal law, which is generally illustrative of FEHA cases, but less so in these circumstances according to Castro-Ramirez].)

The FAC only offers the legal conclusion that there was a close, personal relationship between Maddock and herself that Defendant was aware of. (FAC ¶ 22.) The only pled association between the two is that Plaintiff supervised Maddock. (FAC ¶ 21.) In fact, Plaintiff does not even offer what the disability was. That aside, under the facts alleged, the Court cannot find that this association is covered by FEHA.

The cited cases by both parties that allowed for a cause of action for associational discrimination required a much closer relationship between the two parties, such that there was a motivation related to the disability itself, and not a minor relationship between a disabled person and an employee. Defendants citation to the three categories discussed is instructive into the type of relationship that constitutes a protected association. Notably, the illustrative categories provide an underlying reason a particular relationship deserves legal recognition by FEHA.

In other words, according to the illustrative associations, there should be a connection between the disability and the employee that, in some way, motivates the employer to punish the employee.

In Rope, the Second District found sufficient allegations of associational disability discrimination where the employee was fired after he announced his plan to donate a kidney to his sister. (Rope, supra, 220 Cal.App.4th at pp. 657–658.) While the plaintiff in Rope alleged facts did not “fit neatly within” one of the three categories, the court concluded the plaintiff had sufficiently pleaded a prima facie “expense” claim for associational disability discrimination. (Ibid.) Accordingly, Rope reversed the trial court’s sustaining of a demurrer to those causes of action. (Id. at 661; see Castro-Ramirez, supra, 2 Cal.App.5th at 1041–1042.)

Plaintiff cites no authority that suggests that the statute ever intended to embrace a co-worker or supervisor relationship. Plaintiff does not attempt to place herself into any of these loose categories in her association with Maddock. There are no allegations that Defendant perceived Plaintiff’s relationship with Maddock: (1) risked increased expense to Defendant; (2) could cause Plaintiff to become disabled as well; or (3) distracted Plaintiff or otherwise reduced her working capacity. Rather, Plaintiff merely went to bat for Maddock, a supervisee, and apparently lost her job for it. (FAC ¶¶ 26-41.) These facts may provide for a wrongful termination claim, but it does not constitute a direct discrimination against Plaintiff based on Maddock’s disability.

The Court is also concerned that expanding the categories of association to a mere employee-employee or employee-supervisor relationship would vastly expand liability that FEHA into relationships that never contemplated. Despite its broad construction, tehre must be reasonable limitations to the types of relationships FEHA wishes to protect. While this case does not have to fit “neatly” in the categories shown by caselaw, the current facts are not even in the ballpark. Plaintiff needs more facts to establish their association.

Accordingly, Defendant’s demurrer is SUSTAINED with leave to amend as to this cause.

Fifth Cause of Action for Whistleblower Retaliation
Defendant demurs to the fifth cause of action for a violation of Lab. Code section 1102.5. Defendant argues that Plaintiff cannot plead a protected activity because 1) Plaintiff only disclosed an “internal personnel matter;” and 2) Plaintiff only reported to alleged wrongdoers.

To allege retaliation, a plaintiff must show (1) she engaged in a protected activity, (2) her employer subjected her to an adverse employment action, and (3) there is a causal link between the two. (Patten v. Grant Joint Union High (2005) 134 Cal. App. 4th 1378, 1384.) Lab. Code section 1102.5(b) protects employees from retaliation for disclosing information to government agencies or the employer regarding a violation of the law.

As to Defendant’s first point, it argues that there is a distinction between a complaint regarding “internal personnel matters,” which would not be protected, and the “disclosure of a legal violation,” which would be a protected disclosure under Labor Code section 1102.5. (See Patten, supra, 134 Cal.App.4th at 1384.) Defendant asserts that the FAC is limited to allegations that Plaintiff purportedly made complaints at the workplace to Defendant. (FAC, ¶ 81).

Defendant’s reliance on Patten is misplaced. In that case, the plaintiff alleged four distinct disclosures as potential protected actions under section 1102.5: (1) a refusal to sign off on forms for use of surplus funds due a to a fear that there was no way to ensure the expenditures would be proper under the applicable guidelines; (2) disclosure of complaints about a male P.E. teacher “peering into the girl’s locker room;” (3) “an off-color remark that a male science teacher made to a female student;” and (4) a request for additional staff to ensure student safety after and assault. (Id. at 1382.) Patten held that disclosures (2) and (3) did not constitute a protected activity because they did not constitute the “the disclosure of a legal violation.” (Id. at 1385.) Because these items did not appear to be reports of legal violations, but only internal employment disputes, they did not constitute protected activities under section 1102.5. (Ibid.)

Defendant exclusively relies on the Patten court’s analysis of those disclosures to conclude that Plaintiff’s disclosures did not fall under section 1102.5 protection. However, those categories are inapplicable to the instant allegations. The FAC alleges that Plaintiff informed Defendants that she believed their treatment of Maddock was a “violation of applicable California laws protecting disability rights and protected employees from discrimination, retaliation and harassment.” (FAC ¶ 40.) Thus, this would be a disclosure of a “legal violation” as opposed to an internal personnel matter.

As to Defendant’s second point, Defendant heavily relies on Mize-Kurzman. This case held that there is no potential liability under Labor Code section 1102.5 where the complaint or report was made only to the alleged wrongdoer. (Mize-Kurzman v. Marin Community College Dist. (2012) 202 Cal.App.4th 832, 859 (2012) [A complaint about illegal conduct made to a supervisor who is engaged in the misconduct is not a “disclosure” and is not protected whistleblowing activity because the recipient of the complaint already knows about his or her own wrongdoing.].) Defendant argues that Plaintiff did not engage in a protected disclosure because the complaints were made to Aleixo or Moore, who were already aware of the alleged violations because they were the wrongdoers. (FAC ¶ 40.) Of course, Plaintiff alleges that she informed “Defendants” (i.e. Emptech) of the violations. In any event, the Court does not find Mize-Kurzman persuasive, as more recent Second District case law disapproved of Mize-Kurzman’s analysis in a more applicable context. (See Hager v. County of Los Angeles (2014) 228 Cal.App.4th 1538.)

In Mize-Kurzman, the court addressed what constitutes a “disclosure,” citing both the dictionary definition and federal whistleblowing case law/statutes. The court found that the trial court had not erred when it looked to federally-based limitations on disclosures in drafting jury instructions. (Mize-Kurzman, supra, 202 Cal.App.4th at 846-849.) Relying on federal case law, the court agreed that “disclosures” did not include reports of information “already known.” (Id. at 858-859.) The court also found that a disclosure did not include reports to a supervisor who is the alleged wrongdoer, since it was also known. (Id. at 857-859.)

In Hager, the Second District addressed Mize-Kurzman and whether the plaintiff had engaged in a disclosure under section 1102.5. (Id. at 270.) The court in Hager first discussed whether section 1102.5(b) limited whistleblower protection to the first employee who discloses a violation of state or federal law that had not been previously disclosed by another employee. The Hager court chose not to follow Mize-Kurzman and held that this was “contrary to the plain statutory language and legislative intent in enacting section 1102.5(b).” (Id. at 270-276.) The court noted that “[n]o such ‘first report’ limitation was discussed in Mize-Kurzman, appears in section 1102.5(b), or is addressed in the federal and state cases cited and relied on by the Mize-Kurzman court.” (Id. at 276.) This was because the Mize-Kurzman decision never considered whether a second employee who disclosed the same unlawful activity that the plaintiff disclosed would or would not have been protected under section 1102.5(b); and the plain language of section 1102.5(b) also did not limit whistleblower protection only to an employee who discloses unlawful conduct that had not been previously disclosed by another employee.

Second, Hager rejected federal case law that found that disclosures to the wrongdoer are not protected. (Id. at 277-278.) The court noted that the California cases cited by Mize-Kurzman on this issue did not address the issue of whether a report to a wrongdoer was protected. (Ibid.) Hager also cited Jaramillo, a California Appellate decision, where it was held that a public employee’s report of wrongdoing to the alleged wrongdoer was covered by the statute. (Jaramillo v. County of Orange (2011) 200 Cal.App.4th 811.) Defendant does not adequately address why the “special circumstances” of the wrongdoer being the county sheriff in that case makes Jaramillo exceptional. The circumstances in Jaramillo are analogous to the instant case, where both the wrongdoers were the “last person who might be willing to do anything about it.” (Id. at 827.) Here, Plaintiff allegedly reported to Aleixo and Moore, respectively the CEO/President and Human Resource director of Emptech. There is no indication that Plaintiff could have gone further up the corporate chain of command. Therefore, it can be fairly inferred that they were the “last person” who might be willing to do anything about the wrongful acts.

The Court finds that Hager and Jaramillo to be persuasive. To the extent there appears to be a split of authority, the Court chooses to follow the Second District in Hager. Plaintiff’s reports of illegal activity to his superiors may constitute protected disclosures even if the persons to whom the disclosures were made were the alleged wrongdoers.

Accordingly, Defendant’s demurrer to the fifth cause of action is OVERRULED.

Moving party is ordered to give notice.