California Employment Law Notes – Employee Benefits & Compensation

$2.16 Million Defamation Verdict Is Voided On Appeal

Hearn v. Pacific Gas & Elec. Co., 108 Cal.
App. 5^th 301 (2025)

In this case, the Court of Appeal reaffirmed the principle that
an employee’s tort claim is not separately actionable against
an employer when it is premised upon the same conduct that gave
rise to the termination of employment and where the damages sought
are solely related to the loss of employment. The Court relied upon
case law going back as far as Foley v. Interactive Data
Corp., 47 Cal. 3d 654 (1988), which delineates the ability of
an employee to recover tort damages.

Todd Hearn went to trial on claims for (1) retaliation in
violation of section 1102.5 of the California Labor Code and (2)
defamation. Hearn’s former employer (PG&E) terminated Hearn
based on findings from an investigation into various violations of
the employee code of conduct. At trial, the jury found against
Hearn on the retaliation claim but found in his favor on the
defamation claim, awarding him $2.16 million in compensatory
damages. The jury specifically found that the investigative report
that resulted in Hearn’s termination was the source of the
purportedly defamatory statements. PG&E moved for JNOV on the
ground that Hearn had conceded that his damages for the alleged
defamation were simply his termination-related damages –
i.e., that he had suffered no distinct reputational harm
or other damages specifically attributable to the allegedly
defamatory conduct. The trial court denied PG&E’s JNOV
motion.

In a 2-to-1 ruling, the Court of Appeal reversed the trial
court’s judgment entered in Hearn’s favor on the defamation
cause of action, agreeing with PG&E that Hearn could not pursue
a tort claim against PG&E based on the same conduct and seeking
no distinct damages from his unsuccessful wrongful termination
claim. In so ruling, the Court reaffirmed the long‑standing
principle against an employee bringing a duplicative tort claim
against an employer which is simply a wrongful termination claim by
another name.

USPS Employee’s Hostile Work Environment Claim Can
Proceed

Lui v. DeJoy, 129 F.4^th 770
(9^th Cir. 2025)

Dawn Lui, the former postmaster of the United States Post Office
in Shelton, Washington, alleged she was targeted because of her
race, sex and national origin. Lui alleged disparate treatment and
retaliation in violation of Title VII. The district court granted
summary judgment to the Postmaster General, but the Ninth Circuit
reversed in part, holding that Lui’s disparate treatment claim
should not have been dismissed. The Court concluded that Lui had
satisfied the McDonnell Douglas test for establishing a
prima facie case by showing she was removed from her position as
Postmaster, demoted and replaced by a white man. The Court further
held that there is a genuine dispute of material fact about whether
the decisionmaker’s decision to demote Lui was independent or
influenced by a biased subordinate and that Lui had properly
exhausted her administrative remedies. As for Lui’s claim of
retaliation, the Court affirmed summary judgment on the ground that
Lui failed to establish a causal connection between any protected
conduct and the demotion decision.

Employer Did Not Violate FEHA By Denying Employee Disability
Retirement Benefits

Lowry v. Port San Luis Harbor Dist., 109 Cal.
App. 5^th 56 (2025)

John Lowry was employed as a harbor patrol officer before
suffering a permanently disabling on-the-job injury. His treating
psychiatrist concluded that Lowry suffered from PTSD as a result of
the accident and was not fit to return to work and instead should
be “medically retired.” Lowry was subsequently terminated
because he could not perform the essential job duties of Harbor
Patrol Officer III with or without accommodation. Lowry sued for
disability discrimination under the FEHA based on the
District’s denial of disability retirement benefits. The trial
court granted summary judgment to the District on the ground that
disability retirement “does not qualify as a term, condition,
or privilege of employment.” The Court of Appeal affirmed.
See also Mandell-Brown v. Novo Nordisk Inc., 2025 WL
718890 (Cal. Ct. App. 2025) (trial court properly granted
employer’s motion for summary after plaintiff failed to file an
opposition after receiving two continuances to do so).

Employee’s Attorney And Expert Witnesses Were Properly
Disqualified For Use Of Employer’s Privileged Information

Johnson v. Department of Transp., 2025 WL
829714 (Cal. Ct. App. 2025)

After Christian L. Johnson sued his employer (Caltrans), an
attorney for Caltrans sent a confidential email about the
litigation to Nicholas Duncan (Johnson’s supervisor). Duncan
then sent an image of the email to Johnson who shared it with his
attorney and several retained experts and other individuals. The
trial court granted Caltrans’s request for a protective order
on the ground that the email was covered by the attorney-client
privilege. The trial court also ordered Johnson and his attorney to
destroy or return all copies of the email and to refrain from any
further dissemination of the email. The trial court subsequently
granted Caltrans’s motion to disqualify Johnson’s attorney
and retained experts with whom the email had been shared based upon
various violations of the protective order. The Court of Appeal
affirmed the order. See also Cahill v. Insider Inc., 2025
WL 838264 (9^th Cir. 2025) (district court had authority
to order media organizations to return or destroy confidential
documents that had been inadvertently disclosed).

Sexual Harassment Lawsuit Cannot Be Compelled To
Arbitration

Casey v. Superior Court, 108 Cal. App.
5^th 575 (2025)

Kristin Casey, a former employee of D.R. Horton, Inc., sued the
company and one of its employees, Kris Hansen, for sexual
harassment, sex discrimination, retaliation and failure to prevent
discrimination and harassment in September 2023. D.R. Horton
attempted to enforce an arbitration agreement in Casey’s
employment contract, which included a choice-of-law provision
applying California law. Casey opposed arbitration, arguing that
the federal Ending Forced Arbitration Act (the EFAA) gave her the
right to pursue her claims in court.

The EFAA, enacted in 2022, provides that a “person alleging
conduct constituting a sexual harassment dispute” may elect
that “no predispute arbitration agreement . . . shall be valid
or enforceable with respect to the case filed under federal, tribal
or state law and relates to the sexual harassment dispute.”
The trial court upheld the arbitration agreement, enforcing the
terms to which Casey had agreed. But on a writ petition, the Court
of Appeal reversed, holding that the EFAA preempts state law so
long as the employment relationship involves interstate commerce (a
low hurdle). The court further determined that an employer cannot
rely on a choice-of-law clause to avoid the effect of the EFAA.

Arbitration Agreement Was Not Substantively Unconscionable

Vo v. Technology Credit Union, 108 Cal. App.
5^th 632 (2025)

Thomas Vo sued his former employer (TCU) for violations of the
FEHA; TCU responded with a motion to compel arbitration. The trial
court denied TCU’s motion on the ground that that it was
unconscionable due to the arbitrator’s inability to compel
prehearing third-party discovery. The Court of Appeal held because
there was only a “minimal degree of procedural
unconscionability” associated with the “standard
pre‑employment paperwork,” the arbitration agreement was
not invalid on that ground. As for whether the agreement was
substantively unconscionable, the Court held that “the JAMS
Rules incorporated into the arbitration agreement here provide an
arbitrator the authority to permit nonparty discovery to allow fair
arbitration of Vo’s statutory claims.” Consequently, the
agreement was not substantively unconscionable, and the motion to
compel arbitration should have been granted.

FAA Does Not Preempt California Anti-Arbitration Statute

Colon-Perez v. Security Indus. Specialists, 108
Cal. App. 5^th 575 (2025)

The employer in this case (SIS) challenged Cal. Code Civ. Proc.
§ 1281.98 (requiring an employer to pay arbitration fees
within 30 days or waive the right to arbitrate) on various grounds,
including that the statute is preempted by the Federal Arbitration
Act (FAA). This issue is currently pending before the California
Supreme Court in Keeton v. Tesla, Inc., 103 Cal. App.
5^th 26, rev. granted (2024). In this case, the
Court of Appeal held “we are not persuaded to depart from our
conclusions in Keeton” that the FAA does not preempt
the state statute. The Court further held that Cal. Code Civ. Proc.
§ 473(b) (excusable neglect of counsel) was inapplicable to
remedy the failure to comply with Section 1281.98. See also
Arzate v. ACE Am. Ins. Co., 108 Cal. App. 5^th 1191
(2025) (plaintiff not defendant was required to initiate
arbitration after trial court granted defendant’s motion to
compel arbitration).

District Court Improperly Remanded Action That Was Removed
Under CAFA

Perez v. Rose Hills Co., 2025 WL 811096
(9^th Cir. 2025)

Elizabeth Perez sued her former employer (Rose Hills) in this
putative class action involving alleged violations of various
California wage and hour laws. Rose Hills removed the action to
federal court under the Class Action Fairness Act (CAFA), but the
district court remanded the action on the ground that Rose Hills
had failed to satisfy CAFA’s $5 million
amount‑in‑controversy requirement. The Ninth Circuit
vacated the remand order and remanded the case to the district
court for further consideration, holding that the removing
defendant was permitted to rely on a chain of reasoning that
includes reasonable assumptions to calculate the amount in
controversy, including a computation based on the wage rate at
which the employer is alleged to have committed various violations
(citing Arias v. Residence Inn by Marriott, 936 F.3d 920
(9^th Cir. 2010)).

Employees Who Recovered $140,000 Were Entitled To $200,000 In
Fees/Costs

Villalva v. Bombardier Mass Transit Corp., 108
Cal. App. 5^th 211 (2025)

Mark Villalva and Bobby Jason Yelverton are train dispatchers
who sued their employer (Bombardier) for allegedly unpaid wages.
Rather than filing their claims in court, the employees first
sought relief from the California Labor Commissioner, using the
so-called “Berman” hearing process pursuant to Cal. Lab.
Code § 98, et seq. After the labor commissioner
denied their claims, the employees filed a request for de novo
hearing in the superior court where they prevailed in a bench trial
and received an award of $140,000 in back wages and penalties. The
trial court also granted the employees’ motion for
attorneys’ fees and costs in the amount of $200,000. On appeal,
Bombardier asserted that the employees were not entitled to recover
their fees and costs because Labor Code § 98.2(c) only
authorizes an award of fees and costs against an unsuccessful
appellant in a de novo superior court trial. The Court of Appeal
disagreed and held that “nothing in section 98.2 suggests that
the Legislature intended to make this remedy unavailable to
employees who first attempt to obtain relief from the labor
commissioner through the expedited Berman hearing.”
Compare In re Kirsten v. California Pizza Kitchen Inc.,
129 F.4^th 667 (9^th Cir. 2025) (court approves
$950,000 class action settlement but remands case for district
court to determine the settlement’s actual value to class
members before approving an award of $800,000 in attorney’s
fees).

California Employment Law Notes

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