In California, as elsewhere, the courts giveth, and the courts taketh away. Two recent wins for employers in the Golden State were accompanied by a setback for individual supervisors and managers.

Win One: Court’s Discretion to Deny Award of Attorney Fees

We may expect to see fewer big attorney fee awards on small judgments in California employment cases. On January 14, 2010, the California Supreme Court held in Chavez v. City of Los Angeles, 47 Cal.4th 970 (2010), that a state civil procedure rule authorizing denial of attorney fees and costs in certain cases applies to employment discrimination claims brought under California’s Fair Employment and Housing Act (FEHA). That rule, Section 1033 of the California Code of Civil Procedure, allows judges to deny fees and costs to a prevailing party who recovers a judgment that could have been rendered in a limited civil case (i.e., less than $25,000) but who failed to bring the action as a limited civil case. Thus, prevailing plaintiffs under FEHA are now less likely to recover big-dollar attorney fees in small-dollar cases.

Win Two: Limit on Punitive Damages

On November 20, 2009, the California Supreme Court, in Roby v. McKesson, 47 Cal.4th 686 (2009), brought itself in line with federal courts by limiting punitive damages to the amount awarded as compensatory damages in that case. That is, the Court held that the jury’s award of punitive damages against an employer exceeded the 1:1 ratio between compensatory and punitive damages allowed by the United States Constitution. The Court established three factors to consider when awarding punitive damages: 1) the degree of reprehensibility; 2) the disparity between the harm suffered by the plaintiff and the size of the award; and 3) the difference between the punitive damages awarded by the jury and civil penalties imposed or authorized in comparable cases. Based on the facts of the McKesson case, the Court held that the amount of compensatory damages set the ceiling for the punitive damages.

Setback: Individual Liability for Discrimination?

In the McKesson case, the Court blurred the distinction between discrimination and harassment with respect to individual liability. Under California law, individuals cannot be liable for discrimination, but they can be liable for harassment. One basis for this distinction is that discrimination involves official employer actions (e.g., hiring, firing), while harassment arises from what individuals say or do to make the environment hostile. In McKesson, the Court held that the same conduct could be both discrimination and harassment because the official employment action could communicate a hostile message. By blurring the distinction between discrimination and harassment, this case may make it easier for employees to impose liability on individuals for what is essentially harassing conduct.