FEHA Promotion Claims Accrue Upon Knowledge Of Denial, And Defendants Get Costs Only If Suit Was Groundless

Seyfarth Synopsis: Failure to promote claims brought under the Fair Employment and Housing Act accrue when the adversely affected employee knows, or reasonably should know, of the employer’s unlawful refusal to promote; and FEHA defendants are not entitled to costs on appeal unless the plaintiff’s claims are objectively groundless. Pollock v. Tri-Modal Distribution Services, Inc.

The Facts

Pamela Pollock worked as a customer service representative at Tri-Modal Distribution Services. In 2014, she started dating Tri-Modal’s executive vice president. The executive vice president ended the relationship in 2016.

On April 18, 2018, Pollock filed an administrative complaint with the Department of Fair Employment and Housing, alleging that Tri-Modal and the executive vice president denied her a series of promotions because she refused to have sex with the executive vice president. Specifically, Pollock challenged a promotion that went to another woman instead of Pollock. The other woman received and accepted the offer of promotion in March 2017, but the promotion did not take effect until May 1, 2017.

The timing of the DFEH complaint matters, because the 2018 FEHA statute required litigants to file administrative complaints within one year of the “unlawful practice.” (The limitations period is now three years). To avoid a limitations defense, Pollock would need to show the failure to promote occurred after April 18, 2017—one year before her administrative filing.

The trial court granted summary judgment against Pollock, reasoning that the failure to promote occurred in March 2017—when the other woman received and accepted the offer of promotion. The court rejected Pollock’s argument that the failure to promote really occurred on May 1, 2017—the effective date of the promotion.

The Decision Below

The Court of Appeal agreed that Pollock’s claim was time-barred, holding that Pollock’s precise injury occurred when Tri-Modal decided not to promote Pollock in alleged violation of the FEHA. The Court of Appeal reasoned that, for a failure to promote claim, the “key date” for limitations purposes is when the employer tells the selected employee she will be promoted, not when the selected employee actually starts the new position.

Then the Court of Appeal also awarded costs on appeal to the defendants, because they had prevailed.

The Supreme Court’s Opinion

The Supreme Court reversed—dealing a double whammy to employment law defendants. First, the Supreme Court held that a FEHA claim for failure to promote does not accrue, and thus the limitations period does not begin to run, until an aggrieved employee knows or reasonably should know of the employer’s decision not to promote her. Second, the Supreme Court held that prevailing FEHA defendants are not entitled to costs on appeal absent a finding that the plaintiff’s claim was objectively groundless.

As to the limitations issue, the Supreme Court rejected the defense argument that Pollock’s claim accrued in March 2017—when Tri-Modal decided not to promote her and instead offered the position to the other woman—because that argument could lead to unjust results for employees. For example, employers may decide not to promote an employee, but never inform the employee of that decision, and then later rely on the employer’s own record of when the decision was made to assert that the time to challenge the decision had already lapsed.

The Supreme Court also rejected Pollock’s argument that her claim did not accrue until May 1, 2017—the effective date of the other woman’s promotion—because that argument conflates a promotion with a failure to promote. A refusal to promote one employee does not depend on any decision to promote another employee. Once an employer informs an employee she will be denied a promotion, the refusal to promote has occurred.

The Supreme Court adopted an approach between the two extremes. The Supreme Court reasoned that the aggrieved employee’s actual or constructive knowledge of the employer’s decision starts the limitations period running. Because notice to the aggrieved employee is an element of the limitations defense, the employer bears the burden of proving when the employee knew or should have known of the promotion was being denied.

The record on appeal did not discuss when Pollock knew or should have known of the decision to promote someone else. Accordingly, the record did not support a finding whether Pollock’s claim was time-barred under the Supreme Court’s rule, and so the case was remanded for further proceedings.

Meanwhile, the Supreme Court vacated the appellate award of costs to the prevailing defendants, because there was no finding that Pollock’s claims were objectively groundless. The Supreme Court held that an appellate court may not award costs or fees on appeal to a prevailing FEHA defendant without first determining that the plaintiff’s action was frivolous, unreasonable, or groundless when brought, or that the plaintiff continued to litigate after it clearly became so.

What Pollock Means for Employers

Pollock is especially important for employers in a remote workforce economy, where employees may not receive actual or constructive notice that a promotion has taken place as they might in a typical office setting. Since employers invoking the limitations defense must prove when the employee knew or should have known of the adverse promotion decision, employers should maintain clear written records of communication with employees regarding their promotional opportunities, including communications denying promotion.