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Raising the Avoidable Consequence Defense In Employment Matters

In State Dept. of Health Services v. Superior Court (2003) 31 Cal. 4th 1026, 1044, the California Supreme Court stated: “[I]n a FEHA action against an employer for hostile environment sexual harassment by a supervisor, an employer may plead and prove a defense based on the avoidable consequences doctrine. In this particular context, the defense has three elements: (1) the employer took reasonable steps to prevent and correct workplace sexual harassment; (2) the employee unreasonably failed to use the preventive and corrective measures that the employer provided; and (3) reasonable use of the employer’s procedures would have prevented at least some of the harm that the employee suffered.”

And, in City of Petaluma v. Superior Court (2016) 248 Cal. App. 4th 1023, the court explained: “The [avoidable consequence] defense allows an employer to escape liability for those damages ‘the employee more likely than not could have prevented with reasonable effort and without undue risk, expense, or humiliation, by taking advantage of the employer’s internal complaint procedures appropriately designed to prevent and eliminate sexual harassment.’” (City of Petaluma v. Superior Court, supra, 248 Cal. App. 4th at page 1036, quoting from State Dept. of Health Services, supra, 31 Cal. 4th at page 1044.)

In City of Petaluma, the trial court ruled that an employer waived any claim of privilege that might otherwise protect outside counsel’s factual investigation into a former employee’s FEHA claims by asserting an avoidable consequences defense. However, the Appellate Court reversed the trial court, and held that an employer does not waive any applicable privileges associated with an investigation conducted after an employee leaves his or her employment by asserting such a defense. City of Petaluma, supra, 248 Cal. App. 4th at page 1036.

The Appellate Court in City of Petaluma reviewed Wellpoint Health Networks v. Superior Court (1997) 59 Cal. App. 4th 110, which considered whether an employer waived any attorney-client or work product protections associated with a prelitigation investigation by raising the investigation as a defense to harassment claims. In Wellpoint Health Networks, the court held that “[i]f a defendant employer hopes to prevail by showing that it investigated an employee’s complaint and took action appropriate to the findings of the investigation, then it will have put the adequacy of the investigation directly at issue, and cannot stand on the attorney-client privilege or work product doctrine to preclude a thorough examination of its adequacy.” (Id. at page 128.)

“The avoidable consequence defense focuses upon what the employer and employee did or did not do while the employee was employed. The assertion of the avoidable consequences defense may put the adequacy of an investigation into issue if the person was still employed and able to take advantage of any corrective measures the employer undertook as a result of the investigation. The investigation may also be relied upon to show that the employer took reasonable steps to prevent and correct workplace sexual harassment while the employee was employed.” City of Petaluma, supra, 248 Cal. App. 4th at pages 1036 and 1037.

However, “the assertion of an avoidable consequence defense does not put a postemployment investigation directly at issue in the litigation. The employee necessarily could not have taken advantage of any corrective measures adopted in response to a postemployment investigation. Further, a postemployment investigation would not itself demonstrate that the employer took reasonable steps to prevent and correct workplace harassment while the employee was still employed.” City of Petaluma, supra, 248 Cal. App. 4th at page 1037. 

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