AGHW Partners Peter Glaessner and Steven Werth Win Arbitration Decision for City of Milpitas

The FEHA and common law employment claims of the former City Manager of the City of Milpitas were rejected in a binding arbitration decision.  Peter Glaessner and Steve Werth teamed up to examine 22 witnesses in a five day arbitration hearing.

The former City Manager testified that he was the target of age harassing comments that were directed toward his plans to retire, by the newly-elected Mayor, starting in December 2016. He also claimed that he verbally reported instances of sex and age harassment that were directed at other City employees, but he never followed the City’s established procedures for reporting age-harassing remarks that were directed at him. The City demonstrated  the City Manager never reported remarks made to him for almost four months. Once reported (April, 2017), the City promptly hired an independent investigator.

Before making  the City aware of his age-harassment complaint, the City Manager hired a private law firm  – at the City’s expense –  to investigate and prosecute his claims against Milpitas. This law firm first reported his age-harassment claims in a letter making a $1 million settlement demand on behalf of the City Manager. Two weeks after the settlement demand letter was received at City Hall, the City’s finance department discovered the City Manager’s use of a City-issued credit card to pay for his own legal expenses. He also attempted to get approval of a $30,000 requisition for further funding of his legal expenses, which were rejected by the City’s finance department. The City Attorney was informed by the finance department of the misuse of the City-issued credit card, and the City Manager’s attempt to secure another $30,000 through the requisition process. The press also learned of the City Manager’s misuse of public funds, and publicly exposed his actions.

In response, the City Manager furiously backpedaled, first suggesting he hired the law firm to investigate possible sexual harassment of female employees by the Mayor. However, the retainer agreement was issued to the City Manager at his personal address. The City Attorney was unaware of the retention of the law firm by the City Manager.  The scope of representation in the letter identified only his claims, not any work to investigate a hostile workplace for female employees.   No evidence was presented that the law firm did any investigation. In fact, the law firm would have had a conflict of interest by concurrently representing the City Manager on his age harassment claim while acting on behalf of the City in conducting a sexual harassment investigation.

Once the charge was discovered on his City-issued credit card, the City Manager was informally asked by the City Attorney about the credit card charge from the law firm. The City Manager initially replied that this charge had already been repaid – a false statement at the time.  (He later repaid the City for the credit card charges.) The City Manager then attempted to retrieve original documents from the finance department providing the paper trail to his approval of the law firm’s charges as a City expense.

The City Manager was angered by the press reporting. He began a campaign to harass and discredit those City employees he suspected of “leaking” the story to the press. (He never proved there was a leak coming from City employees.) His conduct reached a point that by May, 2017 the Council had received multiple reports of tense confrontations with several City employees, and it issued a stay away order for the City Manager not to physically enter the finance department.  Yet within one business day of receiving the stay away order, the City Manager made three separate visits to the finance department to coerce an employee to write an email that would distance him from having approved the City’s credit card policies.

Once it was discovered that he ignored the “stay away” order, the City Manager was placed on administrative leave for insubordination (and thereby disregarding the stay away order). Meanwhile, a separate outside investigator was hired to investigate the City  Manager’s suspected misuse of City money to finance his own legal claims. As a result of the findings of that investigation, the City issued a notice of intended discipline to the City Manager, indicating that it was considering terminating him and scheduling a Skelly hearing. The City Manager resigned/retired on the eve of the Skelly hearing, claiming that he could not receive a fair hearing.  At the arbitration, the City Council members testified that they would have considered any exculpatory evidence the City Manager was prepared to present, and that they had not made up their minds about the Skelly hearing in advance.

The arbitrator (Martin Dodd, AAA) rejected all of the employment claims. The arbitrator found the City Manager was not forced to resign, that the City afforded him a Skelly hearing, and only after he knew he was at potential risk of termination did he decide to resign. As to the age harassment claims, the arbitrator noted that age was not the focal point for the comments and age was not the primary or motivating factor in these comments; rather, the comments were expressing frustration that the City Manager could be terminated only for cause and that he was able to block or frustrate the Mayor’s campaign promises.  In rejecting the City Manager’s claims that the Mayor orchestrated a campaign to terminate him, the arbitrator noted that the Mayor was one of five elected councilmembers, and that the City could not remove an elected council member. The arbitrator found the Mayor was not a supervisor under FEHA because the City Council as a governing body, not any individual council member, had the authority to hire, fire and direct him.

For further information about this case, please contact Peter Glaessner at pglaessner@aghwlaw.com or Steven Werth at swerth@aghwlaw.com, or by calling 415.697.2000.