California Peculiarities Employment Law Blog

Ninth Circuit Jeopardizes Broad “No Re-Hire” Clauses

Posted in 2015 Cal-Peculiarities, Case Update

(Illustration) No HiringBy Carrie Price and Robert Milligan

In Golden v. California Emergency Physicians Medical Group, a divided Ninth Circuit panel held that a “no re-hire” provision in a settlement agreement could, under certain circumstances, constitute an unlawful restraint of trade under California law.

The Facts

Dr. Golden, a physician, agreed to settle his discrimination claim against his employer, California Emergency Physicians Medical Group (“CEP”). Their oral settlement agreement, later reduced to writing, had Dr. Golden “waive any and all rights to employment with CEP or at any facility that CEP may own or with which it may contract in the future.” The district court enforced the parties’ settlement over Dr. Golden’s objection that this “no-rehire” clause violated Section 16600 of California’s Business & Professions Code, which provides that a contract is void if it restrains anyone from engaging in a lawful profession.

The Appellate Court Decision

On appeal, Dr. Golden argued that the “no re-hire” clause was unlawful and that, because it constituted a material term of the settlement, the entire agreement was void, permitting Dr. Golden to pursue his discrimination lawsuit.

The Ninth Circuit panel determined that Dr. Golden might prevail on this argument, and remanded the case to the district court for further proceedings. The panel first found that the validity of the “no re-hire” clause was ripe for determination. The dispute was ripe not because CEP was currently seeking to enforce the “no re-hire” clause against Dr. Golden (it was not), but because Dr. Golden sought to have the settlement agreement voided after his former attorney attempted to enforce the agreement in order to collect attorney’s fees. The panel reasoned that “when a litigant resists his adversary’s attempt to enforce a contract against him, the dispute has already completely materialized.”

The Ninth Circuit panel next addressed the validity of the “no re-hire” clause. Historically, this type of clause, which commonly appears in settlement agreements, has not been viewed as a non-compete clause, in that a “no re-hire” clause does not keep a former employee from working for a competitor—just for the former employer. The Golden court, however, took a wider view of Section 16600, reasoning that it applies to any contractual provision that “ ‘restrain[s anyone] from engaging in a lawful profession, trade, or business of any kind’ … extend[ing] to any ‘restraint of a substantial character,’ no matter its form or scope.”

To support this broad interpretation, the Ninth Circuit panel majority cited Section 16600’s language, statutory context, and case law to reason that Section 16600 applies to any contractual limitation that restricts the ability to practice a vocation. See, e.g., Edwards v. Arthur Andersen LLP, 189 P.3d 285 (Cal. 2008); City of Oakland v. Hassey, 163 Cal. App. 4th 1447 (2008). The panel majority noted that both Edwards and Hassey focused on the text of the law—whether the contested clause restrained someone from engaging in a trade, business, or profession—and not specifically whether the clause prevented competition with the former employer. The panel majority concluded that a clause creating a restraint of “substantial character” that could limit an employee’s opportunity to engage in a chosen line of work would fall under Section 16600’s “considerable breadth.”

Significantly, the Ninth Circuit panel did not rule that the clause was actually void. Instead, the panel majority concluded that the district court would need to do more fact-finding to see if the clause actually created a restraint of a “substantial character” on Golden’s pursuit of his profession.

It also is significant that the Ninth Circuit panel majority—mindful that the California Supreme Court itself has not ruled on whether Section 16600 extends beyond traditional non-compete clauses in employment agreements—was merely predicting how it thought the California Supreme Court would rule.

A sharp dissent by Judge Kozinski expressed skepticism that the California Supreme Court would reach the same result as the panel majority, and argued that the settlement agreement should be enforced because the provision put no limits on Dr. Golden’s current ability to pursue his profession.

What Is the Golden Rule for California Employers? Continue Reading

California Legislative Update: 2015 Employment Legislation To Watch

Posted in 2015 Cal-Peculiarities, 2015 Legislative Updates

California State FlagBy Kristina Launey and Christina Jackson

Having reconvened this past Monday from Spring Recess, the California Legislature will return its attention to the employment-related bills that were introduced for this 2015-16 Legislative Session. These bills—covering topics including paid leave rights, hours of work, and payment of wages—will now be heard in committees, as their authors attempt to carry them through the process to the Governor’s desk for approval. While it is too early to tell which bills will make the cut, those that do will be sure to affect employers doing business in California.

The proposed bills we’re watching most carefully are: Continue Reading

Not an April Fool’s Joke! Possible Legislative Clarification to CA Paid Sick Leave Law To Come: Proposed Amendments Introduced

Posted in 2015 Legislative Updates, Sick Leave Series

(Photo) Sick PhoneBy Kristina Launey

On March 26, 2015, Assembly Member Lorena Gonzalez - the author of California’s Paid Sick Leave law, the Healthy Workplaces, Healthy Families Act of 2014 (the “Act”) – introduced amendments to that law. The vehicle for those amendments, Assembly Bill 304, was re-referred to the Assembly Committee on Labor and Employment to be set for hearing.

The bill would amend Labor Code sections 245.5, 246, and 248.5, to make the following changes to the Act:

  • Require that an employee work for the same employer for 30 or more days within the previous 12 months to qualify for paid sick leave under the Act.
  • Regarding the definitions in the Act:
    • Exclude a retired annuitant of a public entity and a worker covered by the Railroad Unemployment Insurance Act, as specified, from the definition of employee.Remove the definition of health care provider.
    • Authorize an employer to provide for sick leave accrual on a basis other than one hour for each 30 hours worked, provided that the accrual is on a regular basis and the employee will have at least 24 hours of paid sick leave accrued by the 120th calendar day of employment.
  • Clarify that no accrual or carry over is required if employees receive the full amount of paid sick leave at the beginning of each calendar year, year of employment, or 12-month basis, rather than the previous ambiguous reference to simply “year.”
  • Permit an employer that provides unlimited sick leave to its employees to satisfy notice requirements by indicating “unlimited” on the employee’s itemized wage statement.
  • Delete the current rate of pay provision in Section 246(k), and instead provide that if the employee receives different hourly rates when the accrued sick leave is taken, then the rate of pay would be calculated in the same manner as the regular rate of pay for purposes of overtime.
  • Provide that an employer is not required to reinstate accrued paid time off to an employee who is rehired within one year of separation from employment, that was paid out at the time of termination, resignation, or separation.
  • From Section 248.5(e), remove “any person” with respect to enforcement of the Act’s provisions, which would likely remove concern that a private right of action exists.
  • Make other “technical and conforming changes.”

But the bill contains no urgency clause—which would be necessary for the amendments to take effect prior to the effective date of July 1, 2015 that applies to the bulk of the Act’s rights and obligations. Unless later amendments add an urgency clause (as they should), the contemplated amendments to the bill won’t take effect until January 1, 2016.

We’ll continue to follow this bill as it moves through the legislative process and keep you updated. For background on the Act, see our prior blog posts here and here.

New Law Delights California Employers

Posted in 2015 Cal-Peculiarities, 2015 Legislative Updates

April the first, Fool's day, on table calendarBy our source in Sacramento

Emergency legislation promises to revitalize the California economy and place our state in the forefront of jurisdictions promoting economic growth and employment opportunity.

The California’s Open for Business—Really!—Act (“COBRA”), AB 666, effective April 1, works the following reforms in California employment law.

PAGA repeal. Article I of COBRA repeals the Private Attorneys General Act of 2004. The legislative finding reports that PAGA, during its first ten years, did little more than enrich opportunistic plaintiffs’ counsel by creating collateral settlement leverage in wage and hour class actions.

Other wage and hour reform: Systematic Labor Code amendments advance a new general principle that pay practices that are lawful under federal law are also lawful in California, absent express statutory language stating a clear intent to deviate from the employment law followed in America generally. Under COBRA, judges no longer can invent special rules to burden California employers. The Legislature has thus restored California to the national fold with respect to a business’s use of piece rates, commission plans, temporary employment agencies, independent contractor relationships, and other traditional methods of securing services.

Litigation reform: Employees suing employers must now make a written monetary demand before they sue. Plaintiffs’ lawyers cannot recover attorney’s fees or costs unless the final outcome of the case is more favorable to the employee than the amount of the initial demand. And defendants filing summary judgment motions can now do so with 28 days’ notice (as is often the case in federal courts), rather than the excessive 75 days’ notice that California now requires.

Leave law reform: COBRA repeals California’s new mandatory paid sick leave act, and preempts municipal ordinances that require paid sick leave.

In his signing statement, Governor Jerry Brown praised the Legislature’s historic bipartisan accomplishment: “When we got to talking about this, everyone realized that we were tired of California being the laughing stock of the nation. No prudent business was even thinking about starting or expanding operations here with all the crazy labor laws we’ve created. They were just driving up costs and impairing efficiency while encouraging shake-down ‘gotcha’ lawsuits. Now we can truly welcome the businesses that create jobs for California families.”

Governor Brown continued: “We finally realized that our labor law has been prescriptive without being clear, mandatory without accounting for how working relationships vary, and onerous to employers while not producing significant benefits for workers. Enough already!”

If you would like to discuss this exciting new development, then please contact your favorite Seyfarth lawyer.

Or you might skip that step because you know that any news about California actually reducing burdens on employers would have to be an April Fool’s joke.

Edited by Chelsea Mesa

Fasten Your Seatbelts and Enjoy the Ride: the 2015 Edition of Cal-Peculiarities is Coming Soon!

Posted in 2015 Cal-Peculiarities

As loyal Cal Pecs Blog readers, you probably know of our signature book Cal-Peculiarities: How California Employment Law Is Different, which we update on an annual basis.  The 2015 edition will be ready for release by April 15.

This edition is the most comprehensive to date.  It highlights the most recent court decisions and legislative developments for private employers who do business in California.

The 2015 edition will be available in a convenient, searchable eBook format as well as paper.  Look for Seyfarth Shaw’s announcement in your Inbox on or before April 15.

How Do We Treat the Leased Among Us? New Law on Joint Liability With Labor Contractors

Posted in 2015 Cal-Peculiarities, Labor Contractors

(Illustration) ProfileBy Laura Maechtlen and Dana Howells

As of January 1, 2015, new California Labor Code section 2810.3 requires a “client employer” to share civil liability with “labor contractors” (aka payrolling, temporary staffing, or employee leasing agencies) for (1) payment of wages of the contract employees, and (2) failure to procure worker’s compensation coverage. Client employers will also have non-delegable responsibilities for worksite occupational health and safety.

What Does The New Law Provide?

  • No Shifting Of Liability, But Indemnity Allowed. Although a client employer cannot shift away all liability to a labor contractor for either wage payments or workers’ compensation, client employers may seek contractual indemnity against a labor contractor for liability that the labor contractor creates.
  • Workplace Safety Compliance Cannot Be Shifted. Client employers cannot contractually make the labor contractor solely responsible for workplace safety compliance.
  • 30-Day Notice Requirement Before Filing Civil Action. A worker or his or her representative must notify the client employer of specified violations at least 30 days before suing the client employer. Because of this notice provision, client employers may want to include language in contracts requiring a process in which the labor contractor must attempt to remedy any violation, before a civil action is filed, within the notification period. Client employers should also consider language that allows the client employer to step in and remedy during the notice period, while reserving its right to be reimbursed by the labor contractor.
  • No Retaliation. Neither the client employer nor the labor contractor can take action against a worker for providing the 30-day notice or for filing a claim or civil action.
  • Records Inspection. While the client employer’s records are subject to inspection by state enforcement agencies, the law also expressly “does not require the disclosure of information that is not otherwise required to be disclosed by employers upon request by a state enforcement agency or department.”
  • Exempt Employees Not Covered. The statute excludes from the definition of contracted “workers” those exempt under California’s executive, administrative, or professional exemptions (see Labor Code Section 515).

What Can Client Employers Do To Minimize Liability Under This New Law?

To try to protect against potential liability under the new law, client employers can: Continue Reading

A One-Two Punch: New CFRA Regs and Abusive Conduct Training

Posted in 2015 Cal-Peculiarities, 2015 Legislative Updates

thumbnailBy Dana Peterson

Breaking News: New CFRA regulations will take effect July 1, 2015.

Mandatory paid sick leave will not be the only new rule affecting California employers this summer. Also effective on July 1 are amendments to the California Family Rights Act (CFRA) regulations, just approved by the Office of Administrative Law. These regulations will more closely align the CFRA with the federal Family and Medical Leave Act (FMLA) regulations. This is welcome news to California employers who have grappled with the overlay of the FMLA regulations (amended in 2008) and the pre-2008 CFRA regulations (which did not incorporate the FMLA’s 2008 amended regulations.)  Nonetheless, some differences still exist between state and federal family and medical leave laws, including how the CFRA coordinates with state pregnancy disability leave laws.

Quick preview: The amended CFRA regulations include guidance on certain definitions (such as how to determine when businesses will be considered joint employers under CFRA), include changes to the mandatory poster requirement, and change what information employers must include on the certification form they make available to health care providers who are asked to certify leave for serious health conditions.

Coming soon: A complete analysis of the new amendments will follow shortly, so that you can be prepared when the amendments “go live” in July. We will also be hosting a webinar on the subject, which you will not want to miss!

Is California Poised to Be the First State to Outlaw Workplace Bullying? Or Will New York Beat Us to It? 

Following an amendment (AB 2053) to the Fair Employment and Housing Act (FEHA) that took effect January 1, 2015, California employers that are subject to the mandatory sexual harassment training requirement for supervisors must now include an additional training topic: prevention of “abusive conduct.” Read the text of the bill here.

Readers will recall that existing law (AB 1825, codified at Cal. Gov’t Code § 12950.1) requires employers with 50 or more employees to provide all California supervisory employees with at least two hours of effective interactive training on sexual harassment prevention. New supervisors must be trained within six months of being promoted or hired into a supervisory position and, thereafter, every two years.  The required training must include “information and practical guidance” regarding federal and state laws concerning sexual harassment, remedies available to victims of harassment, and practical examples to instruct the supervisors participating in the training. Now, in addition to the previously required topics, employers must include a segment aimed at the prevention of abusive conduct in the workplace.

What does that mean? Continue Reading

Post-Cochran BYOD Class Actions: Who’s an Employer To Call?

Posted in 2015 Cal-Peculiarities

Keyboard Illustration BYODBy Kristen Verrastro and Michele Haydel Gehrke

Loyal readers will recall our discussion of the perplexing Cochran v. Schwan’s Home Services, Inc. cell phone reimbursement case in this space (initially here, and then again here).

We’ve yet to see any other California appellate decision that confirms or challenges Cochran’s holding that, under California Labor Code section 2802, employees are entitled to reimbursement for “some reasonable percentage” of their personal cell phone bill if they must use their personal cell phone for work. And that “reasonable percentage” seems to apply irrespective of whether (1) the employee actually incurs any additional charges for the work-related portion of the total cell phone use, (2) a third party pays the employee’s bill, or (3) the employee has made any voice, text, or data plan changes because of the employee’s work-related usage.

But hold the phone—though California appellate courts have not addressed employer reimbursement for personal mobile device usage post-Cochran, we have seen Cochran-inspired class actions. In Araiza v. The Scotts Company, LLC, Los Angeles Superior Court Case No. BC570350 (filed January 26, 2015), the plaintiffs bring class claims alleging a failure to reimburse employee business expenses, in violation of Section 2802, and also allege a violation of Section 17200 of the Business and Professions Code. The plaintiffs expressly cite Cochran, arguing that Cochran requires the defendant employer to “maintain an expense reimbursement policy and/or practice stating that Defendant will affirmatively reimburse Class Members for a reasonable portion of their monthly personal cell phone bills and expenses necessarily incurred in their discharge of their duties.”

This case joins the many pre-Cochran class actions already invoking Section 2802 to claim expense reimbursement for work-related personal mobile device usage.

Cochran and cases of its ilk have many employers calling for guidance on how to reconcile their California expense reimbursement practice with their Bring Your Own Device (BYOD) policy.

We are here to help. We track all of these developments, so continue to check back here. In the meantime, we continue to encourage employers to assess their current expense reimbursement and cell phone policies and practices in light of this evolving legal landscape.

Additionally, join the authors of this post as they present a Seyfarth Shaw webinar on June 23, 2015, when they will discuss the impact of Cochran and highlight compliance issues for California employers to consider when crafting their BYOD and reimbursement policies.

Edited by Chelsea Mesa

CA Paid Sick Leave Update: Labor Commissioner Issues More FAQs

Posted in 2015 Cal-Peculiarities, 2015 Legislative Updates, California Leaves, Sick Leave Series

(Illustration) Sick PayBy Kristina M Launey

The Labor Commissioner has issued a new and updated set of FAQs interpreting California’s new Paid Sick Leave Law (AB 1522 of 2014).

If you’ve been following along, you know that after passage of the new law last year, the Labor Commissioner issued a template Poster and Wage Theft Prevention Notice for employers to use and post, as well as a first set of FAQs.

The new FAQs obligate employers to inform existing employees of the new sick pay law and changes in policy via the Wage Theft Notice, provide guidance regarding when such notice must be given to existing employees, and provide guidance regarding sick leave eligibility for seasonal or break-in-service employees, as well as part-time and alternative work schedule employees.

Wage Theft Prevention Notices: Employees hired before January 1, 2015 must receive a new Notice that contains the new information regarding paid sick time under amended Labor Code section 2810.5, even if there is no change in employer policy.

Employers must give all employees (not just those hired after January 1, 2015) a new Wage Theft Prevention Notice, announcing any change to paid sick leave, within seven days of the actual change. Although the FAQs are silent on this point, note that Labor Code section 2810.5,  which requires Wage Theft Prevention Notices, applies only to non-exempt employees.

The “date of actual change” would depend on when the employer either establishes a paid sick program under the paid sick leave law or changes an existing paid leave program to comply with this law, but would be no later than July 1, 2015. Thus, the last date to provide notice of changes would be no later than July 8, 2015 (seven days after the July 1 sick leave entitlement effective date).

Employers who do not want to issue new Wage Theft Prevention Notices to all current employees may instead inform those employees of the change to paid sick leave by using an alternative method authorized by Labor Code section 2810.5(b)(1) or (b)(2) (e.g., giving notice of change in a pay stub or itemized wage statement). Employers who choose this route should take care to follow the requirements of these alternatives and keep records of having provided those employees with the notice.

Even employers whose existing policy satisfies the minimum requirements of the law must still provide notice—via the new Wage Theft Prevention Notice or an alternative method—regarding the new paid sick leave law. The notice must contain information about the new paid sick leave law and how the employer intends to meet its requirements for the particular employee. For example, a timely writing provided to each employee that refers to or summarizes the existing policy and contains the points of information specified in the revised Wage Theft Prevention Notice would comply with the individual notice requirement. Continue Reading

More Alphabet Soup: A SF-Style Retail Workers Bills of Rights, A Proposed OSHA Regulation for Healthcare Workers, and an Update to the ABCs of the ACA

Posted in 2015 Cal-Peculiarities, 2015 Legislative Updates, San Francisco Ordinances

ABC Soup

 

California legislators and regulators continue their efforts to expand employee protections, and the IRS permits a temporary subsidy for separating employees who want to sample the small business exchanges for health care.  Read on for highlights.

 

 

San Francisco Retail Workers Bill Of Rights Redux: The State Legislature Is Cooking Up Trouble Outside Of San Francisco

By Kristen Verrastro and Jason Allen

The same old soup, just reheated?  State Assemblymember né San Francisco Supervisor David Chiu, along with Assemblymember Dr. Shirley Weber, recently introduced statewide legislation called the Fair Scheduling Act (AB 357), a bill meant to provide more predictable and stable work schedules to food and retail workers throughout California.  The full language of AB 357 has not yet been released, but the bill is expected to require food and retail establishments with 500 or more California employees to give at least two weeks’ notice of employee scheduling and provide extra pay for schedule changes made last minute.

As our loyal CalPecs blog readers know, San Francisco recently passed two ordinances—“Hours and Retention Protections for Formula Retail Employees” and “Fair Scheduling and Treatment of Formula Retail Employees”—which, together, are informally known as the “San Francisco Retail Workers’ Bill of Rights.”  (Click here, here, here, and here for our previous coverage.)  Then-Supervisor Chiu introduced the latter of the two ordinances.  Is Assemblymember Chiu simply modifying his recipe for statewide consumption?

Stay tuned and we will keep you posted as more information is released about this proposed legislation.

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This just posted by our Seyfarth Shaw’s Environmental and Safety Law Update:

CA Proposes New Workplace Violence Regulations for Health Care Employers, Home Health Providers and Emergency Responders

By Meagan Newman, Brent I. Clark, and Mark A. Lies, II

A draft proposed regulation from the California Division of Occupational Safety and Health (Cal/OSHA) would require health-care employers, home health and hospice providers and emergency responders to develop workplace violence-prevention plans, train their employees and keep records related to workplace violence incidents.  To read on, click here.

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The Separation Anxiety Continues, But A New IRS Regulation Answers One Question

By Dana Howells and Ben Conley

On February 18, we noted in this space (“Separation Anxiety:  The ABCs of Affordable Care Act & Covered California at Separation From Employment”) that employers are prohibited, in almost every instance, from reimbursing employees for individual health insurance premiums (either through the Covered California marketplace or otherwise).  This is in stark contrast to employers subsidizing COBRA, which is not only permitted but encouraged by being tax free to employers and employees (subject to IRS rules prohibiting discrimination in favor of highly compensated employees, where applicable).  Wouldn’t you know it, the same day we published, the IRS released additional guidance relaxing this limitation for some employers, albeit temporarily.

Specifically, the IRS created a limited transition period during which small employers (generally, those with no more than 50 full-time equivalent employees) may reimburse employees (or former employees) on a pre-tax basis for individual insurance market premiums.  The transition relief only extends through the end of 2015 when, as the IRS notes, the small business exchanges should be operating more smoothly, which provides an alternative to this practice.

For larger employers wishing to subsidize individual exchange coverage for departing employees, options are limited and complex.  Plans covering fewer than two participants who are current employees on the first day of the plan year are exempt from these prohibitions (meaning a plan covering only former employees could reimburse those former employees for individual insurance premiums).  Employers exploring this approach should exercise caution to ensure they have established a truly separate ERISA plan (including a plan document, summary plan description and, although unlikely, an annual report where applicable) to cover this population.  The exemption is not available if the reimbursements are treated as part of the active employee health plan (either intentionally or by default because the employer failed to establish a separate plan).