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(Illustration) Shakespeare TypingBy Candace Bertoldi

“The rest is silence.” So spake Hamlet, as he expired on stage. Lawyers love wordplay. Webster defined it as the “playful or clever use of words.” Google defines wordplay as “the witty exploitation of the meanings and ambiguities of words, especially in puns.” Shakespeare was the king of wordplay; his exuberant punning, much like Hamlet’s famous last words, has kept literary critics debating for centuries over their meaning.

Lawyers especially enjoy the wordplay game of statutory interpretation, which many regard as the highest form of intellectual fodder. No one can deny that wage and hour litigation often arises out of the exploration (or exploitation) of seemingly innocuous words in California’s Labor Code. Perhaps the most litigated word in recent years was “provide”—until the California Supreme Court issued, in Brinker v. Superior Court, the final word on an employer’s duty to “provide” meal periods.

Currently in the hot seat are lesser-known words, contained in the Labor Code’s “day of rest” provisions:

  • Section 551 provides that “every person employed in any occupation of labor is entitled to one day’s rest therefrom in seven.”
  • Section 556 exempts employers from the duty to provide a day of rest “when the total hours of employment do not exceed 30 hours in any week or six hours in any one day thereof.”
  • Section 552 prohibits employers from “causing their employees to work more than six days in seven.”

Adding further to the confusion, the IWC Wage Orders acknowledge that an employee will sometimes work more than six consecutive days. They state that Sections 551 and 552 shall not be construed to prevent an accumulation of days of rest when “the nature of the employment reasonably requires the employee to work seven (7) or more consecutive days; provided, however, that in each calendar month, the employee shall receive the equivalent of one (1) day’s rest in seven (7).”

Employers have grappled with what it means to “cause” an employee to work six days in seven, what it means to provide “one day’s rest in seven,” and when the day of rest requirement is excused. Wage and hour litigation has exploited the ambiguity in these statutes. But the California Supreme Court now has an opportunity to provide some clarity.Continue Reading Mendoza v. Nordstrom: Court to Define “Day of Rest”

(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 Ninth Circuit Jeopardizes Broad “No Re-Hire” Clauses

By Daniel Whang

In plaintiff-friendly California, it may be surprising to learn that the California Supreme Court threw a few bones to employers during 2014. First, although lower courts seem determined to make it easier for plaintiffs to obtain certification in wage and hour class actions, the California Supreme Court’s decision in Duran v. U.S. Bank signaled that certification of wage and hour claims has become too perfunctory.

The Duran decision, covered in far more detail in a client alert, requires trial courts to consider an often neglected requirement for class certification: that the trial of the certified claims would be manageable. Duran is one of the few wage and hour class actions that went to trial, and the disastrous consequences of a poorly planned trial provided a powerful lesson that courts need to be far more careful in certifying class actions.

If Duran provided a useful weapon to oppose class certification, the California Supreme Court threw employers another bone by solidifying an employer’s ability to enforce class action waivers in arbitration agreements. In Iskanian v. CLS Transportation Los Angeles, LLC, the California Supreme Court acknowledged that, under the United States Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, class action waivers in arbitration agreements are enforceable.

But this was not a total employer victory. The California Supreme Court also held that claims under the Private Attorneys General Act of 2004 (“PAGA”) are not subject to mandatory arbitration, because the State (and not the employee) is the real party in interest and the State is not a party to an employer’s arbitration agreement. While employers were hopeful that the United States Supreme Court would grant the petition to review the PAGA exception that the California Supreme Court had created, the U.S. Supreme Court declined to hear the petition, leaving Iskanian good law for now, and permitting employees to pursue PAGA claims in court even if they have signed arbitration agreements that waive the right to pursue class and representative actions.


Continue Reading California Supreme Court: What It Did To Employers In 2014 And What’s Pending

By David Kadue

On Tuesday, January 20, 2015, the Court declined to take the case of CLS Transportation Los Angeles, LLC v. Iskanian, in which an employer asked the Court to reverse a ruling of the California Supreme Court. At issue was whether an employee who has agreed to submit all employment-related claims to arbitration, and who has also agreed to waive participation in class and representative actions, can evade that agreement and sue the employer under California’s Private Attorney General Act (“PAGA”). The California Supreme Court in June 2014 had sided with the suing employee.

Many observers expected that the case would be the latest episode in a drama that features a complicated relationship between two supreme courts. To simplify a bit, the U.S. Supreme Court traditionally has read the Federal Arbitration Act (“FAA”) to require the enforcement of private arbitration agreements by their terms. The California Supreme Court, meanwhile, has often searched creatively for some Cal-centric reason to deny enforcement to arbitration agreements.

Recent examples of the contrasting supreme viewpoints have occurred in the context of arbitration agreements that waive the procedural right to proceed or participate in a class action. The California Supreme Court once held, in both the consumer-claim context and in the employee-claim context, that a class-action waiver in an arbitration agreement is unenforceable, because any such waiver offends the California public policy favoring class actions. But then the U.S. Supreme Court, in Concepion v. AT&T Mobility, ruled in 2011 that the FAA preempts the California ban on class-action waivers. Concepion involved a consumer complaint. For several years, California courts resisted the clear implication that Concepcion also applies to employee complaints. Finally, in Iskanian, the California Supreme Court relented, acknowledging that, under the FAA, class-action waivers in arbitration agreements are enforceable, even in California.
Continue Reading U.S. Supreme Court Declines to Referee Slugfest Between Federal and California Courts on Enforceability of Arbitration Agreements

Recently, one of our colleagues, Jim Harris, attended the oral argument in Iskanian v. CLS Transportation of Los Angeles, LLC.  The California Supreme Court’s decision, expected by July 3, 2014, will have significant consequences for employers who use or are contemplating using mandatory arbitration agreements with class action waivers.   The result could be that the Gentry case is …
Continue Reading Let’s Play Two: California Supreme Court Hears Oral Argument in Two Important Class Action Cases

By Josh Rodine and Leo Li

We take a break from our Onboarding Series to inform you of a new case with implications for anyone with employees in California.  If you are reading this, that’s probably you. 

On January 13, 2014, in Taylor v. Nabors Drilling USA, LP, the California Court of Appeal held that, under the California Fair Employment …
Continue Reading California Court Takes The “Sex” Out Of Sexual Harassment

By Brian Long

The California Supreme Court rarely puts employers in the holiday spirit. But this year, amidst all the lumps of coal that employers could find in the Christmas stocking, there was one treat: Harris v. City of Santa Monica (2013) 56 Cal.4th 203.

In Harris, a unanimous high court held that a “same decision” defense applies to employment…
Continue Reading Year-End Round-Up of Employment Cases Pending Before the Cal Supremes

Update:  In April we reported on a California appellate court decision, Gonzales v. Downtown LA Motors, which held that an employer paying on a piece-rate basis must pay a separate “hourly” rate for time spent waiting between compensable piece-rate tasks.  The California Supreme Court recently denied review in Gonzalez v. Downtown LA Motors.  If you are wondering what …
Continue Reading Update — California Courts: a Piece of Work?

If you are employing piece-rate employees who don’t get paid for downtime, California Courts have just given you a piece of their minds. 

In Gonzalez v. Downtown LA Motors, a group of car repair technicians who were paid on a piece-rate basis brought a class action to recover unpaid minimum wages for the time they spent waiting between repairs. …
Continue Reading California Courts: a Piece of Work?