Seyfarth Synopsis: Governor Newsom has approved some of the bills most feared by employers, including bills to ban employment arbitration, extend FEHA administrative deadlines, codify the Dynamex ABC test, and create San Francisco-style lactation-accommodation requirements. Governor Newsom also vetoed a few bills that we might expect to be re-introduced in the same or similar form
Seyfarth Synopsis: The California Legislature has passed a series of bills for Governor Newsom to consider. He now has until October 13 to approve or veto bills such as a Dynamex codification bill and a San Francisco-inspired lactation accommodation bill.
Friday, September 13th marked the Legislature’s last day to pass bills to Governor Newsom’s desk…
Seyfarth Synopsis: For certain employment-related contracts, California legislation effective January 1, 2019, will limit efforts to prevent disclosure of information relating to claims of unlawful acts and sexual harassment in the workplace. Read on for the devilish details.
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Seyfarth Synopsis: California Legislators sent Governor Jerry Brown 1,217 bills to consider in his final bill-signing period as Governor—more than any California governor has seen since 2004. The final tally: 1016 signed, 201 vetoed. Below is our full, final roundup of new laws that employers must comply with, bills that fell to the Governor’s…
Seyfarth Synopsis: August 31 was the California Legislature’s last day to send bills to Governor Brown for his approval or veto by his September 30 deadline. Chief among them are bills addressing sexual harassment.
2018, the year of #MeToo, saw California Senators and Assembly Members introduce numerous bills on sexual harassment-prevention, often followed by…
Seyfarth Synopsis: Several bills of concern to California employers failed to receive the house of origin blessing and passage by the June 1 deadline, including this year’s attempts at PAGA reform, criminal history inquiries, and medical marijuana accommodations, while a boatload of others, most notably sexual harassment-related bills, sail on. The measures being passed to…
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.
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