A Couple of New California Employment Laws that Require Attention

Here are two recently signed laws that will go into effect 1/1/17.

First, the Legislature re-drafted the Labor Code provision that prohibits asking applicants about arrests, convictions that have been expunged, or about misdemeanor marijuana possession charges more than 2 years old, etc.

The new bill, numbered AB 1843 (here) makes it unlawful to ask applicants to disclose

an arrest, detention, processing, diversion, supervision, adjudication, or court disposition that occurred while the person was subject to the process and jurisdiction of juvenile court law.

Is a "court disposition" a conviction?  Don't know.  But the statute also cryptically says:

For purposes of this section, “conviction” does not include, and shall not be construed to include, any adjudication by a juvenile court or any other court order or action taken with respect to a person who is under the process and jurisdiction of the juvenile court law.

There are also special provisions regarding conviction / arrest inquiries applicable to public sector police / peace officer applicants, the health care industry, and certain occupations. So, read the law carefully and ask your lawyers for more detail.

And now, a mini-rant! I know that's why you come here.   

I'm not sure who's writing these statutes nowadays. But "does not include" and "shall not be construed to include" is entirely unnecessary repetition. And why say "court disposition" when they could say something more clear?  These California employment laws are getting longer and less comprehensible. Good for me; good for plaintiff lawyers; bad for our clients.

Anyway, you'll have to ensure conviction inquiries on application forms etc. are modified. 

* * * 

The second law could be a game changer for out of state and multi-state employers. 

SB 1241 (here) prohibits employers from requiring, as a condition of employment, that an employee agree to 

- litigate or arbitrate a dispute outside of California. For example a NY-based employee cannot require an employee to litigate or arbitrate his or her dispute in NY court.  This is a prohibition on "choice of venue" or "forum selection clauses." 

- a "choice of law" clause that requires another state's law to apply to a dispute.   So a multi-state employer that has a confidentiality / trade secret agreement cannot provide for another state's law to apply in the case of a dispute. 

Note - though that the law is applicable only to an employee who "primarily" resides AND works in California.  In wage-hour law, primarily means more than 50%.  Here, however, that term is not defined.  The law, then, will not apply to employees who do not primarily live in California.  It also will not apply to employees who work in more than one state, if California is not the "primary" state. 

The bill says that the provision is "voidable" by the employee, which means it is not illegal as written, but the employee can object to it and have it struck.  If it is struck then the matter must be litigated in California under California law. 

The new law also allows employees to challenge these provisions and receive an award of attorney's fees. However, the fee provision is "one way" and employers therefore will not be awarded fees if they win. 

Finally, this new law does not apply if a lawyer represented the employee when the employee agreed to the choice of law / venue provisions in the employment agreement. 

The law takes effect January 1 and applies not only to new agreements, but also to any agreement "modified" or "extended" after that date. 

So, the new law does not appear to apply to post-hire agreements unless modified or extended after 1/1/17. But it  will apply if  employment is conditioned on the agreement (e.g., the employee is fired if s/he doesn't agree).  It also does not appear to apply to separation agreements. 

This new law, however, will affect offer letters, confidentiality agreements, bonus plans, and restrictive covenants.  

Court of Appeal: Two New Arbitration Decisions Highlight Importance of Drafting Agreements Correctly

Here are two new decisions that illustrate why arbitration agreements have to be drafted properly to be enforced.

The Court of Appeal's decision in Rebolledo v. Tilly's, Inc. (opinion here)  is important for employers who issue revisions to policies and employment agreements.  Basically, Tilly's issued several versions of an arbitration agreement and did not adequately manage how the revisions' affected prior ones.  A 2001 version of the arbitration agreement excluded wage-hour claims within the jurisdiction of the Labor Commissioner.   A 2005 arbitration provision did not contain the exclusion. However, the 2001 agreement said that it required three signatures of company executives to modify it.  The 2005 provision did not include those signatures.

Upholding the trial court, the Court of Appeal held that the later arbitration agreement did not supersede the earlier one, and the earlier one did not cover Rebolledo's claims:

We agree with the trial court’s interpretation of the agreement holding arbitration would fall within the broad category of “employment policies” requiring the signature of three executives for any modification. And because the 2005 Agreement contains a material modification of the types of claims that must be arbitrated, it required the signature of three executives to be enforceable.

The employer in Galen v. Redfin Corporation (opinion here) won enforcement of its arbitration agreement, but the plaintiff challenged the arbitration agreement as limited to disputes concerning the interpretation of the arbitration agreement itself.

Paragraph 26 of the Agreement initially states: “In the event that any disputes arise regarding the interpretation or enforcement of this Agreement, such disputes shall be resolved as follows . . . .” (Italics added.) The paragraph goes on to discuss the use of good faith negotiations followed by mediation, if necessary. In the event mediation fails or is refused, the Agreement provides that all disputes “arising out of or related to this Agreement which have not been settled by mediation shall be resolved by binding arbitration within the State of Washington.” (Italics added.) 

The court ultimately determined that this language included claims concerning whether the plaintiff was an independent contractor agreement, but primarily because the arbitration provision was contained within the plaintiff's independent contractor agreement.  The plaintiff would have had a stronger argument if the arbitration agreement was "stand-alone."  So, it's important to draft the scope of the arbitration clause carefully.  A broader provision might read, for example, "any dispute regarding the [employment] [independent contractor] relationship, and the termination of that relationship or any other matter contained within this agreement."

The court's opinion in Galen is also notable because it held that a mutual attorney's fees provision and a forum selection clause did not render the agreement unconscionable.  The attorney's fees discussion did not address the other decisions that hold such agreements are unconscionable unless they explain that employers cannot recover fees under some statutory claims.  The forum selection clause discussion ostensibly authorizes employers to require arbitration outside of California if there is a logical relationship between the forum and the contract.   So, interesting decision, but one that may be at odds with others already on the books.