California Supreme Court: Waiting Time Penalties are..Penalties!

I know, sounds obvious. But folks were claiming that waiting time penalties, like meal period penalties, are a form of wage.  They were making this argument to permit claims for waiting time penalties under California's unfair competition law, because that law has a four year statute of limitations.

No sale, said the California Supreme Court in Pineda v. Bank of America (opinion here). In that case, Pineda received his wages four days late. He brought a class action for waiting time penalties. on behalf of everyone who was paid late under Bank of America's final pay policies. 

Pineda argued that he should be able to sue for waiting time penalties under California's unfair competition law (Bus. Prof. Code section 17200).  The Supreme Court rejected that argument because waiting time penalties are not "restitution," the only time that money is recoverable under the UCL.  Plaintiffs wanted to use the UCL to benefit from that law's four-year statute of limitations.

But the Supreme Court giveth, and taketh away.  The other issue decided today is that the statute of limitations for waiting time penalties is not affected by whether the employer ultimately paid the wages, albeit late.

The lower courts dismissed the case because he did not file his case within a year of his termination. The lower courts applied case law like in McCoy v. Superior Court (2007) 157 Cal.App.4th 225, 229-230. There, the court of appeal held a one-year statute of limitations applies to waiting time penalty claims if the wages are paid as of the time of suit. 


The Supreme Court rejected McCoy and held that in all instances, the waiting time penalty statute, Labor Code Section 203, imposes the same statute of limitations. That section says that the statute of limitations for waiting time penalties is the same as the limitations period applied to the underlying wage claims.  The Supreme Court said that rule applies whether the wages are paid or not at the time of suit.

DGV

Arizona Medical Marijuana Law

So, there was a big debate over what would happen in the workplace if California's Prop. 19 were to pass. If you have a short memory, that was the initiative to basically legalize personal use of marijuana.  Well, that initiative failed to pass back on November 2.

In Arizona, on the other hand, the voters passed their own Prop. 203. Text is here.
Prop. 203 legalizes certain "medical marijuana," making AZ the 15th state to do so. But AZ's new law expressly protects medical marijuana users at the workplace:

6-2813. Discrimination prohibited

***. 

B. UNLESS A FAILURE TO DO SO WOULD CAUSE AN EMPLOYER TO LOSE A MONETARY OR LICENSING RELATED BENEFIT UNDER FEDERAL LAW OR REGULATIONS, AN EMPLOYER MAY NOT DISCRIMINATE AGAINST A PERSON IN HIRING, TERMINATION OR IMPOSING ANY TERM OR CONDITION OF EMPLOYMENT OR OTHERWISE PENALIZE A PERSON BASED UPON EITHER:

1. THE PERSON'S STATUS AS A CARDHOLDER.

2. A REGISTERED QUALIFYING PATIENT'S POSITIVE DRUG TEST FOR MARIJUANA COMPONENTS OR METABOLITES, UNLESS THE PATIENT USED, POSSESSED OR WAS IMPAIRED BY MARIJUANA ON THE PREMISES OF THE PLACE OF EMPLOYMENT OR DURING THE HOURS OF EMPLOYMENT.

36-2814. Acts not required; acts not prohibited 

A. NOTHING IN THIS CHAPTER REQUIRES:

* * *

3. AN EMPLOYER TO ALLOW THE INGESTION OF MARIJUANA IN ANY WORKPLACE OR ANY EMPLOYEE TO WORK WHILE UNDER THE INFLUENCE OF MARIJUANA, EXCEPT THAT A REGISTERED QUALIFYING PATIENT SHALL NOT BE CONSIDERED TO BE UNDER THE INFLUENCE OF MARIJUANA SOLELY BECAUSE OF THE PRESENCE OF METABOLITES OR COMPONENTS OF MARIJUANA THAT APPEAR IN INSUFFICIENT CONCENTRATION TO CAUSE IMPAIRMENT. 

B. NOTHING IN THIS CHAPTER PROHIBITS AN EMPLOYER FROM DISCIPLINING AN EMPLOYEE FOR INGESTING MARIJUANA IN THE WORKPLACE OR WORKING WHILE UNDER THE INFLUENCE OF MARIJUANA.

Rad, huh?  So, you can't smoke pot AT work. The employer doesn't have to give up federal dollars to permit users to have pot in their system. ...  But generally, (1) no taking action based on positive drug tests unless the level in the blood suggests impairment (2) employers don't have to let you work "impaired" (stoned) or under the influence (buzzed?).  


I guess we're going to find out what "impaired" and "under the influence" means through a series of regulations that are supposed to be issued within the next few months.  


Remember, this isn't a general legalization of marijuana. It will apply only to "qualified" patients who are certified as having the requisite medical conditions. 


Good luck Arizona employers!  

DGV

"Suitable Seating" Class Action Goes Forward

Retailers must provide "suitable seating" in accordance with the California Industrial Welfare Commission's Wage Order 7-2001, section 14. It says: "All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats."

Eugina Bright worked for 99 Cents Only Stores. She brought a class action alleging that, as a cashier, the company could reasonably have provided her with a seat suitable for cashiering. She sought penalties under PAGA (Private Attorneys General Act of 2004), claiming that the Wage Order violation supported PAGA penalties.

The trial court held that Ms. Bright was not "underpaid" and, therefore, could not collect penalties under Section 20 of the Wage Order. She also could not collect PAGA penalties, the trial court believed, because PAGA's extra "catchall" penalty does not apply when there is an applicable penalty in place. Sort of a "gotcha" ruling, which I admire.

But the court of appeal did not share my sense of irony, holding that PAGA penalties are available for wage order violations, even if Wage Order Section 20 penalties do not apply:

Section 2699, subdivision (f) makes its civil penalty applicable to violations of “all provisions of this code except those for which a civil penalty is specifically provided.” (§ 2699, subd. (f).) Section 1198, the code section Bright contends was violated, contains no civil penalty. (See § 1198.) Nowhere in the Labor Code is a civil penalty specifically provided for violations of the suitable seating requirement incorporated in section 1198. Thus, section 2699, subdivision (f), by its terms, allows for a civil penalty for violations of section 1198 based on failure to comply with the suitable seating requirement.

The case is Bright v. 99 c Only Stores, Inc. and the opinion is here.

DGV

Annual Legal Update - Web or Live

The end of the year is here. There are new laws, new regulations, and new court decisions to digest.  How will you keep up? How will you know what to do?  Please, somebody help you!  Aaargh.

Relax. Shaw Valenza is here to ease your worried mind, smooth your furrowed brow, apply myrrh to your foreheads. OK, I wouldn't know where to get any myrrh now that Prop. 19 did not pass.  Myrrh dealers... get the word out.

Anyway, wise men -- and women -- from all over are going to get even wiser when they attend our annual Employment Law Update!  Statutes, regulations, case law, and how to's. Best news yet, Jennifer Shaw herself is presenting.  And such a deal.

Here's a link for more information.  Click it.  Now.  Ok, now.
http://www.shawvalenza.com/training_sessions.php?id=81

DGV

Blog refresh - Blogroll dead

Just a quick note that I slightly upgraded the design of the blog. If you have feedback please let me know.

I just learned that my list of interesting blogs (blogroll) was destroyed, because the "blogroll" company that hosted it "ceased operations."  So, if you have suggestions for additions to my blogroll, please let me know. Also, if you used to be on my blogroll and would like to be added again, please send me a note.

DGV

Court of Appeal: No Attorney Present at Plaintiff's Mental Examination

The court of appeal's opinion in Toyota v. Superior Court should be interesting to employment lawyers and maybe to their clients involved in employment litigation.
Steven Braun was a plaintiff in a discrimination and harassment case against Toyota. He claimed significant emotional distress as a result of the conduct. Toyota arranged for a mental examination. Braun's attorney sought to impose certain conditions, including that it be taped, and that the attorney could accompany Braun to the exam and wait in an adjoining room. The doctor balked at this condition, as did Toyota. The Superior Court, however, allowed it. So, Toyota sought a "writ" - a mid-litigation appeal - overturning the Superior Court's decision.

The Court of Appeal granted the writ, which almost never happens in discovery disputes. The court said that although an attorney is not always prohibited from attending an examination, he or she must make some evidentiary showing of need. Toyota, on the other hand, showed (1) that the examination's scope was limited by court order (2) that the doctors believed the attorney's presence could influence the examination. The court also noted that medical professionals conducting such examinations are entitled to a presumption they will act properly.

The case is Toyota v. Superior Court and the opinion is here.

Court of Appeal: Meal and Rest Breaks Need Not Be Forced

Everyone is waiting for the California Supreme Court to issue its decision in Brinker or Brinkley or both regarding whether meal / rest periods must be ensured or merely provided under California law. Well, nearly everyone.

The Court of Appeal in Hernandez v. Chipotle Mexican Grill, Inc., just decided that meal and rest periods must be allowed, but that employees who choose not to take them cannot recover penalties. The court upheld dismissal of a class action given that each individual class member would have to prove he or she was prevented from taking given meal or rest periods.

The opinion in Hernandez v. Chipotle Mexican Grill, Inc. is here.

Court of Appeal Moves the Arbitration Goal Posts Again

One of the frustrations with employment arbitration is that the courts continue to invent new ways of invalidating them. Employers who favor arbitration are stuck with re-issuing agreements with each new court decision.

The California Court of Appeal's decision in Trivedi v. Curexo Technology Corp. is the latest effort to invalidate arbitration contracts.

First, the court found that the arbitration agreement was "procedurally unconscionable." That is the first step, because a court has to find both procedural and substantive unconscionability. Since the employer usually presents an arbitration agreement as "take it or leave it," an arbitration agreement usually has some "procedural unconscionability" because it is an "adhesion contract" (take it or leave it.).

But the court did not stop at adhesion contract. In a footnote, the court said that the arbitration clause was in the same type face as the rest of the employment contract in which it was contained. The court found that its lack of "prominence" was "one factor" courts consider in determining unconscionability. With this statement, the court proves once again that the doctrine of "unconscionability" is being used as an end-run around the Federal Arbitration Act. If the court required "prominence" as a condition of enforcing the agreement, the requirement would plainly violate the U.S. Supreme Court's decision in Doctor's Associates v. Cassarotto, 517 U.S. 681 (1996). In that case, Montana required arbitration agreements to be in all-caps and on the first page of a contract.

But wait, there's more. The court also held that the employer referenced the American Arbitration Association employment arbitration rules. These rules are expressly DESIGNED to implement procedural fairness. Get this - the employer did not attach the rules to the arbitration agreement. As a result, the court found, the agreement was procedurally unconscionable(!)
I just linked to the rules above. They're as easy to obtain as the Code of Civil Procedure or California case law. The employer did not attach the Code of Civil Procedure either. If the AAA rules were not used, would the agreement have been unconscionable because the Code of Civil Procedure was not attached? What if the California Supreme Court's Armendariz case was not attached? (That case imposes several requirements on lawful agreements.)

Anyway, the court then turned to substantive unconscionability. The arbitration agreement permitted the arbitrator to award fees to the prevailing party. The court held this provision to be unconscionable, because case law says that defendants may recover fees in FEHA cases only when the plaintiff's claims are frivolous, unreasonable, or without foundation. The funny thing is that the FEHA statute itself simply says that the "prevailing party" may recover fees. So, the decision requires the arbitration agreement to spell out what case law says?? The court ignored the reality that the arbitrator will consider case law in making his or her decision. The court also dismissed the employer's argument that the AAA rules require the arbitrator to award fees in accordance with applicable law.

The court also concluded that the agreement's reference to injunction relief was consistent with the Code of Civil Procedure, but was nevertheless evidence of unconscionability. The logic is that the employer would take advantage of that provision more frequently than the employee. The court leaves us to guess how a provision that is no broader than an existing statute is evidence that an agreement is invalid.

Finally, the court refused to sever the attorney's fees or injunction provision. It found the agreement was "permeated" by unconscionability because of the injunctive relief and attorney's fees provisions. The court neglected to cite the key case on severability, Little v. Auto Stiegler Inc., 29 Cal.4th 1064 (2003). The court also made no mention of how the agreement was "permeated" with unconscionability given the rather mild clauses the court found to be unconscionable.

Anyway, if this case stays on the books, it's going to require significant changes to arbitration agreements. Employers should consider either directing employees to dispute resolution rules on the web or, preferably, give the employees a copy with the agreement. Additionally, attorney's fees and injunctive relief provisions should contain the qualifying language, "as permitted by applicable law."

This case is a good example of why the U.S. Supreme Court is going to decide whether these "unconscionability" cases are a mere end run around the Federal Arbitration Act. Look for the Court's decision in AT&T v. Concepcion in a few months. Ross Runkel's excellent resources on Concepcion are here.

The decision in Trivedi v. Curexo Technology Corp. is here.

DGV

Ninth Circuit Explains "BFOQ" Defense in Sex Discrimination Case

Title VII of the Civil Rights Act of 1964 prohibits discrimination based on sex and other criteria. But there are some defenses to discrimination. One of these is the "BFOQ" or bona fide occupational qualification.

As the court of appeals explained in Breiner v. Nevada Dept. of Corrections, the BFOQ defense is "an 'extremely narrow exception to the general prohibition of discrimination on the basis of sex' that may be invoked 'only when the essence of the business operation would be undermined' by hiring individuals of both sexes."

So, the Nevada prison system was beset by a number of instances of male corrections officers engaging in sexual conduct with female inmates. A guard impregnated an inmate, which came to the attention of administration. The inmates purposely traded favors for better treatment.

Nevada's response, in part, was to exclude males from certain jobs, including "Corrections Lieutenant" at women's prisons. The thought was that hiring only female lieutenants would cut down corruption caused by female inmates' solicitations. Some male corrections officers sued, saying they were denied promotional opportunities at the female prisons.

The Ninth Circuit reversed the prison systems' summary judgment victory. The court did not believe that Nevada adequately supported its justification for discriminating against male candidates for hiring at women's prisons.

This opinion explains in detail the BFOQ defense and the employer's difficulty proving it. Much of the opinion focuses on prison cases, but the BFOQ defense and its burdens will be applicable to all businesses seeking to establish a sufficient justification for hiring women or men exclusively in a particular setting.

The case is Breiner v. Department of Corrections and the opinion is here.

New DOT Drug Testing Rules

The US Department of Transportation (DOT) modified its drug testing rules. The entire new rules can be read here.

Only employers that MUST comply with DOT drug testing rules (for drivers of larger trucks) MUST comply with these new rules, which take effect October 1, 2010.
So, employers that have voluntary (optional) drug testing plans in effect may wish to modify them to conform with the DOT rules, but they do not have to.

The DOT has summarized the changes in an email which I'm pasting here:

1) The Department is required by the Omnibus Transportation Employees Testing Act (Omnibus Act) to follow the HHS requirements for the testing procedures/protocols and drugs for which we test.

2) Primary laboratory requirements in this final rule include:

- Testing for MDMA (aka. Ecstasy);

- Lowering cutoff levels for cocaine and amphetamines;

- Conducting mandatory initial testing for heroin;


3) The Department brought several testing definitions in-line with those of HHS.

4) Each Medical Review Officer (MRO) will need to be re-qualified – including passing an examination given by an MRO training organization - every five years. The Final Rule eliminated the requirement for each MRO to take 12 hours of continuing education every three years.

5) An MRO will not need to be trained by an HHS-approved MRO training organization as long as the MRO meets DOT’s qualification and requalification training requirements.

6) MRO recordkeeping requirements did not change from the five years for non-negatives and one year for negatives.

7) The Final Rule does not allow the use of HHS-Certified Instrumented Initial Testing Facilities (IITFs) to conduct initial drug testing because the Omnibus Act requires laboratories to be able to perform both initial and confirmation testing but IITFs cannot conduct confirmation testing.

8) The Final Rule is effective October 1, 2010.

Ninth Circuit and Female on Male Sexual Harassment

The EEOC sued on behalf of Lamas, a male worker at Las Vegas' airport. He worked for a service company called Prospect Airport Services. Over time, a female, married employee,Munoz, openly solicited Lamas for sex and a relationship. When Lamas rebuffed him, she recruited co-workers to help. He steadfastly told her he wasn't interested.

Lamas ultimately complained. The first supervisor said she'd talk to Munoz, but didn't. The senior Prospect manager told Lamas it was a "personal" issue but that he would talk to Munoz as a "favor." He actually did talk with Munoz, but she was undeterred.

Lamas over time became upset and offended, his work performance suffered, and - yep - Prospect fired him.

So, the district court held the work environment was insufficiently hostile. The Ninth Circuit reversed. The court went through each element of a harassment claim and found Lamas satisfied each one at least enough to avoid Prospect's motion for summary judgment.

The opinion of course is interesting because it involves a female harassing a male. For readers of this blog, though, it's a reminder of how unsophisticated line management is about harassment. Had the sexes been reversed, it's pretty safe to assume management would not have been so cavalier. Lamas had written evidence of Munoz's come-ons. Management simply did not take him seriously, but then fired him when his performance deteriorated. Jeez. If they're conducting training at Prospect, it's not sinking in or it's not effective.

The opinion is EEOC v. Prospect Airport Services, Inc. and the opinion is here.

Court of Appeal Reverses Summary Judgment in Age and Disability Case

Sandell, formerly Taylor guitars' vice president of sales, suffered a stroke. As a result, he walked with a cane and spoke slower than had previously had. Taylor ultimately fired him, claiming he did not motivate the sales staff and because sales were anemic under Sandell's leadership.

The court of appeal reversed the trial court's summary judgment. On the disability discrimination claim, the court noted that Sandell did not claim Taylor failed to accommodate him. Sandell said he could do his job without accommodation. Rather, this was a straight disparate treatment case - "they fired me because I had a disability."

Finding a factual dispute on whether Taylor's reasons for discharge were pretextual, the court relied on performance appraisals that were rosier than Taylor's characterization of Sandell's performance during litigation. So... stop me if you've heard this ... overly nice performance appraisals will come back to bite you.

Another interesting part of the opinion addressed Sandell's subordinates declarations confirming Sandell's lack of leadership skills. The court said that the employees had failed to complain during Sandell's employment, so a reasonable jury could infer the opinions had changed (for litigation?!). That's a very generous inference for the court to make, IMO.
Finally, the court was troubled by some he-said /he-said discriminatory comments, which the court believed was enough additional evidence of discrimination to send the case to the jury. The court rejected the "same actor" claim that the CEO hired and fired Sandell within five years. The court said that the CEO's perception of Sandell as "old" could have changed within that period of time, particularly because of Sandell's physical changes.

The opinion is Sandell v. Taylor-Listug, Inc. and the opinion is here

No More Demurrers to Wage Hour Class Action Complaints?

The Court of Appeal in Guiterrez v. California Commerce Club, Inc. (opinion here) pretty much said that trial courts should not sustain demurrers (aka motions to strike class allegations) in wage-hour class actions. Ever. There are a few cases where demurrers have been sustained / granted. So, unless the Supreme Court or Legislature closes the door forever, it is not sanctionable to keep trying!

New California Workers' Compensation Regulations

Workers' compensation law is just one more thing that HR has to be worried about. I try not to worry about it, but I can't help it. Our friends at the California Chamber of Commerce published a handy FAQ regarding new regulations. The regulations concern Medical Provider Networks. In particular, the posters and notices must be revised substantially. The FAQ's lead you to the government's source documents. The deadline is October 8, 2010, so get ready.

California Court of Appeal Invalidates Anti-Injunction Law

I am still a bit behind on blogging because of last month's trial. Here's one that came down in the middle of the trial.

As the courts in this case noted, California law ma[d]e it nearly impossible to get an injunction against a union picketing in front of a private business. Labor Code Section 1138.1 and Code of Civil Procedure Section 527.3 impose significant procedural hurdles and substantive limitations on courts to issue injunctions against "peaceful picketing." These protections were extended to private property, such as outside the front entrance of retail stores.

The court first held that the entrance of a FoodsCo, including the sidewalk and "apron" were private property, not a public forum. The court distinguished cases that held enclosed shopping malls were public areas. Because the FoodsCo entrance and surrounds were private, the court noted, the company could prohibit speech without violating the picketers' First Amendment or California constitutional rights.

The court then examined whether the anti-injunction laws violated FoodsCo's rights. FoodsCo sought an injunction againt a union's trespass. The union had picketed from the opening of the store until the present, five days per week, 8 hours per day. The complaint was that FoodsCo was operating non-union.

The trial court denied the injunction because FoodsCo had not adequately proved its entitlement to an injunction under the Labor Code's special provision, Section 11381.1. The business owner must prove, among other things, that the police are unwilling or unable to provide assistance, and other grounds that do not apply to the issuance of trespass injunctions generally.
Here is the money quote:

Accordingly, as applied in this case, the Moscone Act violates the First and Fourteenth Amendments of the United States Constitution. The Act affords preferential treatment to speech concerning labor disputes over speech about other issues. It declares that labor protests on private property are legal, even though a similar protest concerning a different issue would constitute trespassing. And it denies the property owner involved in a protest over a labor dispute access to the equity jurisdiction of the courts even though it does not deny such access if the protest does not involve a labor dispute.

So, unless the Legislature acts somehow to create a constitutional anti-injunction law, the courts will have to enforce anti-trespass injunctions against unions on the same basis as it does so outside the union picketing context.

The case is Ralphs Grocery Company v. UFCW, Local 9 and the opinion is here.

Ninth Circuit: Fired Harassers Lose Sex Discrimination Claim

The plaintiffs were males who worked for Executive Jet. They were fired after an investigation revealed they engaged in certain inappropriate conduct that violated the Company's anti-harassment policy. The female who complained filed a charge with the EEOC, which found cause to believe a violation of Title VII occurred. The male employees claimed that the female was a willing participant and engaged in the same conduct of which she complained.

The males sued for, among other things, sex discrimination. They claimed that Executive Jet fired male employees for sex-based conduct, but not females who engaged in similar conduct.

The court engaged in detailed analysis regarding whether the male and female employees were "similarly situated," but found that they were not. The males never complained about harassment. The female did. Although the presence of a complaint by one group is not per se enough to render employees non-similar, that was enough to render their situations different in this case.

The court's analysis also included whether the EEOC's probable cause finding should be admitted as evidence that the males' conduct warranted action taken against them. The court of appeal reaffirmed its rule that EEOC probable cause determinations may be admissible in some circumstances, particularly in summary judgment proceedings and bench trials, where there is little chance of prejudice.

The case is Hawn v. Executive Jet and the opinion is here.

Ninth Circuit: Triable Issue on Accommodation of Hearing Impaired

The EEOC brought suit against UPS Supply Chain Solutions for failing to accommodate a hearing impaired employee. The employee, Mauricio Centeno, was deaf since birth and American Sign Language was his primary language.

He was able to do his job in accounting without a sign language interpreter. But he asked for an interpreter at company meetings. The employer offered post-meeting recaps in writing and contemporaneous notes during the meetings. He also wanted an interpreter's help with respect to certain job training and to understand the company's sexual harassment policy.

The district court granted UPS' motion for summary judgment because, it found, UPS had engaged in an interactive process with Centeno and had provided accommodations that were sufficient to enable Centeno to understand what transpired at meetings, etc.

But the court of appeals reversed. The appellate court held it was a genuine dispute of fact regarding whether the accommodations were effective. The court decided that agendas, contemporaneous notes, and summaries in English were not necessarily sufficient substitutes for a sign language interpreter. The court was especially concerned because Centeno was not proficient at written English, but the court also said it would be a triable issue even if Centeno were fluent in English.

Similarly, the court held that UPS may have failed to accommodate Centeno by delaying Excel training. Centeno claimed he could not read the online training program and required an interpreter. UPS ultimately provided him one, but two years later.

Centeno also complained he did not understand the company's anti-harassment policy and training materials because he was not given a sign language interpreter to read them. The court held that Centeno's professed lack of comprehension was sufficient to put UPS on notice that an accommodation was necessary.

This case raises the bar for employers who employ hearing impaired employees. Even when the hearing impaired can perform essential job functions without interpreters, they may be necessary so the employee can enjoy the "benefits and privileges" of employment.

The opinion is EEOC v. UPS Supply Chain Solutions and the opinion is here.

Court of Appeal Expands Wrongful Discharge Law

OK, so let's say an employee has a non-compete agreement with a former employer. After Employee is hired by new employer, the former employer sends a "cease and desist" letter to the new employer. The new employer, fearling litigation, fires the employee. Employee sues new employer for wrongful discharge?!

Yep. I know....#@^!%.

In 2003, Silguero began employment with Floor Seal Technology, Inc. as a sales representative. In August 2007, FST threatened Silguero with termination unless she signed a confidentiality agreement. The agreement prohibited her from sales activities for 18 months following either departure or termination. (A Non-compete). FST terminated Silguero's employment in October 2007.

Shortly therafter, Silguero was hired by with Creteguard. But FST contacted Creteguard and requested enforcement of the non-compete.

In November 2007, Creteguard's chief executive officer, Thomas Nucum, did not call me. Instead, he informed Silguero in writing that "although we believe that non-compete clauses are not legally enforceable here in California, [Creteguard] would like to keep the same respect and understanding with colleagues in the same industry." Nice.

Silguero argued the noncompetition agreement enforced by Creteguard was void pursuant to section 16600, that no statutory exception to section 16600 applied, and that Creteguard's enforcement violated public policy.

The Court of Appeal agreed:

The complaint in this case alleges an ―understanding‖ between Creteguard and FST pursuant to which Creteguard would honor FST‘s noncompetition agreement. Creteguard admitted in writing that it entered into this understanding with FST, ―although [Creteguard] believe[d] that non-compete clauses are not legally enforceable here in California,‖ because Creteguard ―would like to keep the same respect and understanding with colleagues in the same industry. This alleged understanding is tantamount to a no-hire agreement.

No hire agreements are illegal too.

This case is Silguero v. Creteguard, Inc. and the opinion is here.

California Supreme Court Bings Google

I think Reid v. Google (opinion here) will be more memorable for its discussion of objections in summary judgment proceedings than for its discussion of the stray remarks doctrine.

I will post my upcoming article here next Monday, which will explain the above gibberish. (Or I'll cheerfully refund your money, and that's a promise!)

Ninth Circuit Thwarts End Run Around California Labor Code

EGL, a Texas transportation company, came up with an idea. Avoid all those pesky California wage and hour laws by making everyone an independent contractor, and inserting a choice of law clause into the agreement.

First, the court had to get by the Texas choice of law clause. The clause said only that the independent contractor agreement would be "interpreted under the law of the State of Texas." The claims, however, were not brought under the agreement, but rather were brought under the California Labor Code. So, this case is a warning to practitioners to draft choice of law clauses expansively. The court did not consider whether the Texas choice of law clause could be enforced in California.

Then, applying California law, the court reversed summary judgment. The court held that there was significant evidence of an employment relationship under California's test for independent contractor status. The court went on at length. So, you can read the opinion in Narayan v. EGL, Inc. et al. here.