California Court of Appeal Calls into Question the Validity of Employee Non-Solicitation Provisions

California Business and Professions Code section 16600 invalidates any contract restraining anyone from engaging in a lawful profession, trade, or business.  While this language has been understood to prohibit non-compete agreements, it was generally understood that it still permitted employee “non-solicitation agreements,” which are agreements preventing former employees from poaching employees from their former employers.  In AMN Healthcare, Inc. v. AYA Healthcare Services, Inc.; et al., the California Court of Appeal called that prior understanding into serious question.

AMN involved an action between plaintiff AMN Healthcare, Inc. (“AMN”) and defendant AYA Healthcare Services, Inc. (“AYA”).  AMN and AYA were competitors in the business of providing temporary workers to medical care facilities across the country.  AMN brought suit against AYA and certain former AMN employees now working for AYA.  These former employees had previously worked for AMN as recruiters of temporary workers and had all executed Confidentially and Non-Disclosure Agreements with AMN which included a provision preventing them from soliciting any AMN employees to leave the service of AMN for a certain designated period of time.  AMN’s lawsuit alleged that these defendants had breached the terms of that agreement by recruiting temporary workers for AYA that AMN had previously employed. Continue Reading

California Courts Slowly Interpret Dynamex

Almost six months ago, the California Supreme Court issued its decision in Dynamex, which dramatically altered the landscape pertaining to the classification of California workers as either employees or independent contractors.  This past Monday, the California Court of Appeal issued one of the first decisions interpreting that seminal case.

In Dynamex, the California Supreme Court issued a new, employee-friendly test for determining whether a worker is properly classified as an employee or independent contractor for the purposes of claims brought under California’s wage order – the “ABC” test.  Under the ABC test, the burden is on the hiring entity to establish that the worker is an independent contractor.  In order to satisfy this burden, the hiring entity must establish all of the following:  (1) that the worker is free from the control and direction of the hiring entity in connection with the performance of work; (2) that the worker performs work that is outside the usual course of the hiring entity’s business; and (3) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. Continue Reading

California Supreme Court Resolves Conflict Regarding California’s Background Check Laws

In Connor v. First Student, Inc., the California Supreme Court resolved a conflict in Court of Appeal decisions relating to the constitutionality of California’s background check laws.

Employers frequently request background information from job applicants.  California has two primary laws regulating the collection and distribution of this background information:  the Investigative Consumer Reporting Agencies Act (“ICRAA”) and the Consumer Credit Reporting Agencies Act (“CCRAA”).  The ICRAA concerns investigative consumer reports, which are reports containing information on a consumer’s character, general reputation, personal characteristics, or mode of living.  Expressly excluded from the ICRAA are consumer reports limited to specific factual information relating to a consumer’s credit record.  On the other hand, the CCRAA concerns consumer credit reports, which are defined as reports bearing on a consumer’s credit worthiness, credit standing, or credit capacity.  These laws impose certain obligations on both the agencies providing the information and on the parties requesting the background information, with the ICRAA generally imposing greater obligations and stricter limitations. Continue Reading

California Labor Commissioner Issues $1.9 Million Citation to Contractor for Wage Theft

Continuing its aggressive enforcement of California wage and hour laws, the Labor Commission issued wage theft citations of $1.9 million to Fullerton Pacific Interiors, Inc. for failing to pay minimum wage and overtime and failing to provide rest periods to 472 workers on 26 construction projects throughout Southern California.

Fullerton Pacific Interiors provided drywall work at commercial projects throughout southern California.  The company paid its taping and drywall installation crew a flat daily rate.  Thus, regardless of the number of hours actually worked, employees received the same daily pay.  Workers were permitted the legally required 30-minute meal period, but did not receive mandated rest breaks. On July 9, 2018, the Labor Commissioner also determined that the company failed to provide employees accurate itemized wage statements as required by law. The $1,964,679 citation includes $1,892,279 payable to the workers for owed wages, liquidated damages and waiting time penalties, as well as $72,400 in civil penalties.

Since being appointed Labor Commissioner by Governor Brown in 2011, Julie A. Sue has been very public about her intention to dramatically increase enforcement of California’s Wage Theft Protection Act that went into effect in January 2012.  “Wage theft” is defined as any instance when an employer fails to provide an employee full pay for all hours worked, including paying less than minimum wage, failing to provide overtime pay, requiring workers to perform off-the-clock work, and failing to provide meal and rest breaks. The Act and subsequent legislation have given the Labor Commissioner more legal tools and financial resources to enforce California’s myriad wage and hour laws. Under Su’s leadership, the California Division of Labor Standards Enforcement has focused its enforcement efforts on low wage workers, particularly those in the construction industry.

Takeaway for Employers:

This citation should be a wake-up call for California employers that failing to comply with California wage and hour laws can be extremely costly.   These laws are notoriously complex and counter-intuitive.  To ensure compliance, an employer may wish to conduct a self-audit under the direction of legal counsel.

California Supreme Court Determines that the Federal De Minimis Doctrine Does Not Apply to California Wage Claims

In Troester v. Starbucks Corp., the California Supreme Court determined that the federal de minimis doctrine does not apply to California wage claims.  While this ruling does not completely eviscerate this legal defense for California employers, it places a very high burden on employers who are brave enough to raise this defense in California courts.

The facts in Troester are simple.  Troester worked for Starbucks as a shift supervisor.  In this role, he had the responsibility of completing the “close store procedure” at his store, which required him to transmit the store’s financial information to Starbuck’s corporate headquarters.  Troester argued that prior to completing this procedure, Starbuck’s computer software required him to clock out of his store shift.  Troester filed a putative class action against Starbucks in the Superior Court alleging that he and other putative class members were owed unpaid wages due to this close store procedure, which amounted to four to 10 additional minutes each day. Continue Reading

California Enacts New Law Protecting as Privileged Workplace Sexual Harassment Complaints

On July 9, 2018, California Governor Jerry Brown signed Assembly Bill 2770.  This bill extends privileged communication status to certain communications by employees and employers regarding alleged sexual harassment and continues California’s efforts to address claims of sexual harassment in the workplace.

Prior to AB 2770, California law protected as privileged an employer’s responses to questions from prospective employers regarding a former or current employee’s job performance or qualifications, so long as such communications were made without malice and based on credible evidence.  Also privileged were an employer’s answer as to whether or not the employer would rehire a current or former employee.  Based on this law, employers could not be sued for libel or slander based on these privileged communications.  AB 2770 extends this privilege to (1) complaints of sexual harassment by an employee, made without malice, to an employer based on credible evidence and (2) as particularly relevant to California employers, communications between the employer and interested persons regarding a complaint of sexual harassment.  The new law also authorizes an employer to answer whether the decision to not rehire a current or former employee is based on the employer’s determination that the employee engaged in sexual harassment.

Similar to other bills introduced to address legitimate and reasonable concerns about sexual harassment in the workplace, AB 2770 forces employers to consider how they handle sexual harassment allegations and how to respond to questions from prospective employers regarding such allegations.  While ostensibly protecting employers from claims of libel and slander brought by current and former employees, statements to prospective employers regarding prior claims of sexual harassment could still result in possible litigation brought by that applicant, thereby forcing employers to defend these claims based on the position that such statements were made without malice.  On the other hand, if an employer refuses to answer questions from prospective employers regarding sexual harassment, and harassment issues arise in the subsequent employment, it is not difficult to imagine a situation where the new employer sues the former employer based on its failure to disclose such allegations during the application process.

AB 2770 is less than one week old, so it still needs to be seen precisely how it will be interpreted by California courts and whether it will be weaponized by plaintiff-side employment counsel.  Either way, it is clear that California is still dealing with this important issue and that California employers should continue to pay attention to this difficult and complex situation.

California Federal Court Suspends Enforcement of Certain Provisions in California’s Sanctuary Laws

On July 5, 2018, a federal judge in the Eastern District of California granted the U.S. Department of Justice’s (“DOJ”) request to temporarily prevent the state of California from enforcing key provisions of AB 450, one of three “sanctuary” laws that Governor Jerry Brown signed into law on October 5, 2017, and which took effect on January 1, 2018.  AB 450, known as the Immigration Worker Protection Act, provides that California employers:

  • May not allow federal immigration officials to access the employer’s nonpublic work areas unless the officials have a judicial warrant;
  • May not allow federal immigration officials to access employee records without a subpoena or judicial warrant;
  • Must provide notice to its employees before and after the federal government inspects the employer’s I-9 forms; and
  • May not re-verify an employee’s lawful work authorization status unless required to do so by federal law.

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Idaho Supreme Court Adopts New Standard for Defining “Cause” in Employment Cases

On June 28, 2018, the Idaho Supreme Court issued an opinion in a case entitled Lunneborg v. My Fun Life that outlines how cause will be defined in employment cases.  Simply put, this case could be a real game changer for employers and particularly those that have employment agreements with senior management or other executives.

This development means the following for employers:

  • Summary judgment is going to be much harder to obtain when cause is at issue;
  • Idaho now imposes a good-faith standard that demands “a balanced regard for the employee’s interest in continuing employment with the employer’s interest in efficient personnel decisions”;
  • The fact-finder, i.e., the judge or a jury likely composed of employees and not human resource professionals, lawyers or executives, is permitted to assess the objective reasonableness of the employer’s factual determination of misconduct;
  • Employers will be advised to retain an impartial (outside) third party investigator to undertake an investigation of the purported grounds for termination; and
  • Employees should be given notice and an opportunity to cure any deficiencies relied upon to support a termination decision—even when such a provision is not otherwise called for in the employment agreement.

Given My Fun Life, employers have two immediate action items:

  1. Consult the standards set forth in case every time you contemplate an employment termination that includes an element of cause. This will likely be the necessary when considering the termination of executives or other high-level corporate employees who receive a severance if they are terminated without cause; and
  2. Start thinking now about the employment agreements covering incumbents and future agreements with employees and whether something other than at-will employment is really necessary.

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Supreme Court Rules Mandatory Union Fees for Public Sector Employees are Unconstitutional

In yet another significant victory for employers, the United States Supreme Court has held that the First Amendment prohibits public sector unions from collecting mandatory “agency fees” from non-union members who do not consent to the payment of fees.  The Court’s ruling in Janus v. AFSCME, Council 31 overturns prior precedent that allowed public sector unions to collect these mandatory fees from employees who choose not to be a part of the union. Continue Reading

Oregon’s Secure Scheduling Law Goes into Effect July 1: Are You Ready?

The 2017 Oregon legislature passed a “secure scheduling” or “fair work week” law that imposes significant requirements on certain categories of large employers.  The law, available here, goes into effect July 1, 2018.  We previously blogged about the law here.

Are You a Covered Employer? 

The law applies to retail, hospitality, and food services employers with 500 or more employees worldwide.  Continue Reading

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