Time to reconsider California employee non-solicitation provisions

California has long been known as a state that bans post-employment non-compete and customer non-solicitation agreements for its employees, absent very limited exceptions related to the sale of a business and trade secret protection. Employee non-solicitation provisions were believed to be the last post-employment restrictive covenant that California law still generally allowed, assuming they were properly drafted. Now, because of two recent California court decisions, even inclusion of limited employee non-solicitation provisions needs to be reconsidered.

The legal landscape until November 2018

Within its Business and Professions Code, California has a specific legislative ban on provisions that restrain anyone from engaging in their lawful profession. In 2008, the California Supreme Court in Edwards v. Arthur Andersen LLP specifically held that post-employment non-compete and customer non-solicitation provisions were disallowed under California law regardless of their scope or reasonableness. Because of the California Supreme Court’s silence as to employee non-solicitation provisions, the legal consensus has largely been that California decisions pre-Edwards, which allowed limited employee non-solicitation provisions, were likely still good law. In particular, the 1985 California Court of Appeals decision Loral Corp. v. Moyes allowed a one year post-employment employee non-solicitation provision. Therefore, these provisions have remained staples of California employment agreements.

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National Mediation Board proposes simplifying decertification under the Railway Labor Act

On January 31, 2019, the three-member National Mediation Board (NMB), which oversees labor relations for the airline and railroad industries, published a proposed rule-making to simplify the process for workers covered by the Railway Labor Act (RLA) to decertify the unions representing them.

Currently, RLA-represented employees seeking to decertify a union must identify an individual willing to be personally named and represent the bargaining unit. After more than 50 percent of the unit’s members sign an authorization card that clearly states their desire to no longer be represented by the union, the named person is authorized to apply to the NMB to hold a representation election. Then, the NMB will hold an election with options to vote for (1) the current union representation, (2) the named individual, (3) a write-in candidate, or (4) “no union.” To decertify the incumbent union, the majority vote must be for either “no union” or the named individual – who would then disclaim interest in representing the bargaining unit.

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New York Federal Court lays down the law: Employees cannot invoke NYCHRL’s broad protections when impact of discrimination is felt outside NYC

In Amaya v. Ballyshear LLC, et al., a case before a New York Federal District Court, Nelly Amaya, a Long Island resident, alleged that her former employers engaged in unlawful discrimination and retaliation, in violation of the New York City Human Rights Law (NYCHRL). Amaya’s employers argued that Amaya failed to show that their alleged conduct had an “impact” on her within the confines of New York City. At the time of the alleged conduct, Amaya was employed as a housekeeper at Ballyshear, Michael Bloomberg’s Southampton, Long Island residence.

Despite the long-standing precedent that the protections of the NYCHRL are only afforded to those who inhabit or are “persons in” New York City, Amaya attempted to invoke the law’s broader protections by claiming that the following connections to city satisfied this requirement: (1) the decision to hire and fire her was made in New York City; (2) she attended several meetings in the corporate defendants’ New York City office; (3) supervisors in the New York City office interacted with her during the course of her employment; and (4) there was a possibility that she might work at other locations within New York City.

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NLRB returns to more employer-friendly independent contractor test

In a recent decision involving SuperShuttle drivers, the National Labor Relations Board (NLRB or Board) overruled a 2014 decision making it less likely a worker would be deemed an independent contractor, returning to the more employer-friendly common law test to determine independent contractor status.

In 2014, the Board purported to clarify the standard for evaluating whether a worker is an independent contractor (see FedEx Home Delivery, 361 NLRB 610 (2014)). In FedEx, the Board articulated a new factor in the contractor analysis – whether “putative independent contractor is … rendering services as part of an independent business” (Id.) In doing so, the Board diminished the significance of the putative contractor’s entrepreneurial opportunity in the independent contractor analysis by making it one aspect of the newly created “independent business” prong (Id. at 619).

Last week, the Board overruled FedEx and returned to the traditional common law test. SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019). Under that test, “entrepreneurial control, like employer control, is a principle by which to evaluate the overall effect of the common-law factors on a putative contractor’s independence to pursue economic gain” (Id. at *9). The Board held that the test articulated in FedEx “fundamentally shifted the independent contractor analysis … to one of economic realities, i.e., a test that greatly diminishes the significance of entrepreneurial opportunity and selectively overemphasizes the significance of ‘right to control’ factors relevant to perceived economic dependency” (Id. at *7-8).

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Seventh Circuit limits ADEA’s scope, but beware state law

The U.S. Court of Appeals for the Seventh Circuit recently reversed its prior decision and upheld an Illinois district court ruling that the federal Age Discrimination in Employment Act (ADEA) does not protect job applicants from disparate impact claims. But beware, as this seemingly apparent win for employers in Illinois, Indiana, and Wisconsin may drive employees to bring their claims under more forgiving state anti-discrimination laws, which often provide for greater damages.

Case background and decision

The plaintiff in Kleber v. CareFusion Corporation, No. 17-1206, 2019 WL 290241 (7th Cir. Jan. 25, 2019) was a 58-year-old attorney who applied for and was denied a general counsel position. The job posting sought an attorney with three to seven years of experience. CareFusion hired a 29-year-old attorney for the role. In his lawsuit, Kleber argued that CareFusion’s “cap” on experience effectively weeded out older applicants.

Initially, a three-judge Seventh Circuit panel found that the ADEA did apply to disparate impact claims by job seekers. But when the full Seventh Circuit reheard the case, it ruled 8–4 that Section 4(a)(2) of the ADEA covers only discrimination against current employees, meaning that non-employee job seekers cannot sue companies for so-called disparate impact claims alleging neutral practices that adversely affect older applicants, thus affirming the district court’s original finding. Comparing the text of various ADEA provisions, the full Seventh Circuit’s majority opinion concluded that Congress did not intend for the Act to cover applicants asserting disparate impact claims.

Importantly, the ruling does not limit an applicant’s ability to sue for intentional age discrimination, such as a potentially ageist comment by a recruiter or a job posting stating “applicants over 40 need not apply.”

The Seventh Circuit joins the Eleventh Circuit (covering Alabama, Florida, and Georgia), which issued a similar ruling in 2016.

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San Francisco increases costs and requirements for employers in 2019

San Francisco’s Office of Labor Standards Enforcement (OLSE) continues to raise the cost of doing business at the foot of the Golden Gate by requiring employers to provide some of the most generous benefits to employees in the United States. The OLSE has amended certain of its rules regarding employer obligations, and will begin enforcing these changes (adopted by San Francisco voters and the City’s Board of Supervisors) as of January 1, 2019. Below are some of the highlights employers should consider as they make their way in the new year:

  • Health Care Security Ordinance (HCSO) increases the minimum dollar amount employers must spend on health care on behalf of all covered employees (those who have been employed for more than 90 days and who regularly work at least eight hours per week in the City of San Francisco). As of 2019, San Francisco employers with 20–99 employees worldwide must spend $1.95 per hour, and those with 100 or more employees worldwide must spend $2.93 per hour. Businesses with less than 20 employees remain exempt from the HCSO.

The 2019 “Exemption Threshold” (minimum amount for managerial, supervisory, and confidential employees to be exempt from the HCSO) has increased to $48.46 per hour or $100,796 per year.

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NYC Council enacts new protections for employees’ sexual and reproductive health decisions

This week, the New York City Council passed new amendments to the New York City Human Rights Law, which prohibit employment discrimination, discriminatory harassment and violence on the basis of an individual’s sexual and reproductive health decisions. A copy of the new, amended law can be found here.

The amended law defines “sexual and reproductive health decisions” as any decision by an individual to receive services, which are arranged for, or offered or provided to individuals, relating to their sexual and reproductive health, including the reproductive system and its functions.

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NLRB clarifies standard for protected concerted activity

On January 11, 2019, the National Labor Relations Board clarified and narrowed the standard for finding that an employee engaged in protected concerted activities under the National Labor Relations Act. See Alstate Maintenance, LLC, 367 NLRB No. 68 (2019). In doing so, the board overturned a 2011 decision – WorldMark by Wyndham, 356 NLRB 765 (2011) – that held that an employee who protests at a group meeting is necessarily engaged in concerted protected activity.

Summary of decision

In Alstate, a manager approached airport baggage handlers (referred to as skycaps) and requested that they help unload a soccer team’s equipment. One of the skycaps, Trevor Greenidge, responded that “we did a similar job a year prior and we didn’t receive a tip.” When the soccer team’s equipment arrived, the skycaps walked away. The employer terminated Greenidge “for griping about not being tipped.” Greenidge contended that his comment regarding lack of tips (not the act of walking away from the unloading task) was protected concerted activity and thus his termination violated the Act.

The board rejected the employee’s argument, concluding that Greenidge’s conduct was neither concerted nor engaged in for mutual aid or protection. In reaching this conclusion, the board reaffirmed the standard for protected concerted activities derived from its earlier decisions in Meyers Industries, 268 NLRB 493 (1984) and Meyers Industries, 281 NLRB 882 (1986).

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High court finds independent contractor truck drivers excluded from FAA

On Tuesday, January 15, 2019, the U.S. Supreme Court found that truck drivers classified as independent contractors cannot be compelled to arbitrate their claims under the Federal Arbitration Act (FAA). See New Prime, Inc. v. Oliveira, No. 17-340, 2019 WL 189342 (U.S. Jan. 15, 2019).

This decision has significant ramifications for transportation industry companies that previously utilized arbitration agreements with their independent contractor drivers. Given the court’s ruling, those independent contractor drivers can no longer be compelled to arbitrate their claims under the FAA.

The plaintiff, Dominic Oliveira, worked as an independent contractor driver for a trucking company, New Prime Inc. As part of his contract with New Prime, Olivera agreed to arbitrate all disputes. In contradiction to this agreement, Oliveira brought a claim in court against New Prime on behalf of himself and thousands of other independent contractor drivers. Oliveira alleged that he and the other drivers were misclassified as independent contractors, and that they were actually employees of the company.

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Divided D.C. Circuit panel largely upholds the NLRB’s Browning-Ferris decision and challenges the Board’s authority to conduct rulemaking

On December 28, 2018, a divided D.C. Circuit panel affirmed, in part, the National Labor Relations Board’s (NLRB’s or Board’s) Browning-Ferris joint-employer analysis. See Browning-Ferris Indus. of Cal., Inc. v. NLRB, No. 16-1028 (D.C. Cir. Dec. 28, 2018). The D.C. Circuit’s decision marks the latest chapter in the NLRB’s ever-shifting joint-employer standard.

At issue on appeal was the Board’s divided Browning-Ferris decision in 2015 overruling longstanding precedent and relaxing the evidentiary requirement for finding a joint-employer relationship. In December 2017, after the Board’s composition changed with two Trump administration appointments, the new Board majority overruled Browning-Ferris in Hy-Brand Industrial Contractors, Ltd. et al., 362 NLRB 186 (2017). Then, in February 2018, the Board vacated its decision in Hy-Brand, reinstating the earlier Browning-Ferris holding, deciding that one of the new Board members should not have participated in the Hy-Brand decision. With the NLRB’s earlier Browning-Ferris decision reinstated, the D.C. Circuit restored to its docket the Browning-Ferris appeal. Later, in September 2018, the NLRB announced a much-anticipated proposed regulation to establish a rule-driven standard for determining joint-employer status under the National Labor Relations Act (NLRA). With the public comment period on the proposed regulation open through January 14, 2019, the D.C. Circuit issued its decision.

In a 51-page opinion, the D.C. Circuit agreed with the Board’s determination that an employer’s mere right to control and indirect control over terms and conditions of employment are both relevant factors in the joint-employer analysis. The Court, however, faulted the Board for failing to confine its analysis to “indirect control” over essential terms and conditions of employment, rather than extending the analysis to indirect control over “routine parameters of company-to-company contracting,” which it held was inconsistent with common law precedent. Based on that distinction, the court remanded the matter to the NLRB for further consideration on that issue.

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