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.

Continue Reading Time to reconsider California employee non-solicitation provisions

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.

Continue Reading San Francisco increases costs and requirements for employers in 2019

In an important decision for California health care employers, the California Supreme Court recently confirmed that certain health care employees are allowed to waive their second meal breaks even if they work more than 12 hours in a shift.

History of the Gerard litigation

In 2015, the California Court of Appeal shocked health care employers throughout California by invalidating section 11(D) of Wage Order 5, which permits many health care employees (for example, nurses involved in patient care, pharmacists, etc.) to waive second meal breaks even when their shift exceeds 12 hours, Gerard v. Orange Coast Mem’l Med. Ctr., 234 Cal. App. 4th 285 (2015) (Gerard I). The Court concluded that section 11(D) was inconsistent with Labor Code section 512, which only permits a second meal period waiver “if the total hours worked is no more than 12 hours.” Lab. Code § 512(a). The same court reversed itself in 2017 after the California Supreme Court instructed it to reconsider Gerard I in light of subsequent legislative enactments seeking to nullify the decision and clarify existing law, Gerard v. Orange Coast Mem’l Med. Ctr., 9 Cal. App. 5th 1204 (2017) (Gerard II).

On December 10, 2018, after a decade of litigation, the California Supreme Court affirmed Gerard II, concluding that section 11(D) is not inconsistent with the Labor Code, Gerard v. Orange Coast Mem’l Med. Ctr., 2018 WL 6442036 (Cal. Dec. 10, 2018). Thus, health care employees can waive their second meal breaks even on workdays when their shift exceeds 12 hours.

Continue Reading California Supreme Court clarifies rules regarding health care employees’ waiver of second meal breaks

Employers considering requiring their employees sign arbitration agreements with class waivers just got a real-world example of the effectiveness of such agreements. On September 25, 2018, the U.S. Court of Appeals for the Ninth Circuit upheld the enforceability of arbitration agreements signed by thousands of Uber drivers in California. In the underlying lawsuits, the Uber

Today, the California Supreme Court issued its much-anticipated opinion in Troester v. Starbucks Corp., No. S234969 (Cal. July 26, 2018), regarding whether the long-standing de minimis doctrine adopted under the federal Fair Labor Standards Act (FLSA) applies to claims for unpaid wages for minute increments of time under the California Labor Code.

The majority

Note: All bills become effective January 1, 2018 unless stated otherwise.

AB 168 – Ban on Salary History Inquiries

NEW LAW: Effective January 1, 2018, California employers cannot ask a job applicant about his or her prior salary or seek out an applicant’s salary history through a third party. Employers may consider prior salary information that an applicant voluntarily discloses (but don’t forget that under Labor Code Section 1197.5, employees may not use an applicant’s salary history alone to justify a pay disparity). Furthermore, employers will now be required to provide a pay scale for a position whenever a job applicant inquires.

The intent of this law is to narrow the gender wage gap by preventing employers from basing offers on prior salary information and, thus, perpetuating historical lower pay for female employees. In that regard, California has followed a recent trend of “salary history ban” legislation; San Francisco banned salary history questions earlier this year and other jurisdictions, including New York City, Philadelphia, Puerto Rico, Delaware, Oregon, and Massachusetts, have all adopted similar laws.

REED SMITH RECOMMENDS: All recruiters and interviewers should be informed of the ban on salary history inquiries, and any job application materials or interview scripts which ask for such information should be revised immediately. Employers may still ask an applicant how much he or she would like to be paid or expects to be paid, which will provide a sense of the employment market and an applicant’s salary expectations without violating this new law. Employers should also prepare basic informational forms providing the pay scale for open positions or positions that may become open within the next few years so that this information is readily available if requested by job applicants. Finally, given the pay scale requirement of AB 168 and the potential liability facing employers for any gender wage gap following the passage of California’s Fair Pay Act in 2016, employers should seriously consider conducting a compensation audit to internally evaluate whether any gender-based wage discrepancies exist.
Continue Reading California’s Employment Law Class of 2017: The Summarized Laws and Recommendations for Compliance

On July 13, 2017, in a decision with serious repercussions on the scope of PAGA discovery, the California Supreme Court overruled the Court of Appeals in Williams v. Superior Court to allow state-wide discovery of Marshalls employees’ contact information, without the plaintiff first having to show any evidence to support his own individual claims or the existence of a company-wide policy.

Plaintiff was a Marshalls employee who brought an action under the California Labor Code Private Attorneys General Act (“PAGA”) for meal and rest break violations, timely wage payment, and wage statement violations. At the start of discovery, the plaintiff sought employee contact information pertaining to the approximately 16,500 non-exempt workers across all Marshalls locations in California.  Although the trial court and the Court of Appeals held that incremental discovery was more appropriate and denied the plaintiff’s request for any employee contact information outside of his own work location until after undergoing “six productive hours of deposition,” the California Supreme Court disagreed.

Instead, the Supreme Court, in a lengthy opinion, shut down each of the Court of Appeals’ objections to the plaintiff’s request for state-wide discovery.   First, the Supreme Court held that “[i]n pursuing such [representative] discovery, the strength or weakness of the plaintiff’s individual claim is immaterial.”  Second, the Supreme Court stated that state-wide discovery was proper absent any company-wide or uniform policy as “[a] uniform policy may be a convenient or desirable way to show commonality of interest in a case where class certification is sought, but it is not a condition for discovery, or even success, in a PAGA action…”
Continue Reading California Supreme Court Expands Scope of PAGA Discovery