Summary of Program

There is no universal way to prepare for a governmental audit, investigation or inspection. The employment laws governing your workplace have different compliance requirements and governmental agencies have different agendas and degrees of power. This webinar will include tips on whether, and how to, conduct a self-audit; understanding the do’s and don’ts of compliance; and best practices.

Program Highlights

  • Labor Commissioner Claims and Audits — Conduct Regular Self Audits to Avoid and/or Be Prepared for Claims and Agency Audits
  • EEOC/DFEH Investigations—Responding to Claims
  • EDD Audits — Misclassification Issues
  • USCIS/ICE Investigations—Complying with I-9 Requirements
  • CalOSHA—Steps to Take to Be Prepared for an Audit
  • Tips re: Government Audits and Physical Site Inspections
  • Policy Compliance Audit
  • HR Legal Compliance Audit

Date:    June 19, 2014

Time:  12:00 p.m. – 1:30 p.m.

To register for this webinar, please email Ramona Carrillo at rcarrillo@weintraub.com.  For additional information, visit our website at www.weintraub.com and click on the News and Events tab.

 

We periodically discuss California law regarding non-compete provisions in this Blog. The California Supreme Court has made clear that non-compete provisions are unenforceable unless they fall within one of the statutory exceptions set out in sections 16601 et seq. (i.e., in connection with the sale of a business, goodwill, etc.).  Over the years, courts have observed a so-called “trade secret exception” to the general rule that non-competes are unenforceable, holding that non-compete provisions may be enforced to the extent necessary to protect a company’s trade secret information.  The U.S. District Court for the Northern District of California recently revisited this issue in, Arthur J. Gallagher & Co. v. Lang.  Its ruling suggests that the “trade secret exception” is on shakier ground.

Arthur J. Gallagher & Co. (“Gallagher”) is an insurance brokerage firm headquartered in Illinois that acquired a California insurance broker in September 2008.  The employees of the California agency signed employment agreements in connection with the acquisition that contained various non-compete and non-solicitation provisions.  These provisions included: (1) a provision barring employees from soliciting any “insurance related business with any individual partnership, corporation, association or other entity … about which [the employee] received trade secrets of [Gallagher] or any of its affiliates;” and (2) a provision that the employees would not “directly solicit, induce or recruit any employee of [Gallagher] or its affiliates to leave the employ of [Gallagher] or its affiliates.”

Defendant Lang submitted his resignation in January 2014 so that he could start a new insurance brokerage firm with two of his former coworkers.  Shortly thereafter, Gallagher clients began taking their business to Lang’s new company.   Gallagher sued Lang and claimed he breached the non-competition and non-solicitation provisions of his employment agreement, among other claims. Long moved to dismiss the breach of contract claims.  Although the employment contract had a choice of law provision identifying Illinois law as applying, the Court agreed with Lang that California law would apply to the interpretation of the non-competition provisions because of California’s “strong interest in protecting its employees from non-competition agreements under [Business and Professions Code] section 16600.”

The Court next recognized the well-established rule that “[u]nder California law, to the extent that the provisions of the agreement preclude Lang from soliciting business from Gallagher’s clients, they are void,” citing the California Supreme Court’s decision in Edwards v. Arthur Andersen, LLP.  During argument on Lang’s motion to dismiss, Gallagher argued that the non-compete provision should be enforceable because it protected its trade secret information.  The court seemingly rejected this argument and noted that the so-called “trade secret exception” to section 16600 was of doubtful “continued viability.”  The Court concluded that even if the exception was viable, it would not save the provision at issue  because it was simply too broad because it barred Lang from soliciting Gallagher’s customers regardless of whether or not he used Gallagher’s trade secret information.

Although the Court concluded that the non-compete provision was unenforceable under section 16600, it held that the non-solicitation of former employee’s provision was enforceable.  The Court reasoned: “Although California courts recognize that an employer may not prohibit its former employee’s from hiring the employer’s current employees, an employer may lawfully prohibit its former employees from actively recruiting or soliciting its current employees.”

The Court granted Lang’s motion to dismiss in part but allowed Gallagher to file an amended complaint to see if it could allege facts that Lang breached the non-compete provision in a manner consistent with section 16600 [unlikely given the fact pattern] and assert a trade secret misappropriation claim if possible.

The Gallagher decision is a reminder to employers that non-compete provisions will be heavily scrutinized by courts and likely to be struck down unless they fall within the narrow confines of the statutory exceptions.  Although the Gallagher Court was leery of the so-called “trade secret exception” to section 16600, it is possible that had the employment agreement been more narrowly drafted to tie the solicitation to the actual use of Gallagher’s trade secrets, it is possible the Court could have been persuaded to reach a different conclusion.  Employers should consult with legal counsel to see whether a non-compete provision can be crafted in a manner to comply with California law.

On May 29, 2014, the California Supreme Court in Duran v. U.S. Bank National Association clarified employers’ rights in defending against employee misclassification class action cases. The Court held that in defending against such claims, employers must be permitted to present relevant defenses, even if such defenses involve individual issues. The Court’s analysis should have a sweeping effect on trial courts by requiring a more thorough analysis at the time of class certification. Trial courts can no longer leave the issue of a trial plan in the queue and wait to see if the case proceeds to trial, which is exceedingly rare in class actions. Rather, trial courts will need to consider and define a manageable and fair trial plan at the outset that will permit employers to litigate individual liability defenses. 

Duran arose from a class action brought by 260 current and former loan officers of U.S. Bank. The employees claimed they had been misclassified as exempt employees under the outside salesperson exemption and, therefore, had been denied overtime pay.

The class was certified and a trial management plan was created that allowed a random sampling of 21 employees to testify at trial. Although the Bank tried to introduce numerous declarations from absent class members who claimed they met the exemption standard, the court refused to admit the declarations. The employer was only permitted to present evidence related to the 21 class members in the sample.

In the court’s words, Duran was “an exceeding rare beast, a wage and hour class action that proceeded through trial to verdict.” Based on the testimony of the random sampling of class members, the trial court awarded $15 million in restitution and $18 million in attorneys’ fees to all of the class members.

The Bank appealed. The California Court of Appeal reversed the trial court, decertified the class, and held that the trial plan was “fatally flawed” because it deprived the employer of its due process right to litigate affirmative defenses – the trial plan prevented the employer from defending against the individual claims of 90% of the class members. The employees appealed to the California Supreme Court.

In a decision that can be called a “win” for employers, the Supreme Court affirmed the appellate court’s decision that the trial plan was flawed and prevented the Bank from presenting evidence that some of the class members were not misclassified.  Although the court rejected the idea that an employer can present individual evidence for every class member, the court confirmed the right of an employer to present individualized evidence to challenge “common evidence” in a class action.

The court did not wholly reject the use of sampling, but emphasized that, at the class certification state, the litigation of individual issues, including those arising from affirmative defenses, must be managed fairly and efficiently. In the court’s words, “Trial courts must pay careful attention to manageability when deciding whether to certify a class action.” The court clarified that such statistical methods must not undermined a defendant’s right to present relevant evidence.

The court remanded the case to the lower court for a new trial and held that the trial court may hear a new motion for class certification.

Duran should be useful guidance for trial courts in determining whether employee wage class actions can be certified, and, if so, how individual issues must be managed through a trial plan. Much more time will likely be expended by both sides to argue the feasibility of any trial plan based on sampling and statistics. Trial courts may also be asked to review class certification decisions to determine if, in light of this recent clarification, a certified class action should, in fact, remain certified.

A California Court of Appeal decision issued on May 15, 2014 (Tiri v. Lucky Chances, Inc., Case No. A136675) decided that the parties to an arbitration agreement may, by agreement, deprive a civil court of jurisdiction to determine whether an arbitration agreement is enforceable.

Several years after she was hired, Lourdes Tiri signed an agreement with her employer, Lucky Chances, Inc. requiring disputes between them to be resolved by arbitration.  In one of the provisions to that agreement, the parties agreed to delegate questions about the enforcement of the agreement to the arbitrator, instead of to a court.   Tiri was subsequently fired and she filed a complaint in the Superior Court alleging wrongful discharge.  The employer petitioned to compel arbitration but the trial court denied the petition on the grounds that the arbitration agreement was unconscionable and therefore unenforceable.  Lucky Chances appealed the court’s order denying arbitration.  The court held that the trial court lacked the authority to rule on the enforceability of the agreement because the parties’ assignment of this authority to the arbitrator was clear and was not revocable under state law.

This is great news for employers and a further incentive to use arbitration agreements that contain provisions of this kind.  The chances that an agreement will be found to be unenforceable if it contains such “arbitrator decides” language is fairly remote.  A full copy of the decision can be viewed at this link: Tiri v. Luck Chances.

Summary of Program

Companies and their employees are now widely using social media in their daily business activities. These networking sites are used by employees to communicate with one another as well as current and potential customers. However, an employee’s use of social media may occasionally adversely impact their employer’s business or present other legal risks. What can an employer do to protect itself without intruding on an employee’s rights?

Program Highlights

  • Employer’s use of employee’s social media information versus the employee’s right to privacy.
  • Protection of employer’s Confidential and Proprietary Information.
  • Ramifications of B.Y.O.D. policies.
  • Potential employer liability for employee’s on-line conduct.
  • The importance of effective Electronic Use and Social Media policies.
  • Legal limits for employee use of social media in the workplace.

Date:      May 22, 2014

Time:    9:30 a.m. – 11:30 a.m.

Location:  Weintraub Tobin, 400 Capitol Mall, 11th Floor, Sacramento, California.

For more information and to download a copy of the flyer, please click here.