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Federal Court Ruling Expands Reach of Non-Compete Law in California

California employers have long been aware that California state law prohibits inclusion of non-compete clauses in standard employment agreements.  But, in a first of its kind case, a divided federal appeals court panel has interpreted California Business and Professions Code Section 16600 to also bar “no-employment” contract terms that prevent a former employee from working for the former employer or any entity in contract with the former employer.  The court held that this type of provision limits an employee’s ability to work in contravention of the terms of Section 16600.

In Golden v. California Emergency Physicians Medical Group, et al., a majority opinion from the Ninth Circuit Court of Appeals (which covers California) reasoned that Section 16600 is not limited solely to traditional non-compete agreements but instead covers any employment agreement that restrains people from engaging in a lawful profession, trade or business.  At issue in the case was a settlement agreement between an emergency room physician and his former employer that contained a provision that waived the doctor’s rights to employment with the medical practice or at any facility that the practice may own or with which it may contract in the future.  When the doctor refused to execute the written agreement, his attorney sought to enforce the agreement against him and the trial court held that Business and Professions Code § 16600 did not void the settlement agreement as it did not inhibit the doctor from competing with his former employer.

On appeal, the doctor argued that Section 16600 voids the agreement because the no-employment provision may impermissibly restrain his professional practice.  The dissent did not agree with that position, noting that such a possibility was at best hypothetical and did not limit his current ability to practice his profession.  However, the majority ruled that Section 16600 does not limit itself to non-compete clauses and may apply to this case.  In doing so, the court noted that Section 16600 does not use the word “competition” and is written in a very broad manner that contrasts with the later sections that detail specific exemptions to the rule.  The court declined to determine whether the contract was actually void; instead, it sent the case back to the trial court for additional fact-finding to determine whether the contract term created a substantial restraint on his professional practice.

California employers who include no-employment provisions in their severance or settlement agreements with former employees should take caution when including such terms and tailor them carefully to avoid challenge under Section 16600.  Provisions that allow an employer to terminate employment if a former employee is found to later be employed by a contractor or a company acquired by the employer may be deemed overly restrictive based on this ruling and may result in a void agreement.  That is a significantly dangerous result, as other rights created by the agreement regarding the former employee could also be lost to the employer.

April 24, 2015   No Comments

Not an April Fool’s Joke

Protecting alleged “whistleblowers” has become a greater and greater priority of government agencies in recent years.  When agencies believe employers are taking actions that stifle the “whistleblowing” of employees, they are quick to take strong action.  For the first time, an agency that gets plenty of attention from companies has joined in this effort.

The Securities and Exchange Commission (SEC) today issued an order in an administrative proceeding that found KBR, Inc. had violated SEC Rule 21F-17, which states: “No person may take any action to impede an individual from communicating directly with [the SEC] staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement … with respect to such communications.”—Rule 21F-17(a))

KBR has now amended its form confidentiality statement which the SEC found violated that Rule.  Previously, it stated that witnesses were “prohibited from discussing any particulars regarding [business conduct interviews] and the subject matter discussed…unauthorized disclosure may be grounds for…termination of employment.”  KBR has to pay $130,000 in sanctions along with notifying its employees over the past 3 1/2 years that KBR does not require authorization to disclose information to the SEC and other agencies’ Inspectors General.

According to the attached press release from the SEC: “Other employers should similarly review and amend existing and historical agreements that in word or effect stop their employees from reporting potential violations to the SEC.”  That is wise advice — unless you want to have the SEC investigating your business or you want to be a “test case” to challenge the SEC’s action.

Read the press release issued by the SEC.

April 1, 2015   No Comments

Can Employers Prohibit Secret Workplace Recordings?

Our very own HR Law Matters contributor Jim McCabe has written an insightful analysis on whether employers can prohibit employees from secretly recording conversations in the workplace.  The article was published yesterday on Law 360 and can be viewed here.

The article discusses the types of legal challenges to policies and practices limiting secret workplace recordings that have been brought under federal whistleblower statutes, federal nondiscrimination laws, and the National Labor Relations Act.

Jim’s article reviews these challenges and offers thoughts on the risks employers face when they consider enacting or enforcing such policies on secretly recording conversations in the workplace.  He offers considerations all employers must weight before deciding to take an action — such as terminating an employee — for secretly recording conversations.

This article is a must-read for employers, whether they have such a policy, have considered creating one, or just want to be sure they are aware of the benefits and risks such a policy could have for their workplace.  If you have more questions or want to discuss this topic further, be sure to call or email Jim — he’d be happy to hear from you.

March 10, 2015   No Comments

Cyber Threats and Online Defamation: Options When Former Employees Won’t Let Go

Online forums where anyone can post comments, reviews, or opinions about a company are growing in popularity.  As a result, employers are finding postings by former employees who may have left on “bad” terms and now share their unhappy feelings with the world.  Often such postings – while annoying and potentially embarrassing – are well within an employee’s rights.  Companies need to remember that the former employee will likely soon grow tired of the cyber smear campaign, and such posts do not often cause meaningful damages (particularly the type that can be proven in court).  Additionally, where such posts are on sites like Twitter or Facebook, the daily volume of postings means that any bothersome posts get moved down the feed pretty quickly.  Most of the time the employer’s best bet is to follow the advice of Disney’s “Frozen” and just “Let it Go.”

But sometimes a former employee’s postings cross the line into false and defamatory statements that truly affect the company.  Employers have options to consider to try to stop these postings and prevent further damage.  Some of these options are:

1. Issue a press release/formal response.  Where the criticism is so extraordinary that it is damaging the business, an employer could post its own statement or respond via Twitter/Facebook.  But be careful; this approach might fuel more attention on the original post.  

2.  Contact the internet service provider (ISP).  The company could demand that the ISP: (1) remove the post(s), (2) identify the poster, and (3) retain all evidence concerning the origin of the postings.  Where the postings themselves demonstrate  defamatory/blatant misrepresentation intended to cause harm, an internet site may remove the postings as a violation of its terms of service (though this outcome is somewhat rare because ISPs are typically immune from liability for the defamatory statements of third-party users under the Communications Decency Act of 1996).  

3. Cease and Desist Letter.  A letter demanding the poster stop may be sent – if the company can identify the poster.  The letter should outline claims that the company would bring against the former employee, including a request for attorneys’ fees and an injunction.  Depending on whether the former employee is covered by an arbitration provision that survived termination (such as in a severance agreement), such an action may have to proceed via arbitration rather than in court.

4. Litigation.  A lawsuit (or demand for arbitration) may be brought seeking damages and retraction of damaging, malicious misrepresentations as well as for breach of any relevant employee confidentiality agreements.  Defamation claims are difficult to win for companies because they typically require proof not only that the postings caused actual damages to the company, but also that they were malicious misrepresentations rather than mere opinions.  Where statements are made on social media sites where readers expect to see opinions, courts have found that such postings are more likely opinions rather than misrepresentations of fact.  This is significant because, unless enough specificity is provided to convince a court that measurable economic harm has been done by the disparaging postings, the poster’s opinion may be viewed as protected speech, and fees and costs can be awarded against the employer under anti-SLAPP statutes.

While often the former employee is simply blowing off steam and the defamatory postings will peter out without much fanfare, employers should know that these (and other) options are available  to help stop defamatory postings or any further damage to the company’s reputation.  Just be careful that the cure is not worse than the harm itself.

February 13, 2015   No Comments

OFCCP’s 2014 in Review: Regulatory Changes Abound, Systemic Hiring Claims Remain Priority

In 2014, the biggest headlines out of the Office of Federal Contract Compliance Programs (OFCCP) were the slew of regulatory and directive changes announced and finalized.  These included:

  • significant changes to the VEVRAA (veterans) and Section 503 (disabled) regulations;
  • an amendment to Executive Order 11246 (as well as new related regulations) to add sexual orientation and gender identity to the non-discrimination and affirmative action requirements;
  • a new Executive Order requiring contractors to provide  information regarding employment and labor law violations in connection with contract bids (and related other requirements);
  • release of proposed regulations that would require contractors to submit annually their compensation information by race and gender (that are expected to be finalized in early 2015);
  • an overhaul of the federal contractor compliance manual; and
  • a revised and significantly expanded compliance audit letter.

While these changes have dominated the articles and discussions of the prior year, contractors should not lose sight of what remains the OFCCP’s continued priority in audits – pursing systemic hiring claims.  Some of the more significant hiring-related claims and settlements from 2014 included:

  • $1,500,000 in back wages and interest to 3,651 affected applicants, plus 113 job offers to the original class members as positions become available
  • $475,000 in back wages and interest to settle allegations of sex discrimination affecting 1,293 female job seekers, and 116 job offers to the original class members as positions become available
  • 104 women and 91 African-Americans who were denied jobs as valets who received a total settlement of $275,000 and placement of 65 of the women and 27 of the African-American class members into valet positions – with retroactive seniority and benefits for the new hires
  • $1 million in damages and providing 48 job opportunities to 5,557 qualified African-American
  • $200,000 to 247 minority workers who were rejected for engineering positions comprised of 152 Asian Americans, 51 Hispanics, 29 African-Americans, 3 Native Americans and 12 individuals who identified as two or more races
  • $2.2 million in back wages and interest to nearly 3,000 African-American, Hispanic, Caucasian and female job applicants after OFCCP investigators found that hiring managers at each location used inconsistent and subjective practices to favor one group over another based on race and sex
  • $537,000 in back wages and interest to 102 women who were rejected for entry-level attendant positions

Most of these claims were based on a statistical analysis of the number of applicants who were minorities or females as compared to the number of those hired.  In light of this continued OFCCP focus, contractors would be well advised to make it a priority to review their applicant data, especially the impact of any tests utilized in their application process, and make any changes possible to avoid a statistical result showing adverse impact discrimination.

January 28, 2015   No Comments

Required But Not Integral: Why The Supreme Court Held Security Screening Time Is Unpaid

Determining what is or is not paid time under the Fair Labor Standards Act (FLSA) is no easy undertaking for employers.  Whether the time involves preparatory tasks, or activities performed after the conclusion of a shift, employers face a difficult assignment in drawing the line between what activities should and should not be compensated.  Fortunately, the U.S. Supreme Court handed down a unanimous decision yesterday that provides the guidance employers need.

The decision, Integrity Staffing Solutions v. Busk, is being lauded as a major victory for employers.  Integrity Staffing is a warehousing contractor that companies such as Amazon.com hire to fulfill product orders.  In an effort to prevent employee theft, Integrity Staffing requires its employees to undergo a security screening process at the end of their shifts.  This screening process takes up to 25 minutes to complete – and is unpaid.  Two Integrity Staffing employees filed a collective action alleging that they were owed compensation under the FLSA for this screening process time.  The Ninth Circuit Court of Appeals agreed with the employees’ theory and found that the security screenings were an integral part of the warehousing job which must be paid.

In a unanimous decision, however, the Supreme Court reversed and held that the employees were not entitled to compensation for time spent going through the security process after their shifts.  Ultimately, the Court found that the screening process was not a “principal activity” of the workers’ jobs under the FLSA.  Key to this determination was the finding that the screening process was not “integral and indispensable” to the activities that the employees were hired to perform because the screening process did not constitute an “intrinsic element” of the workers’ principal activities.  The Court found it critical that the screening process could have been eliminated without impairing the employees’ ability to perform their work.

The key take-away from the Supreme Court’s decision is that to be compensable an activity must be “an intrinsic element” of the job―meaning an activity “with which the employee cannot dispense if he is to perform his principal activities.”  Perhaps as important as the legal test adopted by the Supreme Court is the legal test that it rejected.  Namely, Integrity Staffing’s employees urged the Court to hold that because the screening process is required by the employer, and the employer benefits from the security process, it is a principal activity of the job.  Sensibly, the Supreme Court rejected this argument and expressly stated that the inquiry regarding whether compensation is required does not turn on whether an employer mandates a particular activity.  Had the Supreme Court been persuaded by this reasoning it is difficult to fathom how expansive the flood of accompanying litigation would have been.  Thankfully for employers faced with the unenviable task of determining what exactly constitutes work time, the Supreme Court opted to go in a more sensible direction and provide all of us some much needed guidance going forward.


December 10, 2014   No Comments

Remember “5/11″

Georgia’s new statutory law of restrictive covenants became effective more than three years ago, on May 11, 2011.  The significance of the new law cannot be overstated.  Prior to the new law, Georgia Courts were required to follow sometimes arcane rules of construction that frequently resulted in covenants being invalidated in their entirety based on what seemed to be trivial defects.


Within the first year or two following May 11, 2011, several court decisions established that the shelter offered to employers by the new law was available only for agreements that were executed on or after the effective date of the new statute.  Older agreements remained subject to the “old” law, and were no easier to enforce than before the new law went into effect.

One of the many remaining unanswered questions was whether an amendment executed on or after 5/11/11 to a pre-5/11/11 agreement made the new, enforcement-friendly law applicable to the whole agreement.  A decision by the U.S. District Court sitting in Macon earlier this month decided that the answer to that question was “no.” Lowe Electric Supply Co. and Edward Spell v. Rexel, Inc., (M.D. Ga. 2014).

Spell, a salesperson, signed a restrictive covenant agreement with his then-employer, Rexel, on January 12, 2011.   The non-compete provision in this agreement was unenforceable on its face under the “old” Georgia law.  Spell became dissatisfied with his employment and, in an effort to retain him, Rexel proposed a letter agreement modifying his compensation.  The letter agreement expressly incorporated by reference Spell’s January 12, 2011 restrictive covenant agreement.  Spell signed the letter agreement on May 14, 2014.

A few months later, Spell remained dissatisfied with his employment with Rexel and resigned to go to work for Lowe Electric Supply, a competitor of Rexel.  Following threats by Rexel to enforce the restrictive covenants contained in the January 12, 2011 agreement, Lowe Electrical Supply and Spell sued Rexel to enjoin it from seeking to enforce the non-competition and non-solicitation covenants.  The court granted the injunction, finding that the amendment of the 2011 agreement in 2014 did not save the restrictive covenants in the older agreement from being found invalid under the “old” Georgia law.

The message for Georgia employers (or any company with employees in Georgia) is clear – if you have any pre-5/11/11 agreements, have those affected employees execute comprehensive new contracts.   A post-5/11/11 “amendment” will not solve the problem.


November 18, 2014   No Comments

“You Can’t Order Safety”

I recently read a brief article regarding the former Captain of “The Best Damn Ship in the Navy.”  The article, an interview with Capt. D. Michael Abrashoff, formerly Captain of the USS Benfold (shown below), specifically focuses on his view that safety must be a top priority in any workplace.  As he says, even on a ship safety is something that you cannot just “order.” Rather, safety is something that has to be part of every individual’s daily thinking — from the Captain all the way down to the lowest ranking sailor.

The U.S. Navy announced today that the ballistic missile defense (BMD)-capable guided missile destroyer USS Benfold (DDG 65) and USS Milius (DDG 69) will become part of the Forward Deployed Naval Forces (FDNF) based at Commander Fleet Activities Yokosuka, Japan.

Captain Abrashoff’s perspective is useful for any workplace leader or any HR professional with responsibilities for workplace safety — and his point would be that every leader and HR professional has that responsibility.  The Captain offers some points worth considering and taking to heart in creating or reviewing your own safety program:

  • Creating a culture of safety is a must.

As he notes, even the Captain of a ship cannot “order” safety.  A belief in the importance of safety becomes a “culture of safety” when it permates everything.  Everyone has to feel the importance of doing every task safely.

  • When employees are injured, they don’t feel safe and that affects performance, not just medical costs.

Safety affects the success of the organization as a whole.  It cannot be compartmentalized or just made a facet of certain actions or obviously dangerous situations; it must be considered in everything that is done and recognized in everything that is not done too.  Safety impacts the bottom line in more than just lost work time, medical costs and workers’ compensation claims.

  • A safety culture takes actions, not just words.

Captain Abrashoff not only scheduled training on safe practices and improvements, but he attended the training and participated in the initatives right along side everyone else on the ship.  By sending the message that safety considerations applied to everyone, he helped communicate the right message.  As he says, “Every sailor knew that I felt their safety was a top priority of mine and not just lip service.”

  • Any sailor could stop any process if they thought safety was being impaired.
  • Any sailor had a direct line to me if they thought their chain of command wasn’t sufficiently concerned or didn’t see what they were seeing.

These two concepts are key to an effective safety program.  Employees will not believe there is a real commitment to safety if they have no role in it or if they are required to proceed with any action they consider unsafe.  Knowing they have the right to say “stop” and that they can go to the top if they need to — even in a super-heirarchical organization such as a branch of the military — underscored that the Captain was serious about safety.  That made the workplace safer.

While a Navy ship is not your regular “workplace,” the lessons of Captain Abrashoff’s experience offer great guidance to HR professionals and leaders in any workplace.


October 28, 2014   No Comments

Ebola Alert: OSHA Releases Guidance on Employer and Employee Obligations

The Occupational Safety & Health Administration (“OSHA”) recently released an advisory addressing employer and employee obligations “in the event of possible worker exposure to the Ebola virus.” Employers who believe that there is possible worker exposure to Ebola virus must implement various OSHA standards as part of a comprehensive worker protection program. The question many employers now face is: when does our workforce meet the threshold of “possible worker exposure” that would trigger implementation of these standards?

For many industries, it is more likely that there is possible worker exposure, as OSHA explains:

“Exposure to the virus or someone with Ebola may be more likely in certain sectors, including the healthcare, mortuary/death care, and airline servicing industries. Workers who interact with people, animals, goods, and equipment arriving in the U.S. from foreign countries with current Ebola outbreaks are at the greatest risk for exposure.

Precautionary measures for preventing exposure to the Ebola virus depend on the type of work, potential for Ebola-virus contamination of the work environment, and what is known about other potential exposure hazards.”

More specific guidance is provided for workers in some of these specific industries, including healthcare workers, airline and other travel industry personnel, mortuary and death care workers, laboratory workers, borders customs and quarantine workers, emergency responders, and workers in critical sectors (e.g. transportation, bus drivers, subways, pharmacists). Employers in these industries will need to quickly become versed in this guidance.

More generally, OSHA has clarified that, “Employers should educate workers about the hazards to which they are exposed and to provide reasonable means by which to abate those hazards.” In this respect, OSHA has released guidance to workers who believe they may have been exposed:

“If you think you have been exposed…

Any worker who thinks he or she may have been exposed to Ebola virus, including through travel, assisting an ill traveler or other person, handling a contaminated object, or cleaning a contaminated environment (such as an aircraft) should take the following precautions: 

  • Notify your employer immediately.
  • Monitor your health for 21 days. Watch for fever (temperature of 101°F/38.3°C or higher), muscle pain, headache, sore throat, diarrhea, vomiting, rash, and other symptoms consistent with Ebola.
  • Seek medical attention if you develop any of these symptoms.
  • Before visiting a health care provider, alert the clinic or emergency room in advance about your possible exposure to Ebola virus so that arrangements can be made to prevent spreading it to others.
  • When traveling to a health care provider, limit contact with other people. Avoid all other travel.”

In light of this new guidance, employers who do not fit within one of the industries likely to be affected by Ebola should also consider releasing some communication to their workforce regarding Ebola precautions, including the information shared by OSHA above. Employers may also consider establishing guidelines that require employees to notify their employer if they think they may have been exposed to Ebola by traveling to one of the affected areas or by another means (e.g. caring for family member) and provide a confidential mechanism for doing so. At the same time, employers will want to be careful to abide by the mandates of the Americans with Disabilities Act, including providing reasonable accommodations and keeping any medical information shared confidential.

For more information on these issues, please contact Richard Gerakitis or Jim McCabe.

October 17, 2014   No Comments

Healthy Workplaces, Healthy Families Act of 2014 Provides Paid Sick Leave For California Employees

Governor Jerry Brown recently signed legislation that compels California employers to provide sick leave for their employees. The law, AB 1522 – also known as the Healthy Workplaces, Healthy Families Act of 2014 (“HWHFA”) – provides that employees will be entitled to earn at least three paid days of sick leave per year and will go into effect on July 1, 2015.

California employers should be aware of the provisions of AB 1522 and start planning for design and implementation of sick leave programs that comply with the law’s requirements. The law is designed to cover all California employers regardless of size, and there are only a few exceptions in place for employees covered by collective bargaining agreements, certain in-home health care workers, or airline employees. AB 1522 also carries with it notice and record keeping requirements that will compel employers to be proactive to avoid fines and penalties available under the statute.

Key provisions of HWHFA include the following:

  • Full or part-time employees who work more than 30 days per year in California may accrue and take paid sick days
  • Employees must accrue at least one hour of paid sick time off for every 30 hours worked; alternatively, employers may implement a policy that provides at least 24 hours (or three days) of paid sick leave for employee use each year.
  • Accrued sick days carry over from year to year, but do not need to be paid out at time of termination of employment
  • If an employee separates from employment and is rehired within one year, any previously accrued and unused paid sick days must be reinstated
  • Employees must be allowed to use sick time for their own or a family member’s illness or preventative care
  • Employees must also be allowed to use accrued sick time for time off related to an employee’s status as a victim of domestic abuse, stalking, or sexual assault
  • Employers are required to display a posting explaining employees’ rights to mandatory sick time pay
  • Records regarding hours worked, paid sick time accrued and paid sick time used must be maintained for three years

There are a number of other provisions in HWHFA that can catch unsuspecting employers. It is recommended that all employers with California-based employees or employees who may spend more than 30 days in California in a 12-month period review their policies and procedures for accrual and use of sick pay to ensure compliance with HWHFA. Violations of the Act can result in penalties ranging from $50 to $4,000 per violation, with authority for enforcement of the Act resting with the California Labor Commissioner. While HWHFA does not expressly include a private right of action for employees, employers may see such claims brought under the Private Attorney General’s Act (“PAGA”), where employees may attempt to collect penalties on behalf of the state plus attorneys’ fees and costs.

September 30, 2014   No Comments