Selected Developments
March 2020 Update
Chapter 1: Hiring Guidelines and Pitfalls
In SB 188, the legislature extended the prohibition against racial discrimination to include discrimination based on hairstyle. Specifically, effective January 1, 2020, Govt C §12926(w) states that “race” is inclusive of traits historically associated with race, including, but not limited to, hair texture and protective hairstyles. “Protective hairstyles” includes, but is not limited to, such hairstyles as braids, locks, and twists. Govt C §12926(x). See §§1.12, 15.33.
The U.S. Supreme Court has granted certiorari (in part) in R.G. & G.R. Harris Funeral Homes, Inc. v EEOC (2019) ___ US ___, 139 S Ct 1599, to consider whether Title VII prohibits discrimination against transgender people based on (1) their status as transgender or (2) sex stereotyping under Price Waterhouse v Hopkins (1998) 490 US 228, 109 S Ct 1775. See §1.12.
Employees may be required to undergo routine medical and physical examinations as long as the examinations are job-related and consistent with business necessity. However, see EEOC v BNSF Ry. Co. (9th Cir 2018) 902 F3d 916 (employer violated Americans with Disabilities Act (ADA) (42 USC §§12101–12213) by demanding that job applicant with perceived disability pay cost of medical testing). See §1.63.
Labor Code §432.6, enacted by AB 51 and effective January 1, 2020, precludes employers from requiring applicants or current employees to agree as a condition of employment, continued employment, or the receipt of any employment-related benefit to waive any right, forum, or procedure related to any violations of the Fair Employment and Housing Act (FEHA) (Govt C §§12900–12996) or the California Labor Code, including the right to file a claim with a state or law enforcement agency. It also precludes employers from threatening, retaliating against, or discriminating against any employee or applicant who refuses to consent to the waivers prohibited under this section. It also specifies that any agreement requiring an employee to opt out of a waiver provision or to take any affirmative action to preserve their rights will be considered a condition of employment. This prohibition applies to any contracts for employment entered into, modified, or extended on or after January 1, 2020, but does not apply to post-dispute settlement agreements or negotiated severance agreements. Anticipating a preemption challenge (Governor Brown vetoed a similar bill last year, citing his belief that it was preempted by federal law), the bill provides that it is not intended to affect any agreements otherwise enforceable under the Federal Arbitration Act (FAA) (9 USC §§1–16). The statute does not preclude arbitration agreements for FEHA and Labor Code claims, but simply precludes employers from requiring them as a condition of employment, or retaliating against employees who choose not to agree to arbitration. Government Code §12953 specifies that a violation of Lab C §432.6 is an unlawful employment practice under FEHA. Thus, prevailing plaintiffs who enforce their rights under Lab C §432.6 would be entitled to recover their reasonable attorney fees and injunctive relief, including reinstatement and nullification of the improper contract provisions. See §1.82.
In New Prime Inc. v Oliveira (2019) 586 US ___, 139 S Ct 532, the Supreme Court concluded that courts should first determine whether FAA §1’s exclusion of certain contracts of employment from FAA coverage applies; further, §1 applies not only to employer-employee contracts but also to contracts involving independent contractors. See §1.82.
Chapter 2: Employment Contracts and Executive Compensation
Labor Code §432.6, enacted by AB 51 and effective January 1, 2020, precludes employers from requiring applicants or current employees to agree as a condition of employment, continued employment, or the receipt of any employment-related benefit to waive any right, forum, or procedure related to any violations of the Fair Employment and Housing Act (FEHA) (Govt C §§12900–12996) or the California Labor Code, including the right to file a claim with a state or law enforcement agency. The statute does not preclude arbitration agreements for FEHA and Labor Code claims, but simply precludes employers from requiring them as a condition of employment, or retaliating against employees who choose not to agree to arbitration. See §§2.6, 2.85.
In Diaz v Sohnen Enters. (2019) 34 CA5th 126, the court held that an employee had impliedly consented to her employer’s new arbitration policy by continuing to work after being notified of the policy. See §2.85.
In Blair v Rent-A-Center, Inc. (9th Cir 2019) 928 F3d 819, the Ninth Circuit held that the FAA does not preempt the rule of McGill v Citibank, N.A. (2017) 2 C5th 945, that an arbitration agreement that waives the right to public injunctive relief is contrary to California policy and is therefore unenforceable under California law. See §2.85.
Chapter 3: Independent Contractors, Leased Workers, and Outsourcing
The Industrial Welfare Commission’s definition of the employment relationship in its Wage Orders does not incorporate federal law. Atempa v Pedrazzani (2018) 27 CA5th 809, 820. See §3.6.
In 2018, the California Supreme Court issued its landmark decision in Dynamex Operations W., Inc. v Superior Ct. (2018) 4 C5th 903 articulating a new legal test (the so-called ABC test) for determining whether someone is an independent contractor or an employee. In AB 5, the legislature codified the supreme court’s test, with certain exceptions, in Lab C §2750.3. For details, see §3.9B.
In Velox Express, Inc. (2019) 368 NLRB No. 61, the National Labor Relations Board found that an employer’s communication to its workers of its opinion that they were independent contractors did not, standing alone, violate the National Labor Relations Act (NLRA) (29 USC §§151–169) if that opinion later turned out to be mistaken. See §3.33.
Chapter 4: Immigration Law Requirements for Employers
In Diaz-Jimenez v Sessions (9th Cir 2018) 902 F3d 955, the Ninth Circuit held that a false claim of citizenship in applying for employment renders an alien inadmissible for work only if that claim is made on Form I-9. In this case, the applicant had not completed a Form I-9, so he was not removable under 8 USC §1182(a)(6)(C)(ii)(I). See §4.4.
In 2017, USCIS introduced a revised version of Form I-9, marked “Rev. 07/17/2017 N.” Effective September 18, 2017, employers must use only that version of the form. This continues to be true as of December 1, 2019. See §4.12.
Chapter 5: Wage and Hour Laws
Employees working on oil drilling platforms in the Santa Barbara Channel that are under the jurisdiction of the Outer Continental Shelf Lands Act (43 USC §§1331–1356b) are subject only to federal law. Parker Drilling Mgmt. Servs. v Newton (2019) ___ US ___, 139 S Ct 1881. See §5.1.
In Savea v YRC Inc. (2019) 34 CA5th 173, the court held that because an employer and its fictitious business name were the same legal entity, the employer did not violate the wage statement requirement of Lab C §226(a)(8) by listing its fictitious business name as the employer name on its wage statements. Further, consistent with the wage statement template provided by the California Division of Labor Standards Enforcement, which contained no mail stop code or ZIP+4 code, the employer was not required to provide such codes. See §5.14B.
In Furry v East Bay Publ’g, LLC (2018) 30 CA5th 1072, the court held that an employer’s good faith belief that its employee was exempt was not a viable defense to a wage statement claim. See §5.14B.
In Melendez v San Francisco Baseball Assocs. LLC (2019) 7 C5th 1, the California Supreme Court held that §301 of the Labor Management Relations Act did not preempt wage payment claims brought by ballpark security guards, because those claim arose solely under state law, and did not require interpreting the parties’ collective bargaining agreement. See §5.16.
On January 1, 2020, the statewide minimum wage for employers with 26 or more employees increased to $13.00 per hour, meaning the salary threshold for exemption purposes will be $54,080 annually. The minimum wage for employers with 25 or fewer employees increased to $12.00 per hour, and the salary threshold exemption for those employers will be $49,920 annually. Beginning January 1, 2020, federal contractors must pay covered workers at least $10.80 per hour. See §§5.17. 5.56.
In O’Grady v Merchant Exch. Prods., Inc. (2019) 41 CA5th 771, the court held that an employer’s mandatory “service charge” on banquet hall guests may be shown to constitute gratuities payable to food and beverage service staff; the trial court erred in holding that a service charge can never constitute a gratuity. See §5.20.
Meal and lodging credit amounts have been adjusted for 2020. See §5.21.
In Hernandez v Pacific Bell Tel. Co. (2018) 29 CA5th 131, the court held that travel time to and from an employee’s home to customer residences did not constitute hours worked under either the “control” or “suffer or permit to work” tests, and thus was not compensable. See §§5.45, 5.52.
Senate Bill 142 builds on and expands the lactation accommodation requirements enacted in 2018 in AB 1976. It specifies in greater detail how the employer must accommodate an employee who needs to take time to express milk for her infant, including specific requirements for the room or location provided for that purpose. It requires employers to develop and implement a lactation accommodation policy that must be made available to all employees, including new hires, and to employees when they make an inquiry about or request parental leave. Senate Bill 142 also adds retaliation protections for employees who request lactation accommodation and authorizes a civil penalty of $100 for each violation. Employees are permitted to file a complaint with the Labor Commissioner for violations of these requirements, in which case they may seek reinstatement, actual damages, and appropriate equitable relief. See §5.48.
In Ward v Tilly’s, Inc. (2019) 31 CA5th 1167, the court of appeal held that on-call employees who are required to call in should receive reporting-time pay. See §5.50.
Labor Code §515.5 provides that certain software employees are exempt from overtime requirements if they perform statutorily enumerated duties and receive a rate of pay not less than the statutorily specified rate. Effective January 1, 2020, the computer software employee’s minimum hourly rate of pay exemption will increase from $45.41 to $46.55, the minimum monthly salary exemption will increase from $7883.62 to $8080.71, and the minimum annual salary exemption will increase from $94,603.25 to $96,968.33. See §5.60.
The minimum salary level required for an exemption under federal law has been increased to $684 per week (equivalent to $35,568 per year), effective January 1, 2020. See §§5.62, 5.64.
In 2017, California enacted SB 306 to provide greater protections against retaliation for employees after they have filed a wage-related claim with the Labor Commissioner, including authorizing the Commissioner to issue citations and obtain injunctive relief during the investigative process. Senate Bill 229, effective January 1, 2020, builds on SB 306 by aligning the process for enforcement, review, and appeals with the existing process the Labor Commissioner uses for unpaid wage claims (e.g., those contained in Lab C §§98, 98.1 and 98.2). For instance, SB 229 outlines a process through which the Labor Commissioner may convert an unpaid monetary citation or order into a money judgment. It also sets forth how the Labor Commissioner can convert any nonmonetary orders (e.g., reinstatement) into judicial orders. It also provides greater detail about how an employer facing a Labor Commissioner order for unlawful retaliation may challenge it in superior court through a petition for a writ of mandate, and requires an employer’s appeal bond to also include penalties, interest, and any other monetary relief. See Lab C §98.74; see §5.90.
In Muller v Roy Miller Freight Lines, LLC (2019) 34 CA5th 1056, the court held that a truck driver involved in intrastate transportation of out-of-state goods qualified as an interstate transportation worker, exempt from the FAA. See §5.93A.
In ZB, N.A. v Superior Court (2019) 8 C5th 175, the California Supreme Court concluded that only the Labor Commissioner can recover both civil penalties and unpaid wages as set forth in Lab C §558(a); Lab C §2699(a) does not authorize employees to collect unpaid wages under §558 through a PAGA action. See §5.97.
Chapter 6: Vacations, Family and Medical Leave, and Other Time Off
Election Code §14002, added by AB 17, precludes employers from requiring or requesting that an employee bring their vote by mail ballot to work or cast their vote by mail ballot at work. However, it does not prohibit an employer from encouraging an employee to vote. The Secretary of State or any public prosecutor with jurisdiction may seek civil fines up to $10,000 per violation against any employer who violates these protections. See §6.121.
Since 2010, Lab C §1510 has required private and public employers to allow employees to take a paid leave of absence of up to 30 business days within a 1-year period for organ donations, and up to 5 business days for bone marrow donations. Assembly Bill 1223 requires employers grant an employee an additional unpaid leave of absence of up to 30 business days within a 1-year period for organ donations (but makes no changes for bone marrow donations). See §6.138A.
Chapter 7: Tax Compliance
An employer also is required to withhold Medicare and Social Security taxes under FICA from wages paid to an employee. The FICA tax consists of a Medicare portion (1.45 percent of wages, split evenly between employees and employers) and an old age, survivors, and disability insurance (OASDI, or Social Security) portion (12.4 percent, split evenly between employees and employers). The OASDI portion is imposed on an annual compensation base of $137,700 for 2020. See §7.17.
Other tax rates and amounts have also been updated throughout chap 7.
In response to the U.S. Supreme Court’s decision in South Dakota v Wayfair, Inc. (2018) 585 US ___, 138 S Ct 2080, the legislature enacted AB 147, which modifies California’s sales and use tax regime. See §7.30.
Chapter 8: Unemployment Compensation and State Disability Insurance
“Employee” for purposes of the Unemployment Insurance Code was redefined with the enactment of AB 5, which codified the “ABC” test adopted by the California Supreme Court in Dynamex Operations W., Inc. v Superior Court (2018) 4 C5th 903. See §8.10.
California’s disability insurance program includes a paid family leave benefit, under which employees are eligible for family temporary disability insurance in order to do the following:
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Care for a seriously ill child, spouse, parent, domestic partner, grandparent, grandchild, sibling, or in-law;
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Bond with a child within 1 year of the child’s birth; or
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Bond with a new foster or adopted child within 1 year of placement of the child in foster care or by adoption.
Under SB 83, the duration of paid family leave benefits is extended from 6 weeks to 8 weeks, beginning July 1, 2020. See §8.195.
Chapter 9: Notice-Posting, Training, and Recordkeeping Requirements
Enacted in 2018, SB 1343 extended so-called AB 1825 harassment training in two material respects: (1) It required employers with five or more employees (rather than 50 employees) to provide this training, and (2) it required employers to train both supervisors and nonsupervisory employees. However, as the January 1, 2020, compliance date approached, several ambiguities arose, including whether employees trained in 2018 needed to be retrained in 2019, and when training must be provided to nonsupervisory employees. Senate Bill 778, enacted in 2019, modifies or clarifies California’s new harassment training requirements in three respects. First, it extends the deadline for most employers to comply with the new harassment training requirements from January 1, 2020, to January 1, 2021. (The extended date is also the new beginning date for training requirements applicable to temporary and seasonal workers.) Second, the new January 1, 2021, deadline removes the prior concern that supervisors trained in 2018 had to be retrained in 2019 to meet the 2020 deadline. In fact, SB 778 specifies that employers who provided legally sufficient training in 2019—whether to comply with the previously announced January 1, 2020, deadline or because they simply wanted to do so earlier—will not be required to provide any further refresher training or education until 2 years thereafter. Further, it specifies that moving forward, employers must provide this sexual harassment training and education to each California employee once every 2 years. Third, SB 778 specifies that nonsupervisory employees must be trained within 6 months of hire, harmonizing it with a similar rule requiring supervisor training. This law became effective when it was signed by the governor on August 30, 2019, due to its urgency clause. See §9.61.
In 2016, the legislature enacted AB 1978, the Property Service Workers Protection Act (Lab C §§1420–1434). This law contains numerous measures to protect janitorial industry employees from sexual assault and certain other Labor Code violations. Among other things, it establishes a system of annual janitorial contractor registration (Lab C §1423), to encourage labor standards compliance and prompt and effective sanctions for violations. Effective January 1, 2020, all new applications for registration and renewal of registration must demonstrate completion of the sexual violence and harassment prevention training requirements prescribed by the Department of Industrial Relations under Lab C §1429.5, by providing a written attestation to the Labor Commissioner that this training has been provided as required. Lab C §1429(a)(10). See §9.61B.
Employers subject to the Property Service Workers Protection Act (Lab C §§1420–1434) must keep, for a period of 3 years, accurate records containing the following information: (a) the names and addresses of all employees engaged in rendering actual services for any business of the employer; (b) the hours worked daily by each employee, including the times the employee begins and ends each work period; (c) the wage and wage rate paid each payroll period; (d) the age of all minor employees; (e) any other conditions of employment; and (f) the names, addresses, periods of work, and compensation paid to all other covered workers. Lab C §1421(a)–(f). Item (f) was added by SB 83, effective January 1, 2020. See §9.73B.
Chapter 11: Trade Secrets Protection and Unfair Competition
Federal practice generally requires heightened or more detailed pleading than California state court practice. This is true even when pleading a trade secrets claim under both the federal Defend Trade Secrets Act (DTSA) (Pub L 114–153, 130 Stat 376) and the California Uniform Trade Secrets Act (UTSA) (CC §§3426–3426.11). Thus, if your case is in federal court, consider filing a Fed R Civ P 12(b)(6) motion to dismiss based on inadequacy of the allegations, or failure to plead with “sufficient particularity.” See, e.g., Calsoft Labs, Inc. v Panchumarthi (ND Cal, Nov. 11, 2019, No. 19-cv-04398-NC) 2019 US Dist Lexis 194939; Spice Jazz LLC v Youngevity Int’l, Inc. (SD Cal, Sept. 19, 2019, No. 19-cv-583-BAS-WVG) 2019 US Dist Lexis 161283; Siegler v Sorrento Therapeutics, Inc. (ED Cal, Feb. 12, 2019, No. 3:18-cv-1681-GPC-NLS) 2019 US Dist Lexis 23779; but see MACOM Technol. Solutions, Inc. v Litrinium (CD Cal, June 3, 2019, No. SACV 19-00220-JVS (JDEx)) 2019 US Dist Lexis 167880 (holding that allegations of specific trade secrets supposedly misappropriated were sufficient); Cedars Sinai Med. Ctr. v Quest Diagnostics, Inc. (CD Cal, Feb. 27, 2018, No. CV 17-5169-GW (FFMx)) 2018 US Dist Lexis 225681 (determining that heightened federal pleading standard under Fed R Civ P 9 does not apply to trade secret claims alleged under either California version of UTSA or DTSA). See §11.1A.
In Genentech, Inc. v JHL Biotech, Inc. (ND Cal, Mar. 5, 2019, No. C 18-06582 WHA) 2019 US Dist Lexis 35177, the court held that a private right of action for “conspiracy” in the theft of trade secrets cannot be asserted under either the DTSA or the UTSA. See §11.1A.
In MGA Entertainment, Inc. v Mattel, Inc. (2019) 41 CA5th 554, 563, the court held that a trade secrets misappropriation claim accrued when the plaintiff had “reason to suspect” that its competitor had gained knowledge of the trade secrets despite the competitor’s efforts to fraudulently conceal the misappropriation. See §11.2.
In Global Protein Prods., Inc. v Le (2019) 42 CA5th 352, the court found that a manufacturer’s alleged disclosure of one of the ingredients in its proprietary formula did not undermine its claim to a trade secret when its commercial advantage relied not only on the formula itself, but also on the process used to apply the formula. See §§11.4, 11.14.
In Monster Energy Co. v Vital Pharm., Inc. (CD Cal, May 20, 2019, No. EDVC 18-1882 JOB SHKx) 2019 US Dist Lexis 111806, the court found that, at the motion-to-dismiss stage, the plaintiff’s pleading that it used password-protected computers, restricted employee access to information and required them to sign confidentiality agreements, and required third parties to sign nondisclosure agreements were sufficient to show that the plaintiff made reasonable efforts to protect the secrecy of its trade secrets. See §11.6.
Misappropriation of trade secrets is an intentional tort, and a claim of misappropriation cannot be based on negligence. See Spice Jazz LLC v Youngevity Int’l, Inc. (SD Cal, Sept. 19, 2019, No. 19-cv-583-BAS-WVG) 2019 US Dist Lexis 161283. See §11.7.
Generally, widespread publication on the Internet will destroy trade secret status. See Global Protein Prods., Inc. v Le, supra. See §11.13.
When a patent is granted, the owner’s trade secrets disclosed in the patent cease to exist and the owner is granted a limited, temporary monopoly in exchange for the public disclosure. Hong Kong uCloudlink Network Technol. Ltd. v Simo Holdings Inc. (ND Cal, Apr. 22, 2019, No. 18-cv-05031-EMC) 2019 US Dist Lexis 68101. This rule does not apply to patent applications, which by law are maintained in secrecy with the U.S. patent office, or to unlawful misappropriations that occur before the patent is granted. See §11.14.
Employees can be careless when discussing their departure or competition plans, often communicating through their employer’s e-mail system. Also, a waiver of attorney-client protections may occur if the employee communicates to his or her outside counsel through the former employer’s e-mail or computer network. In Andrawes v Flora Media, Inc. (CD Cal, Nov. 5, 2018, No. CV 18-0431 FMO (PLAx)) 2018 US Dist Lexis 223803, however, the court found there was no waiver of the attorney-client privilege when the employee was not aware of the company’s policy providing for the monitoring of its e-mail accounts. See §11.41C.
Monetary damages or restitution for misappropriation of trade secrets must have a reasonable basis in fact, but need not be calculated with absolute precision. CTC Global Corp. v Huang (CD Cal, July 29, 2019, No. SACV 17-02202-AG (KESx)) 2019 US Dist Lexis 156883. See §11.42.
Prejudgment interest may be awarded to a prevailing plaintiff in a trade secrets misappropriation action to make it whole. BladeRoom Group Ltd. v Emerson Elec. Co. (ND Cal, Mar. 11, 2019, No. 5:15-cv-01370-EJD) 2019 US Dist Lexis 38829. See §11.42A.
A trial court may not grant a TRO or preliminary injunction in a trade secrets misappropriation case, regardless of the balance of interim harm, unless there is some possibility that the plaintiff would ultimately prevail on the merits of the claim. Failure to make the necessary evidentiary showing will doom attempts to obtain provisional injunctive relief. See Fidelity Brokerage Servs. LLC v York (CD Cal, Oct. 23, 2019, No. EDCV 19-1929-JGB (SPx)) 2019 US Dist Lexis 186795 (TRO denied when plaintiff’s claim of loss of goodwill and customers was speculative); CleanFish, LLC v Sims (ND Cal, June 28, 2019, No. 19-cv-03663-HSG) 2019 US Dist Lexis 108946 (TRO denied in customer and supplier list case; no showing of probability of success on merits or irreparable harm); Way.com, Inc. v Singh (ND Cal, Dec. 20, 2018, No. 3:18-cv-04819-WHO) 2018 US Dist Lexis 215243 (preliminary injunction denied; customer lists and pricing models not trade secrets because information readily available through public sources, including plaintiff’s business website). See §11.42B.
The California State Legislature in AB 51 enacted Lab C §432.6, effective January 1, 2020, which prohibits employers from requiring job applicants or existing employees to waive their right to a judicial forum as a condition of employment or continued employment. The statute prohibits “mandatory” employment contractual arbitration clauses between employers and employees. In other words, post-2019, employment arbitration agreements must be shown to have been “voluntarily” entered into by the employee to be enforceable. See §§11.42E, 11.55C.
Federal courts recently have taken the lead in developing standardized models or examples of protective orders that are used in trade secrets misappropriation cases. See, e.g., Acquisition Mgmt., Inc. v Retreaver, Inc. (CD Cal, Oct. 25, 2019, No. 2:19-cv-06814-DSF-KS) 2019 US Dist Lexis 187489; Hill Phoenix Inc. v Classic Refrigeration SoCal, Inc. (CD Cal, Aug. 8, 2019, No. 8:19-cv-00695-DOC (HDEx)) 2019 US Dist Lexis 144967. See §11.44.
Considerable new material has been added to the section “Contractual Assignments of Employee/Independent Contractor Inventions.” See §11.49.
It should be noted that a recent questionable California decision (now pending review in the California Supreme Court) distinguished covenants not to compete outside of the employment context, and indicated such restrictions may be enforceable if they are reasonable in scope and otherwise do not violate other anticompetitive or antitrust laws. See Quidel Corp. v Superior Court (review granted Nov. 13, 2019, S258283; superseded opinion at 39 CA5th 530) (ruling that Bus & P C §16600 did not necessarily invalidate covenant not to compete as to certain products in licensing agreement entered into between two sophisticated business entities represented by legal counsel). See §11.52.
In June 2019, the Center for Public Interest Law at the University of San Diego School of Law submitted a letter to the California State Bar requesting an ethics ruling to prohibit California lawyers from drafting employment agreements containing clearly unenforceable covenants not to compete, taking the position that California law is clear that such provisions are invalid and unenforceable (if not narrowly drafted to protect trade secrets), and California attorneys should know that by now. See §11.52.
In Roadrunner Intermodal Servs., LLC v T.G.S. Transp., Inc. (ED Cal, Mar. 28, 2019, No. 1:17-cv-01207-DAD-BAM) 2019 US Dist Lexis 53278, the court found that where a purchase and sales agreement expressly specified that “goodwill” was being transferred, but did not state or allocate a specific amount to goodwill, the covenant not to compete was still enforceable under the Bus & P C §16601 “sale of business” exception. See §11.53.
In Handoush v Lease Fin. Group, LLC (2019) 41 CA5th 729, the court refused to enforce a New York forum selection clause because the contract also contained a predispute jury trial waiver provision; such a provision violates a fundamental California public policy against predispute waivers of the right to a jury trial. See §11.55B.
A recent California decision raises the possibility that when there has not been a total or complete anticipatory breach of the entire contract, but only a partial or discrete breach, with continuing obligations or installments being imposed under the same contract, then the initial breach of the contract might not absolve a third party from later being liable for tortious interference in causing subsequent or future breaches of that same contract under a “continuing/ongoing” breach theory. See Jenni Rivera Enters., LLC v Latin World Entertainment Holdings, Inc. (2019) 36 CA5th 766, 783 (confidentiality/nondisclosure agreement breached each time party to the contract disclosed new information covered by the agreement). See §11.66.
Even employees who are not technically “officers” of the company nonetheless may owe fiduciary duties if they exercise sufficient control over employees in connection with the management of the business. See WeRide Corp. v Kun Huang (ND Cal 2019) 379 F Supp 3d 834, 852 (evidence showed defendant exercised discretionary management authority over group of 10–12 engineers and therefore was a “fiduciary”). See §11.68.
Conversion is the wrongful exercise of dominion over another’s personal property, whether tangible or intangible. The property need not be appropriated to the defendant’s use; it may be destroyed or merely damaged. It is a strict liability tort; it does not require bad faith, knowledge, or even negligence, but requires only that the defendant have intentionally done the act depriving the plaintiff of his or her rightful possession. Voris v Lampert (2019) 7 C5th 1141, 1151. See §11.73.
The “Form: Short Agreement for Protection of Proprietary Information” has been modified by the addition of a provision relating to the DTSA. See §11.76.
The definition of the term “inventions” has been modified in the “Form: Definitions.” See §11.78.
The “Form: No Disclosure or Misappropriation of Proprietary Information” has been modified by the addition of a provision relating to the DTSA. See §11.80.
Chapter 12: Workplace Safety
Effective July 29, 2019, as an emergency regulation, 8 Cal Code Regs §5141.1 provides for “Protection from Wildfire Smoke.” Employers should read this new mandate carefully to ensure compliance during wildfire events. See §12.1A.
Assembly Bill 203 adds Lab C §6709, concerning Valley Fever. As of May 1, 2020, and annually thereafter, construction employers in specified counties whose work activities disturb the soil must train their employees on the causes, recognition, prevention, and effects of Valley Fever. The mandate applies in counties where the incidence of Valley Fever is greater than 20 cases per 100,000 persons per year, and specifically applies to work performed in Fresno, Kern, Kings, Madera, Merced, Monterey, San Joaquin, San Luis Obispo, Santa Barbara, Tulare, and Ventura counties. The law does not direct the Division to adopt a regulation adding Valley Fever to Title 8, and no specific provisions are made in the law for enforcement. See §12.1A.
Civil penalties associated with Cal/OSHA citations will increase annually as the cost of living increases, as outlined by Lab C §§6427–6430 and 8 Cal Code Regs §336. See §§12.53, 12.56.
Employers are required to report every case involving a serious injury or illness or death to the Division of Occupational Safety and Health immediately after its occurrence. Under AB 1804, the Division is tasked with creating an online mechanism for making such reports. Until that mechanism is operational, an employer may report by either telephone or e-mail. Lab C §6409.1(b). See §12.30.
Title 8 Cal Code Regs §330(h), which defines serious injuries and illnesses for reporting purposes, has been amended in several respects. The new regulation drops the 24-hour trigger for hospitalizations, replaces “loss of a member of the body” with simple “amputation,” and adds loss of an eye. It confirms that the definition does not include accidents on public streets or highways unless they occur in construction zones. See §12.30.
For the first time, to the authors’ knowledge, a Title 8 regulation has been named for an individual. Under Lab C §6721, the “Heat Illness Prevention” regulation found at 8 Cal Code Regs §3395 has been renamed the “Maria Isabel Vasquez Jiminez Heat Illness Standard.” Ms. Vasquez Jiminez was the young worker whose death led to the adoption of the regulation. See §§12.33, 12.46, 12.114.
There is a dispute between the Division and employers over the “look back” provisions of the new “repeat” violation rule, which came into effect January 1, 2017. The Division’s view is that it may cite second violations as repeat even if the first violaton occurred before the effective date of the new rule. Employers believe that doing so is a violation of their due process rights. See §12.39.
Although California law already authorizes family members or law enforcement officers to seek gun violence restraining orders (GVROs), AB 61 expands who can petition the court for a GVRO to include employers and co-workers. Specifically, effective September 1, 2020, amended Pen C §§18150, 18170, and 18190 will authorize either employers or co-workers who have regularly interacted with the subject for 1 year and who have the employer’s approval to petition ex parte for a general GVRO, a 1-year GVRO, or a renewal of a GVRO. While the requirements vary slightly, the party seeking the GVRO must present evidence showing that the subject poses a significant danger, that the GVRO is necessary to prevent personal injury, and that less restrictive alternatives are insufficient. See §12.120A.
Chapter 13: Workplace Privacy
A new section has been added discussing “Employee Rights Under the California Consumer Privacy Act.” See §13.72A.
Chapter 15: Discrimination and Harassment
In R.G. & G.R. Harris Funeral Homes, Inc. v EEOC (2019) ___ US ___, 139 S Ct 1599, the U.S. Supreme Court agreed to review the Sixth Circuit’s decision in EEOC v R.G. & G.R. Harris Funeral Homes, Inc. (6th Cir 2018) 884 F3d 560 in order to consider whether Title VII prohibits discrimination against transgender people based on (1) their status as transgender or (2) sex stereotyping under Price Waterhouse v Hopkins (1998) 490 US 228, 109 S Ct 1775. See §15.5C.
Discrimination claims under §1981 may be subjected to compulsory arbitration. Lambert v Tesla, Inc. (9th Cir 2019) 923 F3d 1246, 1249. See §15.11.
In EEOC v BNSF Ry. Co. (9th Cir 2018) 902 F3d 916, the court held that the employer violated the ADA by demanding that a job applicant with a perceived disability pay the cost of his medical testing. See §15.113.
Discrimination claims under the ADA are evaluated under a “but for” causation standard, rather than a “motivating factor” standard. Murray v Mayo Clinic (9th Cir 2019) 934 F3d 1101. See §15.123.
In Lamps Plus, Inc. v Varela (2019) 587 US ___, 139 S Ct 1407, the Supreme Court held that an ambiguous arbitration agreement cannot, consistent with FAA, provide the necessary contractual basis for compelling class arbitration. See §§15.157, 20.31A.
Effective January 1, 2020, AB 9 amends Govt C §12960(e) to extend from 1 year to 3 years the deadline for an employee to file an administrative charge with the Department of Fair Employment and Housing (DFEH) after an unlawful employment practice occurs. It also makes conforming changes to the provision allowing employees an additional period up to 90 days if they first obtain knowledge of the facts of the alleged unlawful practice after the limitations period had expired. Govt C §12960(e)(1). This extended limitations period will not revive already lapsed claims. For these purposes, “filing a complaint” is equivalent to filing an intake form with the DFEH, with the operative date of a subsequently filed verified complaint relating back to the filing of the intake form. Govt C §12960(b). The bill also amends Govt C §12965 to clarify that the DFEH’s 1-year period to investigate an employee’s complaint and decide whether to bring a civil action starts from the filing of a verified complaint, rather than simply an intake form. Note that a complaint alleging a violation of CC §51, §51.5, §51.7, §54, §54.1, or §54.2 still must be filed within 1 year from the date on which the alleged unlawful practice or refusal to cooperate occurred. Govt C §12960(e). See §15.159.
Title VII’s charge-filing requirement, 42 USC §2000e–5(e), is a processing rule and is not jurisdictional. In Fort Bend County v Davis (2019) ___ US ___, 139 S Ct 1843, a former employee filed an EEOC charge alleging sexual harassment and retaliation, and then later handwrote “religious discrimination” on the intake questionnaire but did not make any change in the formal charge document. After several years of litigation, the employer asserted that the district court lacked jurisdiction over the religion-based claim because it was not stated in the EEOC charge. The Supreme Court held that dismissal of the suit was properly reversed because Title VII’s charge-filing requirement was not jurisdictional but a prudential prerequisite to suit. Furthermore, the employer had forfeited that claim because it did not raise it in a timely manner. See §15.187.
Chapter 16: Whistleblower Issues
In Siri v Sutter Home Winery, Inc. (2019) 31 CA5th 598, a winery employee voiced concerns to management and the Board of Equalization about her employer’s failure to comply with the sales and use tax law. Her employment was alledgedly terminated in retaliation. The court held that the risk of disclosure of her employer’s confidential taxpayer information did not warrant dismissal of her wrongful termination claim, absent a showing that she would not be able to prove her claim without that disclosure. See §16.4.
In Wadler v Bio-Rad Labs., Inc. (9th Cir 2019) 916 F3d 1176, the court held that provisions of the Foreign Corrupt Practices Act (15 USC §§78dd–1—78dd–3), including the three books-and-records provisions and the anti-bribery provision, were not “rules or regulations” of the Securities and Exchange Commission (SEC) under §806 of Sarbanes-Oxley (18 USC §1514A(a)). See §16.6.
In Cochise Consultancy, Inc. v U.S. ex rel Hunt (2019) 587 US ___, 139 S Ct 1507, the U.S. Supreme Court held that a whistleblower’s suit under the False Claims Act was timely under 31 USC §3731(b) because it was filed within 3 years of the interview where the relator informed federal agents about alleged fraud by a government contractor. See §16.12.
Chapter 17: Discipline and Termination
In Digital Realty Trust, Inc. v Somers (2018) 583 US ___, 138 S Ct 767, a former employee who was terminated shortly after he reported to senior management suspected securities law violations by the company, but who did not provide information to the SEC before his termination, was held not to be a whistleblower entitled to relief under the anti-retaliation provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 USC §78u–6(a)(6)), because that provision did not cover an individual who did not report a securities law violation to the SEC. See §17.4.
Continuing the trend of legislatively limiting settlement agreement provisions, AB 749 prohibits any settlement agreement related to an employment dispute from preventing or restricting the “aggrieved person” from obtaining future employment with the employer against whom the claim was filed, or any parent company, subsidiary, division, affiliate, or contractor of the employer. Any such provision in an agreement entered into on or after January 1, 2020, will be deemed void as a matter of law and against public policy. An “aggrieved employee” is defined as the person who has filed a claim against the person’s employer in court, before an administrative agency, in an alternative dispute resolution forum, or through the employer’s internal complaint process. However, the law does not preclude the employer and aggrieved person from making an agreement to end a current employment relationship. It also does not preclude provisions restricting the aggrieved person from future employment with the settling employer if the employer has made a good faith determination that the person engaged in sexual harassment or sexual assault. The inability to contractually preclude an employee from being rehired also does not require the employer to employ or rehire a person if there is a legitimate nondiscriminatory or nonretaliatory reason for terminating the relationship or refusing to rehire the person. See CCP §1002.5; see also §17.111.
Chapter 18: Reductions in Force and Plant Closings
In McCray v Marriott Hotel Servs. (9th Cir 2018) 902 F3d 1005, the Ninth Circuit held that the district court did not have jurisdiction to hear a dispute over a union’s alleged waiver of San Jose’s minimum wage ordinance. Deciding the dispute did not require the court to interpret the parties’ collective bargaining agreement, merely the ordinance itself, so there was no preemption under the Labor Management Relations Act (LMRA) §301 (29 USC §185) and no reason for the case to be in federal court. See also Melendez v San Francisco Baseball Assocs. LLC (2019) 7 C5th 1, 10 (action alleging failure to promptly pay final wages on discharge in violation of state law did not require interpretation of collective bargaining agreement, so §301 was not implicated). See §18.74.
Chapter 19: Insurance Coverage for Employment Claims
In Southern Cal. Pizza Co., LLC v Certain Underwriters at Lloyd’s, London Subscribing to Policy Number 11EPL-20208 (2019) 40 CA5th 140, the court held that an expense reimbursement claim under Lab C §§2800 and 2802 fell outside the “wage and hour” exclusion in an EPL policy; those statutes are not wage laws and do not address payments for labor or services. The insurer had a duty to defend because the claim likely was covered as an employment-related workplace tort. See §19.20.
Chapter 20: Mediation and Arbitration of Employment Disputes
In Monster Energy Co. v City Bevs LLC (9th Cir 2019) 940 F3d 1130, the court held that JAMS’s repeated business dealings with Monster Energy Co. mandated that the arbitrator disclose his ownership interest in JAMS; his failure to do so became sufficient grounds for vacatur of the arbitration award. See §§20.23, 20.39.
Labor Code §432.6, enacted by AB 51 and effective January 1, 2020, precludes employers from requiring applicants or current employees to agree as a condition of employment, continued employment, or the receipt of any employment-related benefit to waive any right, forum, or procedure related to any violations of the Fair Employment and Housing Act (FEHA) (Govt C §§12900–12996) or the California Labor Code, including the right to file a claim with a state or law enforcement agency. The statute does not preclude arbitration agreements for FEHA and Labor Code claims, but simply precludes employers from requiring them as a condition of employment, or retaliating against employees who choose not to agree to arbitration. See §20.26.
Discrimination claims under 42 USC §1981 may be subjected to compulsory arbitration. Lambert v Tesla, Inc. (9th Cir 2019) 923 F3d 1246, 1249. See §20.26.
In Henry Schein, Inc. v Archer & White Sales, Inc. (2019) ___ US ___, 139 S Ct 524, the Supreme Court held that when an arbitration agreement contains a delegation clause, the threshold issue of arbitrability must be decided by the arbitrator. See §20.27.
In New Prime Inc. v Oliveira (2019) 586 US ___, 139 S Ct 532, the Supreme Court ruled that independent contractor drivers engaged by a transportation company could not be forced to arbitrate their wage and hour claims under the §1 exclusion for transportation workers engaged in foreign or interstate commerce, because that exclusion covers independent contractors as well as employees. The Court also held that a district court must make an “antecedent determination” of whether the §1 exemption applies to a contract before compelling arbitration, even if the parties’ arbitration agreement contains a clause delegating such threshold determinations to the arbitrator. See §20.28.
In Correia v NB Baker Elec., Inc. (2019) 32 CA5th 602, the court held that the plaintiff employees’ purported waiver of PAGA representative claims in an arbitration agreement was unenforceable under Iskanian v CLS Transp. Los Angeles, LLC (2014) 59 C4th 348. Arbitration could not be compelled because the State of California, as the real party in interest under Lab C §2699, had not consented to arbitration or waived right to go to court. See §20.31A.
Effective January 1, 2020, SB 707 enacts new penalties if an employer fails to pay, within 30 days of their due date, the fees to initiate or to maintain arbitration proceedings for employment or consumer claims. Under CCP §§1281.97–1281.98, such an employer will be deemed in material breach of the arbitration agreement and in default of the arbitration, thus waiving the employer’s right to compel or proceed with arbitration. The employee will then have the option to withdraw the claim from arbitration and proceed in an appropriate court, or continue the arbitration but with the employer paying the employee’s attorney fees involved with the arbitration. If the employee elects to proceed with a court action, the statute of limitations will be considered to be tolled during the pendency of the arbitration for any claims brought in arbitration or that relate back to any claim brought in arbitration. The court will also be required to order monetary sanctions against an employer deemed in breach, and has the authority to award additional sanctions, including limits on discovery, evidentiary, and potentially terminating sanctions. See §20.41A.
Chapter 21: Public Employment Issues
On the request of the exclusive representative, a public employer must grant reasonable leaves of absence without loss of compensation or other benefits to enable employees to serve as stewards or officers of the exclusive representative, or of any statewide or national employee organization with which the exclusive representative is affiliated. Govt C §3558.8. See §21.8.
