Issue 1 - 2003

Consider the following situation. Jane Doe has a productivity and "attitude" problem at your workplace. She frequently complains about her personal life (e.g., ex-husband, mother, car problems, etc.). She also frequently complains about issues and people in the workplace (e.g., co-workers, vending machine prices, telephone equipment, etc.). Jane Doe's manager warns her in an annual performance review that her productivity and attitude problems could lead to discipline including discharge. Several weeks after the performance review, Jane Doe's manager walks by Jane Doe and hears her say the following things to a co-employee during a ten minute break: "Management's goals for 2003 are stupid. How can they expect to adopt a new computer system and have time to train all of us? We don't have enough time to do the work we have. When are we going to attend these training sessions? The current system works perfectly fine, and I think management is just instituting a new computer system in order to exploit us. This is ridiculous. I already HATE this new computer system. Actually, hate is not a strong enough word." Ms. Doe's manager decides to terminate her based upon what he overheard, given the previous performance review. Ms. Doe sues in state court.

Can Ms. Doe win this lawsuit? Given a new California law, Assembly Bill 2895, she may very well prevail.

Assembly Bill 2895 added Section 232.5 to the California Labor Code. Section 232.5 stops employers from prohibiting employees from disclosing information about their wages or working conditions. It specifically prohibits employers from discharging, disciplining, or discriminating against employees who disclose information about their wages or information about the employer's working conditions. It also prohibits employers from requiring an employee to sign a waiver that purports to deny the employee the right to disclose information about his or her wages or information about the employer's working conditions. Fortunately, the law specifically states that it is not intended to permit an employee to disclose proprietary information, trade secret information or information that is otherwise subject to a legal privilege without the consent of the employer.

What are "working conditions"? The new law does not define this term. Ms. Doe will argue she disclosed information about her working conditions which led to her discharge. The Company may respond that it terminated Ms. Doe for the way the message was conveyed, including the words "stupid" and "hate." However, it may ultimately be for a jury to decide what were the Company's motives, and whether the Company violated Labor Code Section 232.5.

In addition, Ms. Doe may argue that the Company violated the federal National Labor Relations Act. This federal law not only gives workers the right to join or assist unions, it also gives workers the right to engage in concerted activity for "mutual aid or protection." Even a conversation may constitute concerted activity if it has some relationship to group action in the interests of the employees.

Joe Dollars contacts your company and says that he wants to work as an intern. He is currently in college obtaining a bachelor of arts degree but would like to work in your computer programming department because he has a special interest in computers. He offers to work for free just to gain the experience of working at your company and says that this could also assist him in one of his computer-related classes at school. Just this morning, the head of the computer programming department said that she needed an additional low level employee to assist with some upcoming projects (her expression, "grunt"). You see this as a good opportunity to meet her need without affecting the department's budget. Joe Dollars signs an agreement stating that he will work as an intern and expects to receive no compensation whatsoever. After working for your company for three months, Joe Dollars sues it for unpaid wages and overtime.

Joe Dollars would win his wage claim against your company. Both state and federal law contain strict requirements in order for trainees, interns, etc. not to be considered employees under the law. These requirements are summarized, as follows:

• The training, even though it includes operation of the employer's facilities, must be similar to that given in a vocational school;
• The training must be designed primarily for the benefit of the trainees or students;
• The trainees or students must not displace regular employees but must work under their close observation;
• The employer providing the training must derive no immediate advantage from the activities of the trainees or students, and on occasion its operations should actually be impeded;
• The trainees or students must not necessarily be entitled to a job at the conclusion of the training period;
• The employer and the trainees or students must understand that the trainees or students are not entitled to wages for the time spent in training;
• The clinical training must be part of an educational curriculum and must be supervised by the school or a disinterested agency;
• The students should not receive employee type benefits;
• The training should be general, so as to qualify the students for work in any similar business, rather than designed specifically for a position with the employer offering the program;
• Upon completion of the program, the students should not be fully trained to work specifically for the employer offering the program, but should require further specific training for such employment;
• The screening process for the program should not be the same as for employment and should not appear to be for that purpose; it should involve only criteria relevant for admission to an independent educational program; and
• Any advertisements or notices for the program should be couched clearly in terms of education, rather than employment, although the employer may indicate that qualified graduates will be considered for employment.

Except in limited circumstances, covenants purporting to prevent former employees from working for competitors -- non-competition agreements -- are not enforceable in California courts. The California policy against prohibitions on competition is so strong that the California courts will not enforce restrictions on competition even if those restrictions were crafted between parties residing out of state at the time of the contract, in a state where the covenant was perfectly legal and enforceable. For a long time, employees relocating to California from another state felt they could avoid non-competition agreements valid in the original state. However, avoidance of a valid out-of-state non-competition clause is no longer a sure thing.

In a ruling late last year, the California Supreme Court held that lawsuits to enforce such covenants could be prosecuted in the foreign state, even if the foreign action is commenced after action in California is commenced. The case, Advanced Bionics Corp. v. Medtronic Inc., 02 C.D.O.S. 12135, involved a non-compete drafted by Medtronic in Minnesota. When Medtronic's former employee moved to California to work for Advanced Bionics, a direct competitor of Medtronic, Advanced Bionics sued in California to strike down the agreement and Medtronic sued in Minnesota to enforce the agreement. Advanced Bionics filed first, in California. The California trial court then imposed an order attempting to enjoin the later-filed Minnesota action; our California Supreme Court overturned the order. The California courts cannot impede pending litigation in a sister state. Therefore, the cases proceed in two different states until a judgment is rendered in one of them that is binding on the parties.

What does this mean for California employers? Be proactive: ensure that you have complete information and develop a strategy early. First, it is important before entering into a new employment relationship to understand any legal issues which may arise following a hiring. Ask prospective employees if they have signed any contracts with former employers. If they have, ask to see those contracts. If a California employer's interest in hiring an employee subject to a valid out of state non-competition agreement is strong, it should consider filing an action for declaratory relief in California to invalidate the contract. Be aware that litigation could pursue parallel tracks in two states; consider a negotiated settlement of the issues.

Your employment counsel can assist you with these issues, as well as with ensuring that your Company's trade secrets are adequately protected. Although covenants not to compete are not valid in California, other clauses restricting post employment activities such as restrictions on soliciting your customers and on raiding your employees may be enforced if properly drafted.

In light of recent developments, many of you may have employees who are armed forces reservists called to active duty. Please be advised that the Uniformed Services Employment and Reemployment Rights Act (USERRA) imposes obligations on employers regarding military leaves of absence, reemployment and benefits rights for these employees. As examples:

• Employees absent for 31 days or less are entitled to continuation of their employer paid health insurance. After 31 days, they are entitled to COBRA-type benefits.
• Pension plan eligibility must continue as if there were no break in service.
• Employees are entitled to certain reemployment rights depending upon the length of their military service.
• Employees on military leave for 30 or more days cannot be discharged "without cause" for six months to one year after their return, depending upon length of military service.