Mandatory Sick Leave Law Temporarily Shelved
In its continuing effort to drive businesses out of California, the State Assembly had proposed and passed AB 2716 (authored by Assemblywoman Fiona Ma, D-SF). This law would have required ALL businesses in California to offer paid sick leave for all employees, whether part-time or full-time.
For now, that proposal has been shelved by the Senate Appropriations Committee, which discovered that the bill would be very costly to state government. The current state budget will not withstand such an addition, but Ma says she will reintroduce the proposal next year. Some have estimated that the proposal would have cost California 370,000 jobs.
Because of a law already passed in California, the new proposal would have gone far beyond simply paying an employee to stay home with the flu. Labor Code section 233 provides that if an employer affords paid sick leave to its employees, it must also permit the employees to take off for what has been called “kin care”. Specifically, in addition to taking days for their own illnesses, employees also get to call in sick to “attend to an illness of a child, parent, spouse or domestic partner.”
Pay Close Attention to Your Employee Handbook (Part 2)
We last discussed the unintended impact employee handbooks can have on at-will employment. There are also innumerable examples where seemingly boilerplate statements in a handbook dramatically defeated the intent.
In one instance, an employee handbook provided that employees could be asked to submit to a drug test if the employer had reasonable cause to expect drug use. This is really just a recitation of the law on drug testing, which is tolerant of random drug tests, but requires a higher standard for 
targeted testing. What the employer meant was that it would follow the law, utilizing random tests, but only using testing an individual with cause. However, the court interpreted the provision to mean that employees could only be tested with reasonable cause. Kraslawsky v. Upper Deck Co. (1997) 56 Cal.App.4th 1142.
And the changes do not end there. In another case, an employee at a car dealership drove one of the cars to lunch, and rear-ended another driver, causing injury. The dealership tried to avoid liability by claiming that the lunch run was outside the employee’s course and scope of employment. As evidence, the employer pointed to the employee handbook, which prohibited the "unauthorized" use of cars from the lot, and claimed that it had never authorized such use. However, the same handbook provided a list of what was prohibited, and did not include using the cars for trips to lunch. The court held that there was therefore nothing in the handbook that prohibited what the employee had done. Taylor v. Roseville Toyota, Inc. (2006) 138 Cal.App.4th 994. Thus, a poorly written handbook actually reached out beyond the company’s own employees and created liability as to third parties.
Employee handbooks are useful tools, but they require close inspection from all angles to make certain they are not having an unintended result.
Don't Shoot Your Business in the Foot With Your Employee Handbook
Most employers and human resource directors are familiar with the concept of at-will employment, but may not know the statutory basis. In California, at-will presumption comes from a short and simple Labor Code. Section 2922 provides:
“An employment, having no specified term, may be terminated at the will of either party on notice to the other. Employment for a specified term means an employment for a period greater than one month.”
A contract that is for a specific term is by definition not an at-will agreement. If you hire an employee under a one-year contract, then you have agreed to employ that person for one year. You thus need cause to fire the employee prior to the expiration of the contract. Terminating without cause would be a breach of the agreement.
Any employee that does not have a contract for a specified term is thus presumed to be at-will. An employer does not need a contract stating that the employee is at-will or even a document signed by the employee acknowledging he is at-will. At-will employment is the default, absent a contract to the contrary. The mistake employers make is to do something to defeat the at-will presumption, and employee handbooks are fertile ground for such mistakes.
The pendulum swings with judicial interpretations of employee handbooks. At one time, employee handbooks were the bread and butter of employment attorneys, who used them to create employment contracts that defeated the at-will presumption. If the handbook provided for a disciplinary process, and the employee relied on that representation, it was argued that an implied contract had been created by the handbook. So, if the handbook provided that no employee would be terminated without first receiving a written warning, then it was a breach of the agreement if the employee was fired with no warning. Businesses responded by printing on page one of their handbooks that the handbook was not an agreement, and that the company was not required to follow its own policies.
That approach is effective only to a point. The courts are mindful and open to the mixed message argument. A classic misstep involves creating a probationary period. If your handbook states that an employee is probationary for their first 90 days at the company, then what do they become on day 91? The classic meaning of “probation” is a test period, where the employee can be fired without cause. Be definition, then, after that 90 days, cause will be required.
It is not enough that your employee handbook states that all employees are at-will, and that it is not at agreement, if there are still internal inconsistencies. After all, if your handbook states that employees can be terminated without cause, and then goes on to set forth what constitutes cause for termination, why should the first statement be elevated over the latter? You and/or your attorney should review every clause and make certain they are all consistent and achieve the intended result.
Next time, a few more handbook provisions that have tripped-up employers.
California Supreme Court Rejects Virtually All Non-Competition Agreements
This is an extremely important Supreme Court decision for any California company contemplating the use of non-compete agreements. I've put together a lengthy article that puts this entire area of the law in context. I'll begin with a summary, but if you need more, click the "continue reading" link below for the entire analysis.
In a ruling long awaited by the employment law sector, the California Supreme Court effectively rejected the use of most non-competition agreements in California.
In Edwards v. Arthur Andersen, S147190, the unanimous court held that Business and Professions Code § 16600 gives California workers great freedom to switch jobs, to compete against old employers and to solicit former clients. "In sum, following the Legislature, this court generally condemns noncompetition agreements," Justice Ming Chin wrote. "Under the statute's plain meaning, therefore, an employer cannot by contract restrain a former employee from engaging in his or her profession, trade, or business unless the agreement falls within one of the exceptions to the rule."
Although the business litigation attorneys at Morris & Stone have long advised that this ruling was coming, this ruling finally creates a brighter line distinction by the state’s highest court. Any non-compete agreements that don't fall under one of the statutory exemptions are void. Previously there was still a potential loophole by which a non-compete agreement could be found enforceable. The Federal Ninth Circuit had ruled that section 16600 contained a “narrow restraint” exception that allowed companies to use non-compete agreements so long as the pacts only restricted "a small or limited part" of their employees' future ability to work.
In Edwards, accounting firm Arthur Andersen argued that the Ninth Circuit’s “narrow restraint” exception validated the company's non-competition agreement, which tax manager Raymond Edwards signed in 1997. In 2002, following upheavals at Arthur Andersen, banking corporation HSBC offered Edwards a job on the condition that he and Arthur Andersen terminate his non-compete contract. Edwards refused to sign the termination agreement because it required him to give up all future legal claims. Arthur Anderson had recently been indicted in connection with the Enron debacle, and Edwards was justifiably concerned that if he was later pulled into the controversy, he might be giving up any indemnity claims against Arthur Anderson if he signed the termination agreement. Arthur Andersen fired Edwards for his refusal to sign the termination agreement, and HSBC rescinded its job offer. Edwards sued both companies for interfering with his career.
"Contrary to Andersen's belief, however, California courts have not embraced the Ninth Circuit's narrow-restraint exception," Justice Chin wrote. "We reject Andersen's contention that we should adopt a narrow-restraint exception to §16600 and leave it to the Legislature, if it chooses, either to relax the statutory restrictions or adopt additional exceptions to the prohibition-against-restraint rule under §16600."
Unfortunately, the Supreme Court, in a footnote, declined to address a trade-secret exception to §16600. The most common dispute when an employee goes to work for a competitor is the issue of clients. The former employer will claim that the client list is a trade-secret, and therefore the employee cannot call on those clients. The employee will claim that there is nothing special about the clients. These competing claims can seriously impact the employability of that employee, because prospective employers do not want to have to worry about who is being solicited by their employees. This decision will place great emphasis on California's Uniform Trade Secrets Act, a statute that gives employers the right to protect certain company information, including client lists.
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