On the Brinker of Disaster: Give Employees a Break, Will Ya?

Oh, that economics, law, and ethics would perfectly align.  In such a world, employers would not only know the law, but they would follow it scrupulously.  They would not allow the emergence of a corporate structure that encouraged the skipping of rest breaks.  Such enlightened employers would not allow overworked employees to skip or delay their lunches.  These same workers, in an economic climate of layoffs and increased work loads, would not sulk in fear at the thought of insisting on their breaks, nor would supervisors mentally mark for layoff those "slaggard" employees who took breaks. 

Soon, an uncitable decision now on appeal to the California Supreme Court [Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25] will result in a final decision on whether an employer must not only have and follow a rest break and meal break policy in accordance with law, but must also actively police the employee population to assure the breaks are actually taken.  In effect, pre-Brinker, employers were charged with nearly "strict liability" if an employee showed breaks were not taken.  The likely presumption behind a "strict liability" standard is that the employer "permitted" and even encouraged employees to avoid their breaks [or risk adverse performance evaluations or ranking for layoff].

I predict the California Supreme Court will affirm Brinker's rule of lax enforcement.  Courts have a fascination with this term "reasonable" as if human conduct was not only "reasonable" but well intentioned.  In truth, a "reasonable" entrepreneur in a competitive environment will seek greater productivity by various kinds of tactics to encourage employees to work through break times and lunch breaks.  One very simple method is to load everyone down with more work because layoffs have reduced the available resources.  Fear of layoffs itself will be enough to induce both employers and employees to "overlook" the break rules.  Will the California Supreme Court see this larger economic
reality of the workplace?  Is it relevant legally?  If the information is relevant, how do they even have access to that information?  Their "world" is limited to the formal record on appeal.  This limitation illustrates why courts are so limited and ill suited (pardon the pun) to decide matters of social policy. 

Even so, one truth is paramount:  employers are constantly enforcing the rules of the workplace.  The best level of enforcement is not the courts, but at the "front lines" where disputes first arise.  In this situation, a rule that placed the "strict liability" on employers to enforce a break and meal time policy would have two good effects:  1) it would present a bright line rule that would make outcomes clear if the policy was violated and 2) it would reduce the amount of litigation because courts would not be presented with the thorny issue of whether an employer was "reasonable" in tracking a rest break and meal time policy. 

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The Big Bananas and the Big Banana Judgment: A sadly sterile outcome.

I remember Walter Lack as a prominent attorney many years ago.  His reputation has not flagged, and he remains a "big banana" in the profession, as does his friend and occasional co-counsel Thomas Girardi.  Both of these Los Angeles based attorneys sought to enforce a half-billion dollar judgment entered by a Nicaraguan Court against Dole Food Co. The judgment mistakenly listed the defendant as "Dole Food Corporation" instead of the correct identification of "Dole Food Company".  Go figure:  Corporation vs. Company, and a half billion dollars in the balance. 

The judgment was a noble cause:  to recover damages for Nicaraguan banana workers who claimed sterility because Dole used pesticides without warning of the "family planning" implications.  Lack and Girardi came under investigation by the CA State Bar for alleged impropriety in misleading the U.S. District Court in Los Angeles that the judgment debtors were properly named:  that is, that the judgment was indeed enforceable.  The Ninth Circuit Court of Appeals was upset at the alleged misrepresentation, and suspended Lack from appearing before the Court and "reprimanded" Girardi.  The State Bar however found no wrong doing, and declined to discipline either man.  After peeling away the layers on these bananas, they were found still fit for resale to the public. 

So the subtext:  two consumer rights champions making individual fortunes by taking on mega-corporations with unlimited resources to mount a defense, have a tense time before the State Bar, probably with the help of the "poor and victimized" defendant, Dole Food Company.  The big bananas almost slipped on their own peels.  Fortunately for the sterile banana workers, their tripped up advocates landed on their feet, to fight yet another day. 

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Peeling the Layers of the Non-Compete Onion: It's Enough to Make You Cry!

Introduction: Oh, that it would be so simple as to render an opinion on a non-compete provision for a California California employee, contracting with a California employer, for services rendered in California, for California customers. Such an effort to restrict an employee’s pursuit of trade would be clearly unenforceable. See California Business & Professions Code Sec tion 16200, et seq; D’Sa v. Playhut (2000) 85 Cal.App.4th 927 at 931 and Advanced Bionics v. Medtronic (2002) 29 Cal.4th 697.

But “what if . . . “ For example, what if the employer is out of state, what if the employer inserts a foreign choice of law provision in its employment contract; what if the employment agreement selects a non-California exclusive venue for filing; what if the employee is “reasonably restricted” under the laws of that foreign jurisdiction; what if the employment agreement specifically excludes its restrictions from application to California employment—that is, it restricts only the solicitation of customers located outside of California? What if the employee is served in California, along with her current employer, with an out of state temporary restraining order or preliminary injunction restraining the employee from working within California to contact, solicit or serve out of state customers? What if a foreign state jurisdiction has issued a restraining order or injunction that limits a California employee from pursuing his livelihood in California by contacting customers and businesses located within California?

How will California courts respond to these various real world scenarios?

Analysis: Here are the answers to the “what ifs”:

California courts will not enforce a foreign jurisdiction’s judicial restraining order to restrict a California employee from pursuing his trade in California by working for California businesses or soliciting California customers. Powell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th 564. Why? Because California has broad ranging, fundamental, and nearly absolute public policy according employees the right to pursue their livelihoods without contractual restraint. Stated differently:

a) Private “choice of law” principles will not operate to trump California law on a matter of fundamental public policy. California courts will neither apply nor enforce another court’s laws to deprive a California employee working within California of his right to pursue his livelihood in California.

b) “Comity”, that is the constitutional principle of giving full faith and credit to the laws and judicial processes of another state, will not operate to require California Courts to follow and enforce the laws and orders of another state to restrain a California employee from pursuing his California based employment.

A non-compete agreement choosing non-California law, and choosing a venue outside of California will operate to restrict the employee’s pursuit of his trade outside of California. Biosense Webster, Inc. v. Superior Court (2006) 135 Cal.App.4th 827. Although no California Court has, to my knowledge, ruled on this precise question, I believe the reasoning of the Biosense v. Superior Court, supra, would lead to a conclusion that California does not have a overriding interest in allowing its employees unfettered access to the markets of other states, in violation of those individual states’ own “non-compete” laws. Stated differently, the constitutional principle of “comity” protected by the decision in Advanced Bionics v. Medtronic (2002) 29 Cal.4th 697 will operate to require a California Court to honor the orders of other state courts restraining California employees from competitive activities within the foreign state. See also, TSMC North America, et al. v. Semiconductor Manufacturing International Corp. (2008) 161 Cal.App.4th 581. [an antitrust action seeking a restraining order to prevent legal proceedings in the Peoples Republic of China.]

1. Under an unusual twist, if a California employee agrees to a application of another state’s law to restrict that employee’s free pursuit of livelihood outside of California, under California “choice of law” principles (a multi-factor test ), a California Court, in my opinion, would be required to apply that foreign jurisdiction’s laws, but only as to employment activities outside of California, and then, only as to the particular state whose laws were deemed to have been chosen by the parties. Of course, the more likely and practical procedure by the former employer seeking the restraint would be to apply for the restraining order directly in the foreign jurisdiction. Advanced Bionics v. Medtronic (2002) 29 Cal.4th 697.

2. If a California employee is served with a restraining order in California, but issued by an out of state court, and if the order is broad reaching to include even employment opportunities within California, the California court is not required to enforce the order. Why? The principle of “comity” is not applicable because of the “exceptional circumstance” that California has a compelling interest in protecting the livelihoods of its own citizens expressed in Business and Professions Code Section 16200. D’Sa v. Playhut (2000) 85 Cal.App.4th 927 at 931.

3. The recourse of the employee and new employer is to obtain a restraining order and eventually an injunction against the former employer [or the foreign court jurisdiction itself] from obtaining or seeking to enforce out of state court orders that operate to restrain a California employee from pursuing his employment within his or her resident state of California.

Conclusion: The reality of interstate commerce, indeed, international commerce, renders “non-compete” agreements a complex issue when these agreements restrain competition across political borders. Thorny issues of choice of law, comity, venue, and “reasonable restraint” can enter into the analysis. California courts cannot simply issue orders operating to impose California law on business conducted within those foreign jurisdictions. Likewise, those foreign jurisdictions cannot enjoin California employees to restrict those employees’ livelihoods within California. The result, in my opinion, is a “patchwork” set of court orders, at least for California residents, that operate to protect the California employee in pursuing his livelihood without restraint in California, but which will also operate to allow other states to issue and enforce orders restraining the competitive activities of those same employees in other states. The economic complexity cannot be resolved: when is a business or customer a “California business” or “California customer”? Like corporations engaged in interstate or international commerce, customers and businesses do not confine themselves to individual state borders. Will the test be the place of incorporation for the targeted customer? Will it be the targeted customers “headquarters” address? Will it be the location and concentration of the bulk of its business? Will it be the place where the customer will receive, use, or distribute the products or services of the new employer? I believe the tension of non-compete agreements existing in an era of free trade across political boundaries will continue to result in repeated conflicts among the jurisdictions. The best resolution, I believe, is to advance the purposes of both free trade and free competition for human talent by allowing each state to protect its citizens from restrictive covenants to the fullest extent they may desire.

Authorities:

CA Business and Professions Code Sec. 16200 et seq.

The Application Group, Inc. v. The Hunter Group, Inc. (1998) 61 Cal.App.4th 881.

Powell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th 564.

Biosense Webster, Inc. v. Superior Court (2006) 135 Cal.App.4th 827.

Advanced Bionics Corp. v. Medtronic, Inc. (2002) 29 Cal.4th 697.

TSMC North America, et al. v. Semiconductor Manufacturing International Corp. (2008) 161 Cal.App.4th 581.

D’Sa v. Playhut (2000) 85 Cal.App.4th 927.

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You Slapp Me; I'll Slapp You Back: Free Speech or Defamation?

Overhill Farms, Inc. v. Nativo Lopez, et al. 2010 DJDAR 18717.

Overhill produces frozen food products and employs 1,000 workers in the industrial Southern California city of Vernon (Los Angeles County). The workers are unionized. Overhill received an IRS notice that a substantial number of its employees had discrepancies in their social security numbers: names and numbers did not match. Many of Overhill’s employees were Hispanic. Overhill faced as much as $80,000 in penalties. Overhill gave its employees 30 days written notice to correct the discrepancies. It continued to pay the employees during the notice period. Most of the employees getting the notice did not respond. Thirty-one employees resigned. Only one submitted a correct social security number. Overhill fired all employees failing to provide accurate social security numbers.

An activist organization, “Hermandad Mexicana Lantinoamericanca (HML) organized the affected workers into a mass protest in which the protesting workers carried signs and distributed pamphlets, and issued a press release. The essential protest message was that Overhill completed the firings for racist motives. The protest included demonstrating outside a Panda Express store, one of Overhill’s customers. The flyers urged recipients to boycott Overhill and accused Overhill of exploiting Latinos “for 30, 20, 15, and 10 years, and then threw them to the streets—many single female heads-of-household.”

Overhill’s response to these demonstration and publication tactics was to sue the Director of HML for defamation, intentional interference with prospective economic advantage, interference with contractual relations, extortion, and unfair competition. HML brought a motion to strike the allegations as attempts to silence HML’s constitutional freedom of public speech. This special motion is called an “anti-SLAPP” motion [C.C.P. Sec. 425.16—the “strategic lawsuit against public participation”]. To grant such a motion a court must first find that the defendant has proven by its evidence in support of the motion that the defendant’s activity or speech is protected by the constitution. Then, the burden of proof shifts to the Plaintiff to prove that the “protection” of the defendant’s speech should not apply because the plaintiff has proof that its case for false and defamatory statements is sufficiently strong that the plaintiff is likely to prevail on those issues.

Overhill succeeded in presenting proof that it was likely to succeed in showing that HML made knowingly false statements about Overhill’s motives in firing the employees. So, even though HML met its burden of proving that it was engaged in speech on a matter of public importance, Overhill overcame that proof with its own proof that HML abused its speech rights by engaging in deliberate falsification of the facts, with the result of injury to Overhill’s business reputation. Specifically, Overhill proved that HML’s repeated public statements that Overhill’s firing of Hispanic employees for racist motives were false. The truth was that Overhill had given the employees notice of the need to provide proof of non-discrepant social security numbers in compliance with the IRS directive. It acted only when those individuals fired failed to provide accurate information. HML failed to present any substantial evidence that the motive for the firing was racially motivated.

Two justices reached this decision. The third dissenting justice reasoned that the use of the term “racist” in a public forum by itself to describe an employer would not be “defamatory” and even the word “racist” added to the words “engaged in a mass employment termination for racist reasons” would not be defamatory, but would be simple “hyperbole” in public rhetoric, not reasonably construed by listeners as more that the speaker’s own interpretation and opinion. The dissenting justice stated: “First, my colleagues in the majority have incorrectly made this court the first state or federal appellate court in America, ever, to hold that the epithet “racist” constitutes a provably false assertion of fact as the basis of a claim for defamation.”

In my opinion, this case presents an interesting clash of interests: a society needs broad opportunity for an exchange of viewpoints and arguments, including room for exaggerated rhetorical attacks. This latitude of speech is probably most essential concerning topics of public importance and interest. Business by its nature is public, and products and services are consumed by citizens with an interest in knowing how those products and services are placed in commerce. On the other hand, if a participant in a public squabble makes statements he knows to be false and that the audience believes to be true unless provided critical unstated facts, then this kind of vile and harmful speech may not merit protection. The overall circumstances of the communications made by HML indicate to me that HML’s purpose was to “chill” a lawful activity, and to intimidate a company from following the law. HML had the opportunity in opposing the anti-SLAPP motion to present substantial evidence that Overhill’s motive was racist, but none was presented. On the contrary, Overhill acted in response to an IRS mandate, and gave its employees the opportunity to show compliance. Only when they failed, did it terminate their employment.

The unwritten “subtext” of this case was a political clash. HML sought to champion the cause of its unemployed immigrant constituency. Overhill likely hired falsely documented workers for financial reasons. Overhill most likely elected lax enforcement until challenged by the IRS. In contrast, HML apparently has an issue with the immigration laws, as indicated by its readiness to disregard the fact that all the persons fired failed to provide necessary legal documentation to work in the U.S. Firing undocumented workers for lack of valid documentation, according to the HML, was an act of “racism.” This charge didn’t convince the Court of Appeal because HML failed to produce any substantial evidence that the firings were racially motivated. The matter is made more complicated by both union and political organizations that give a concerted voice to illegal immigrants to insist upon work in the U.S. when these persons cannot produce valid documentation.

In my opinion, the Court reached the correct decision.

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Prayer to St. Agnes, Patron Saint of Arbitrations

St. Agnes,  intervene for me before the Court of Appeal to cause, by your four factors, a decision that compels arbitration.  Amen. 

A physician sued for malpractice by his patient would ordinarily want to arbitrate under his own arbitration agreement with the patient. The patient had sought liposuction surgery with the doctor. Apparently, matters did not turn out well. This patient filed and litigated in court, but near the eve of trial, sought a court order to have the matter arbitrated. Probably to her surprise, the defendant physician refused. In holding for the physician, the court wrote: “Audiences matter . . .” [Burton v. Cruise, 2010 DJDAR 18393.] In this case, the audience was a jury.

In this December 2010 decision, the Court of Appeal provided a glimpse into the minds of counsel who may delay a petition to compel arbitration until well into the usual court litigation process. The Plaintiff Burton brought an ex parte motion to shorten time for a petition to compel arbitration. Defendant Cruise had already selected and exchanged experts. Burton had requested a jury trial at the case management conference. Inconsistently, in the motion to compel arbitration, Burton stated she wasn’t sure she would add other parties not subject to the arbitration agreement, and so did not request arbitration. Also, Burton’s counsel did not demand arbitration or even an inquiry about arbitration just before bringing her petition to compel arbitration.

The Court of Appeal cited the four “St. Agnes” factors to decide if arbitration has been “waived’: 1) actions inconsistent with seeking arbitration, including failure to request it; 2) are the parties “well into preparation” of the lawsuit; 3) is there an imminent trial date; and 4) has the delay caused harm to the other party? St. Agnes Medical Center v. PacifiCare of California (2003) 31 Ca.4th 1187, 1196. Applying these factors, the court affirmed the trial court’s denial of the petition to compel arbitration. Burton v. Cruise, 2010 DJDAR 13893 at 18396.

The Burton court reasoned that the purpose of arbitration: to expedite a hearing at less expense, is turned upside down by tactics that delay arbitration until the near-end of a civil litigation process. The Court adopted the reasoning of Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 558 that “the courtroom may not be used as a convenient vestibule to the arbitration hall so as to allow a part to create his own unique structure combining litigation and arbitration.” The Court also accepted the defendant’s argument that it selected and exchanged experts with a jury trial in mind, making tactical decisions differently than if the matter was destined for arbitration.

The value of the Burton case to the party opposing a petition to compel arbitration is that it exposes improper tactics of subverting an arbitration agreement to increase delay and costs. Those costs can include the extra expense of choosing different experts than one might otherwise. This case will have particular value as precedent to deny a petition to compel where the case management conference has been held with no reference to arbitration, where the other party has not referenced the arbitration agreement by additional demand for arbitration, and where experts or other witnesses have been tactically selected and prepared for jury trial.

Now, there is text and there is subtext. The latter is subject to speculation of course, but educated speculation. My view of the subtext is that the doctors’ attorneys were struck with a case of hubris. They really thought they could so bedazzle a jury with their experts that they did not want to forego the opportunity. The truth of course is that experts do not often bedazzle juries, who often disregard most of what they say, assuming the expert makes it understandable to them. Secondly, one wonders why the Plaintiff would not want her great case before twelve of her peers. The plaintiff almost always prefers a jury. Why this change of direction on the eve of trial? I suspect the answer also pertains to experts. Possibly the Plaintiff hoped the arbitrator would allow a late designation of experts. Or perhaps the Plaintiff was worried that the medical evidence was weak for her case, and hoped an arbitrator would do what arbitrators do, but never admit: produce a “compromise” outcome that might salvage the case, and at least provide for a possible recovery of attorney’s fees under the arbitration agreement. Or maybe the Plaintiff just wanted to delay the hearing because a witness was not available or she hoped to re-open discovery. These speculations matter little, except to point out that the real story is not often told in the formal appellate decision.


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Let’s Face Up to Facebook Discovery: the Defense Can Discover an Employee’s Postings.

She says she was sexually harassed, but the defendant employer wants to get access to her Facebook postings because it has information that she lists herself as “single” while in truth married.  The employer asserts this is enough information to bring into question her credibility on the sexual harassment charge.  It wants a court order requiring the employee to provide password and username to access and search the site.  How will a court likely rule? 

Another way to ask this question is:  What are the employee’s reasonable privacy expectations, having filed a harassment suit against the employer.  Restrictions on the scope of the social media search are likely, but are total denial of a search legally mandated by privacy expectations? 

Let’s begin by stating that there is no definitive California a case law on this subject as yet.   The legislature has not entered the arena with specific discovery statutes aimed at social media.  Yet, some guiding principles are available.

First, the terms of agreement between the social media host and its user will be very relevant.  If the user has agreed that the posting is for full or partial public viewing, the “privacy expectation” will be determined in part by that agreement.  See Moreno v. Hanford Sentinel, Inc. (2009) 172 Cal.App.4^th 1125.  In Mackelprang v. Fidelity National Title Agency of Nevade Inc. 2007 U.S. Dist. LEXIS 2379 (D. Nev. Jan. 9, 2007) the court denied an employer’s motion to compel the employee to give direct access to her MySpace account.  The facts are those stated by the opening paragraph of this  article.  The court reasoned that the “open ended” search for all MySpace positings was too broad and invasive.  It suggested a more focused description of the discoverable information. 

Discovery seeking “direct access” from the employee has a better chance of surviving a motion for protective order from the employee.  Third party access, that is, serving a subpoena on the website host itself, is unlikely of success due to federal laws generally designed to promote free use the internet.  In Crispin v. Christian Audigier Inc. 2010 U.S. Dist. Lexis 52832 (2010) the Court ruled that the Stored Communications Act (SCA) prohibited a power of subpoena to compel Facebook and MySpace to disclose plaintiff’s  private messages (non-posted, and to specific identified persons).  However, the Court remanded on the question of whether wall postings were discoverable under the SCA.  This 2010 decision, or one like it, is likely to be ultimately the subject of a published decision on the matter of SCA’s impact on the discovery of wall postings.

 

Bottom line:  the law is unsettled, but the best chance of getting social media information through formal discovery is to seek direct access and by a particularized discovery request anticipating the “privacy” objection by the employee.  Because the law is unsettled, the best approach is to enter into a stipulated restriction on the scope of search, and to agree to the confidentiality of the information except as necessary to the presentation of proof at trial or hearing. 

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A Class Act: Women Take on Wal-Mart by the Thousands.

So what do hundreds of thousands of women have in common at Wal-Mart?  They are class action plaintiffs proceeding in a case for gender discrimination against the retail behemoth.  The U.S. Supreme Court has accepted Wal-Mart's appeal to hear the issue of whether the class action certification was properly granted.  Among other matters, there must be an economy of disposition of the class claims because the claimants have factual and legal issues in common.  The conservative position is that they have nothing in common but their gender and that they work for Wal-Mart.  The liberal position is that they were all treated with a common systemic practice of limiting promotion and pay opportunities because they were women.  This case will decide the future of massive future class actions, and whether they will have an impact on how companies operate.  Will this one be scored for David or Goliath?  We should find out in mid 2011.  New York Times Article

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Does the Way She Dresses Invite Sexual Advances?

"Today" video 9-15-10 .   This MSNBC link addresses that question in the context of a female sports caster covering the NFL.  Legally, the perception of the "harasser" as to what constitutes harassment is irrelevant.  The issue is determined from the viewpoint of the alleged victim:  Does she personally experience the advances as unwanted and offensive and would a reasonable woman in her place also feel that way?



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