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To include your news related to legal issues and developments affecting labor and employment, contact Ellen Dannin by email or by postmail at:
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Labor and the Law:
News and Current Events from the LERA Section on Labor and Employment Law
(LEL) © 2009
The full text of many cases is now available free on-line. Where that is the case, links are provided.
Pre-Dispute Arbitration Agreements and the Waiver of Litigation Rights
After the U.S. Supreme Court’s decision in Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), it became common for employers to require employees to arbitrate all disputes related to the workplace and for courts to uphold the obligation to arbitrate. In 2000, the California Supreme Court in Armendariz v. Foundation Health Psychcare Services, set out specific standards that pre-dispute arbitration programs must meet before a state court could uphold an arbitration agreement. Those standards were recently applied in a case involving Domino’s Pizza delivery drivers who had filed a class action lawsuit concerning wages and hours. Their employer filed a motion to dismiss the lawsuit based on an agreement to arbitrate the claims. Sanchez v. Western Pizza Enterprises, Inc., ___ Cal.App.4th ___ (Mar. 17, 2009). http://www.courtinfo.ca.gov/opinions/documents/B203961.DOC
The court found that the agreement did not include the level of distortions about arbitration nor limit employee rights as in other cases where the courts had found agreements to be unconscionable. However, the agreement was, nonetheless, procedurally unconscionable in two respects according to the court. “First, . . . the inequality in bargaining power between the low-wage employees and their employer makes it likely that the employees felt at least some pressure to sign the arbitration agreement. Second, the arbitration agreement suggests that there are multiple arbitrators to chose from . . . and fails to mention that the designated arbitration provider includes only one arbitrator. This renders the arbitrator selection process illusory and creates a significant risk that Western Pizza as a ‘repeat player’ before the same arbitrator will reap a significant advantage.”
As a result, the court held, “These circumstances indicate that the employees’ decision to enter into the arbitration agreement likely was not a free and informed decision but was marked by some degree of oppression and unfair surprise, i.e., procedural unconscionability.” The court also found that many of the terms in the agreement were substantively unconscionable, including limitations on the choice of arbitrator and forbidding class actions.
Noncompete Agreements and the Litigation They Spawn
The basic law of noncompete agreements, that is, agreements that limit an employee’s right to compete with a former employer, are that they must not prevent an employee from being able to work in the employee’s chosen profession for an unreasonable period. In California, state law outlaws noncompete agreements. In other states, noncompete agreements must be limited in time, geographic, and occupational scope so that they protect no more than the employer’s legally protectable interests, such as bona fide investments in training or nondisclosure of confidential information to competitors. Three recent cases illustrate other common problems with enforcing noncompete agreements.
A recent Mississippi case involved the question whether a company could transfer noncompete agreements as part of a sale of assets to another company. The sale agreement excluded from transfer “all assets and liabilities not set forth in the agreement”. Among assets not included were noncompete agreements. Five days after the sale, an employee left to work for a competitor. Nineteen days later, the two companies signed a new contract to assign the now-former employee’s employment contract and noncompete agreement to the purchaser. The facts here make it easy to see why the purchaser could not enforce the noncompete agreement. However, not all states would enforce the transfer of noncompete agreements between a purchasor and seller of a business. Rather, they would require a new contract between the employee and purchase and that the employee be given something of value in exchange for signing new a agreement with a purchaser. Otherwise, as the court here notes, once their employer is out of business, the former employees do not compete with it by taking another job. Herring Gas Co., v. Pine Belt Gas, Case No.2007-CA-01554-SCT (Miss. Feb. 12, 2009)
A related issue is the problem of forced unemployment when an employer enforces a noncompete agreement. A contract that led to that result might be seen as unconscionable, and this is even more the case when the former employer fires an employee and also enforces the noncompete agreement. A solution is to continue pay until the period of unemployment expires. A recent Eighth Circuit Court of Appeals case involved an agreement that promised pay while the former employee was unable to obtain other employment consistent with his abilities and education as a result of the agreement. The court enforced the right to salary after the employee was unable to find work that would not violate the noncompete agreement. Bannister v. Bemis Company, Case No.08-1634 (8th Cir. Feb.25, 2009). http://www.ca8.uscourts.gov/opndir/09/02/081634P.pdf
The third case illustrates a different problem: which law applies to the contract. In this case, the agreement was between a New York employer and an employee who worked in both Texas and Georgia. The contract was signed in Georgia. A key issue in the case was which state’s law applied to the contract. Normally, a choice of law provision in the agreement should prevent such a dispute. However, problems arose even though the parties did have a choice of law provision. It stated: any litigation that arose from, or related to, the agreement had to be filed in the state where the employee last worked for the employer and that the law of that state would govern its interpretation. The court, however, held: “A choice-of-law provision will not be applied, however, if another jurisdiction has a more significant relationship with the parties and their transaction than the state they choose, that jurisdiction has a materially greater interest than the chosen state, and the jurisdiction's fundamental policy would be contravened by the application of the law of the chosen state.” The potential state laws that could have applied would have led to very different outcomes, and, here, led to a long analysis by the court. TransPerfect Translations Inc. v. Leslie, 594 F.Supp.2d 742 (S.D. Tex. 2009).
In short, noncompete agreements are not silver bullets. It worth bearing in mind that they are a tool used after a relationship has ended and problems may have arisen.
WEB LINKS
Michael V. Seitzinger, Executive Compensation: SEC Regulations and Congressional Proposals RS22583 December 08, 2008 (Congressional Research Service)
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Government Accountability Office, Private Pensions: Conflicts of Interest Can Affect Defined Benefit and Defined Contribution Plans GAO-09-503T, March 24, 2009
Government Accountability Office, Social Security Administration: Further Actions Needed to Address Disability Claims and Service Delivery Challenges GAO-09-511T, March 24, 2009
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Government Accountability Office, Nonprescription Drugs: Considerations Regarding a Behind-the-Counter Drug Class GAO-09-245, February 20, 2009
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The American Recovery And Reinvestment Act
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Alison Brown & Angus Erskine, A Qualitative Study of Judgments in Race Discrimination Employment Cases, 31 Law & Pol'y 142 (2009)
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Susan Daicoff, Lawyer, Be Thyself: An Empirical Investigation of the Relationship Between the Ethic of Care, the Feeling Decisionmaking Preference, and Lawyer Wellbeing, 16 Va. J. Soc. Pol'y & L. 87 (2008)
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Guy Davidov, Unbound: Some Comments on Israel's Judicially-Developed Labor Law, 30 Comp. Lab. L. & Pol'y J. 283 (2009)
Debra Davis, How Much Is Enough? Giving Fiduciaries and Participants Adequate Information about Plan Expenses, 41 J. Marshall L. Rev. 1005 (2008)
Christian Day, Risky Business: Popular Images and Reality of Capital Markets Handling Risk – from the Tulip Craze to the Decade of Greed, 113 Penn St. L. Rev. 461 (2008)
Carolyn Dellatore, Note: Blowing the Whistle on CEPA: Why New Jersey's Conscientious Employee Protection Act Has Gone Too Far, 32 Seton Hall Legis. J. 375 (2008)
Viktoria Douka, Prohibition of Discrimination: Law and Law Cases, 30 Comp. Lab. L. & Pol'y J. 199 (2009)
Albert Feuer, Will the Supreme Court Reinforce or Undermine Basic ERISA Principles When it Decides a Death Benefit Dispute? 3 Charleston L. Rev. 289 (2009)
Katherine Field, Note: Agency, Code, or Contract: Determining Employees' Authorization under the Computer Fraud and Abuse Act, 107 Mich. L. Rev. 819 (2009)
Alexandra Fiore & Matthew Weinick, Note: Undignified in Defeat: An Analysis of the Stagnation and Demise of Proposed Legislation Limiting Video Surveillance in the Workplace and Suggestions for Change, 25 Hofstra Lab. & Emp. L.J. 525 (2008)
Miranda Fleschert, Note: Elevator Company Goes Down: Mandatory Arbitration Provisions as Applied to Pending Civil Right Claims in the Employment Context, 2008 J. Disp. Resol. 571
Jon Forman, Promoting Economic Justice in the Face of Globalization, 9 J. L. Soc'y 1 (2008)
Aravind Ganesh, Note: Appointing Foxes to Guard Henhouses: The European Posted Workers' Directive, 15 Colum. J. Eur. L. 123 (2008/2009)
Elizabeth Ghandakly, Note: Employee Wellness Programs: A Cure for Employer Health Plans? 3 Entrepren. Bus. L.J. 37 (2008)
Brian Gilmore, Comment: ERISA's Full and Fair Review: Access to Appeal-Level Documents During the Course of an Administrative Appeal, 43 U.S.F.L. Rev. 383 (2008)
Christy Glass & Nancy Kubasek, The Evolution of Same-sex Marriage in Canada: Lessons the U.S. Can Learn from Their Northern Neighbor Regarding Same-Sex Marriage Rights, 15 Mich. J. Gender & L. 143 (2008)
William Gould, The Employee Free Choice Act of 2009, Labor Law Reform, and What Can Be Done about the Broken System of Labor-management Relations Law in the United States, 43 U.S.F.L. Rev. 291 (2008)
Roy Harmon, The Debate over Deference in the ERISA Setting – Judicial Review of Decisions by Conflicted Fiduciaries, 54 S.D. L. Rev. 1 (2009)
Michael Harper, Judicial Control of the National Relations Board's Lawmaking in the Age of Chevron and Brand X, 89 B.U. L. Rev. 189 (2009)
William Herbert & Amelia Tuminaro, The Impact of Emerging Technologies in the Workplace: Who's Watching the Man (Who's Watching Me)? 25 Hofstra Lab. & Emp. L.J. 355 (2008)
Sarah Hoffman, Comment: Falling Through the Cracks: How the 20/40 Rule Discriminates Against Women Seeking Social Security Disability Insurance Benefits and What Congress Can Do about It, 113 Penn St. L. Rev. 621 (2008)
Scott Hollander, Note: Super Bowl Hero to Bank Account Zero, 26 Cardozo Arts & Ent. L.J. 899 (2009)
Christine Howard, Invasion of Privacy Liability in the Electronic Workplace: A Lawyer's Perspective, 25 Hofstra Lab. & Emp. L.J. 511 (2008)
Sue Irion, Comment: The [Un]constitutionality of the NLRA's Religious Accommodation Provision, 44 Gonz. L. Rev. 325 (2008/09)
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Hilary Josephs, Measuring Progress under China's Labor Law: Goals, Processes, Outcomes, 30 Comp. Lab. L. & Pol'y J. 373 (2009)
Fiona Kay, John Hagan & Patricia Parker, Principals in Practice: The Importance of Mentorship in the Early Stages of Career Development, 31 Law & Pol'y 69 (2009)
Hakop Keshishyan, Comment: We Shall Overcome . . . If the Courts Allow Us: The United States Supreme Court's Decisions Regarding Mitigating Measures, and its Connection to the Circuit Split on Whether Life Accomplishments Should Be Considered in Determining Disability under the ADA, 38 Sw. L. Rev. 357 (2008)
Laura Kessler, The Politics of Care, 23 Wis. J.L. Gender & Soc'y 169 (2008)
Edward Kennedy, Restoring the Civil Rights Division, 2 Harv. L. & Pol'y Rev. 211 (2008)
Anna Kornikova, Note: International Child Labor Regulation 101: What Corporations Need to Know about Treaties Pertaining to Working Youth, 34 Brook. J. Int'l L. 207 (2008)
Ioannis Koukiadis, General Characteristics of the Greek Labor Law, 30 Comp. Lab. L. & Pol'y J. 145 (2009)
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Joseph Lazzarotti, The Emergence of State Data Privacy and Security Laws Affecting Employers, 25 Hofstra Lab. & Emp. L.J. 483 (2008)
Michael Likosky, Gender Arbitrage: Law, Luxury and Labor, 23 Wis. J.L. Gender & Soc'y 293 (2008)
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Guadalupe Luna, "Women in Blue Jeans:" Connecting the Past with Agricultural Transformations in the Present, 23 Wis. J.L. Gender & Soc'y 313 (2008)
Rhonda Magee, Toward an Integral Critical Approach to Thinking, Talking, Writing, and Teaching about Race, 43 U.S.F.L. Rev. 259 -290 (2008)
Martin Malin & Monica Biernat, Do Cognitive Biases Infect Adjudication? A Study of Labor Arbitrators, 11 U. Pa. J. Bus. L. 175 (2008)
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Craig Martin, Matthew Renaud & Douglas Sondgeroth, Baby Ka-boom! Coming Developments in ERISA Litigation Due to Social, Demographic, and Financial Pressures from the Baby Boom Generation, 41 J. Marshall L. Rev. 1037 (2008)
John Matejkovic & Margaret Matejkovic, What Is Reasonable Accommodation under the ADA? Not an Easy Answer; Rather a Plethora of Questions, 28 Miss. C.L. Rev. 67 (2008-2009)
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Guy Mundlak, The Law of Equal Opportunities in Employment: Between Equality and Polarization, 30 Comp. Lab. L. & Pol'y J. 213 (2009)
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Dorit Reiss, Agency Accountability Strategies after Liberalization: Universal Service in the United Kingdom, France, and Sweden, 31 Law & Pol'y 111 (2009)
Edwin Render, The Rules of Evidence in Labor Arbitration, 54 Loy. L. Rev. 297 (2008)
Nicholas Richard, Note: Waivers of Individual Claims via Treaty: Chinese Slave Laborers, Japanese Jurisprudence, and the Solution of the European Court of Human Rights, 34 Brook. J. Int'l L. 239 (2008)
Thomas Riske, Note: No Exceptions: How the Legitimate Business Justification for Unconscionability Only Further Demonstrates California Courts' Disdain for Arbitration Agreements, 2008 J. Disp. Resol. 591
John Sanchez, The Vesting, Modification, and Financing of Public Retiree Health Benefits in Light of New Accounting Rules, 41 J. Marshall L. Rev. 1147 (2008)
Cindy Schipani, et alia, Pathways for Women to Obtain Positions of Organizational Leadership: The Significance of Mentoring and Networking, 16 Duke J. Gender L. & Pol'y 89 (2009)
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Yves Stevens, European and American Issues in Employee Benefits Law Compared, 41 J. Marshall L. Rev. 1189 (2008)
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Melda Sur, The Fundaments and Limits of Managerial Prerogative in Turkish Labor Law, 30 Comp. Lab. L. & Pol'y J. 313 (2009)
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Symposium: Access to the Courts, 122 Harv. L. Rev. 1151 (2009)
Symposium: Feminism and Legal Theory Project, 23 Wis. J.L. Gender & Soc'y 161 (2008)
Symposium. Deconstructing Race: When Reasonable Minds Differ, 43 U.S.F.L. Rev. 227 (2008)
Symposium: Emerging Technology & Employee Privacy, 25 Hofstra Lab. & Emp. L.J. 355 (2008)
Symposium: Employee Benefits Law, 41 J. Marshall L. Rev. 995 (2008)
Symposium: Labor Law Developments in China, 30 Comp. Lab. L. & Pol'y J. 373 (2009)
Symposium: Labor Law in the Eastern Mediterranean, 30 Comp. Lab. L. & Pol'y J. 143 (2009)
Brian Thomley, Comment: Nothing Is Sacred: Why Georgia and California Cannot Bar Contractual Jury Waivers in Federal Court, 12 Chapman L. Rev. 127 (2008)
Deborah Widiss, Shadow Precedents and the Separation of Powers: Statutory Interpretation of Congressional Overrides, 84 Notre Dame L. Rev. 511 (2009)
Sean Williams, Sticky Expectations: Responses to Persistent Over-Optimism in Marriage, Employment Contracts, and Credit Card Use, 84 Notre Dame L. Rev. 733 (2009)
Christopher Vanderbeek, Note: An Untimely Death of Wrongful Death Claims: Ohio Removes Decedent-Employee Wrongful Death Claims from the Arbitral Forum, 2008 J. Disp. Resol. 621
Joshua Waldbeser, Comment: Golden Gate Restaurant Association v. City and County of San Francisco: Setting the Stage for Supreme Court Review of the Most Important Preemption Matter in the History of ERISA, 41 J. Marshall L. Rev. 995 (2008)
Nathan Witkin, Co-resolution: A Cooperative Structure for Dispute Resolution, 26 Conflict Resol. Q. 239 (2008)
Andrew Younkins, Comment: Judicial Review Standards for Interest Arbitration Awards under the Employee Free Choice Act, 43 U.S.F.L. Rev. 447 (2008)
Feng Xu, The Emergence of Temporary Staffing Agencies in China, 30 Comp. Lab. L. & Pol'y J. 431 (2009)
Lawrence Zelenak, The Conscientious Legislator and Public Opinion on Taxes, 40 Loy. U. Chi. L.J. 369 (2009)
Yujuan Zhai & Han Li, The Situation and New Legislation of China Labor Dispute, 15 Willamette J. Int'l L. & Disp. Resol. 111 (2007)
Yun Zhao, China's New Labor Dispute Resolution Law: A Catalyst for the Establishment of a Harmonious Labor Relationship? 30 Comp. Lab. L. & Pol'y J. 409 (2009)
Nancy Zisk, In the Wake of Ledbetter v. Goodyear Tire & Rubber Company: Applying the Discovery Rule to Determine the Start of the Limitations Period for Pay Discrimination Claims, 16 Duke J. Gender L. & Pol'y 137 (2009)
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To include your news related to legal issues and developments affecting labor and employment, contact Ellen Dannin by email or by postmail at:
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The LERA LEL Section Newsletter, Labor and the Law, is available each month
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