Two recent cases out of California courts concern important employment law topics. The first involves whether employers classify workers as employees or independent contractors. This is an important distinction, as the government fines California businesses a lot of money every year for failing to provide benefits or failing to take out taxes for misclassified employees.
The second case involves non-compete agreements, which employers use to prevent their workers from leaving their job and going to work at a competitor and making use of what they learned from the previous position. Many courts are loathe to enforce non-compete agreements, because of their anti-competitive nature. If you would like more information on recent California employment law changes and their impact, a Los Angeles employment attorney is available to assist you.
Narayan V. EGL Inc. – Classifying Workers As Employees Or Independent Contractors
EGL is a transportation company that hired three delivery truck drivers from California. The drivers signed agreements indicating that they were independent contractors working for EGL and not employees of EGL.
Despite the agreement, the drivers filed a lawsuit in California against EGL for failing to provide benefits that the California Labor Code should have provided them. For example, as independent contractors, the drivers were not eligible for overtime compensation. The code also requires that employers reimburse employees for certain business expenses and provide off-duty meal periods.
A federal appeals court ruled against EGL. The appeals court did not agree that an employer could simply avoid California Labor Code requirements by having workers sign an agreement that said they were independent contractors. The court believed that there were facts indicating that the drivers were employees – and not independent contractors – of EGL. Both the IRS and a California employment agency determined that the plaintiff was an EGL employee. The appeals court sent the case back down to the district level so that a jury could make the decision.
Silguero V. Creteguard, Inc. – Enforcing Non-Compete Agreements
Silguero was a sales representative for Floor Seal Technology. Fearing that FST would fire her if she refused to sign a non-compete agreement, Silguero did so. The agreement prohibited her from engaging in all sales activities for 18 months following her departure from the job. Two months after she signed the agreement, FST terminated her employment with the company.
Silguero found a new job with Creteguard. FST, however, contacted Creteguard and asked it to uphold the non-compete agreement that Silguero had signed with FST. Wanting to avoid any litigation expenses, Creteguard agreed to comply with FST’s demand, and it let Silguero go. Silguero, consequently, sued Creteguard for wrongful termination.
Though the trial court initially dismissed Silguero’s lawsuit, the California Court of Appeal reversed it, finding that California Business and Professions Code Section 16600 protected her. Non-compete agreements are usually invalid under 16600, which protects workers’ ability to change jobs. Even though Creteguard argued that the non-compete agreement was only between FST and Silguero, the court disagreed. The court believed that, when Creteguard agreed with FST to enforce the agreement, it was essentially the same as Creteguard imposing a non-compete agreement on Silguero.
Contact a Los Angeles employment lawyer at the Law Offices of Kesluk, Silverstein & Jacob if you or your business is dealing with an employment legal issue.