Court of Appeal Strikes Down Non-Compete Related to Sale of Business

Maas sold his company, Crave, to Handleman.  As part of the sale transaction, Maas signed a stock purchase agreement that prohibited Maas from competing with Handleman for three years from the sale.

Maas became a Handleman employee. He also signed an employment agreement with Handleman that contained another non-compete, barring him from competing for one year from the termination of his new employment with Handleman or from the expiration of the three-year non-compete, whichever came first.  That employment agreement also contained a non-solicitation clause.

Maas stayed with Handleman three years, thereby satisfying the non-compete in the purchase agreement.  But then he went to work for a new company, violating the non-compete in his employment contract. Handleman sued, claiming that the one-year non-compete was part of the sale transaction and was in consideration for the "good will" value of Crave.

Fillpoint bought the Crave assets from Handleman and sued Maas and others for violating the non-compete agreement.

Most people who read this blog know that most non-competition agreements are unenforceable under California law. But there are exceptions.  One exception applies to the sale of a business to protect the buyer.  See Business and Prof. Code Section 16601.

The court of appeal noted that the three-year covenant in the purchase agreement satisfied the exception contained in Section 16601, as it protected Handleman's purchase of Crave.  Fillpoint, however, argued that the employment agreement's further non-compete was part of the same transaction.   The court agreed that the purchase agreement and employment agreement must be read together.  But the court struck down the employment agreement's non-competition provision.

For one thing, Fillpoint argued that the employment agreement's non-compete served a different purpose from the purchase agreement's non-compete.  The latter applied to Maas as a shareholder and the former as a Handleman employee.  The court viewed that argument as a concession that brought the non-compete outside Section 16601.  Moreover, the court decided that the employment agreement non-compete was way too broad and precluded Maas from pursuing a profession regardless of Crave's goodwill.

So, according to the court's decision in Fillpoint v. Maas, non-competes associated with the sale of a business cannot have a "latent tail" that becomes effective years after the sale.   The opinion is here.

Employment Law Blog Developments

I hope you are finding our posts useful and informative and that they help you whether you be an employer or employeee.

Given my busy practice spanning London, Manchester and Edinburgh and everywhere inbetween its not often I get to tell you a little more about my firms capabilities and achievements. As you might know, I am an experienced Employment Lawyer and experienced advocate before the Employment Tribunals and Employment Appeal Tribunals.  I have been involved with a number of matters of late which have been successfully brought to conclusion.

I recently acted for a Pharmaceutical Company based in the South of England - the matter involved a sex discrimination claim arising out of maternity. The matter involved drafting the questionnaire and defending the Employment Tribunal proceedings. This was one such matter that involved a very robust defense and the tactical position of offering no money. The matter was withdrawn by the claimant without any settlement from our client.  Naturally given that the case had no reasonable prospects of success, our client was no doubt very relieved and happy with the outcome.

I have also recently acted for a Claimant who was subjected to a long sustained campaign of sexual harassment and eventually her unfair dismissal. The matter was incredibly complex dealing with four potential respondents and the overlap between the Sex Discrimination Act 1975 and the more recent Equality Act 2010. It also dealt with the issue of potential third party harassment and furthermore the vicarious liability of employers in such circumstances.  This involved two hearings and eventually the parties lawyers including myself reaching an amicable and positive solution for all.  It did appear for a while however that the parties were so far removed, a chance of settlement (which was in everyone's interests) was becoming less likely.  It is in these moments when the tenacity of your legal representation should come to the fore driving forward towards the best possible result.


EMPLOYERS
For Employers we have a dedicated Helpline where we can be contacted to discuss in brief form the issues you might be facing. I am available directly to speak to you on 07716 346 708 - I am available 24/7/365 via email on gda@garydarmstrong.com

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Evidence and DDA Claims

This case concerns whether an Employment Tribunal has jurisdiction to strike out a Disability Discrimination Claim on the basis that a Claimant has failed to attend an appointment with the employers nominated expert.  The EAT decided in GCHQ v Bacchus it can, providing the party seeking the order is sufficiently disadvantaged by the non compliance and an unless order is made beforehand.

The facts were that the claimant refused to attend an appointment with the employers nominated expert and sought only to rely upon their own expert. The employer applied to have the claim struck out which was refused by the Employment Judge.

HHJ Richardson (Presiding) held that the Employment Judge was wrong and stated at para 21 of the judgement:-

"The Employment Tribunal Rules to which we have referred endow Employment Judges and Tribunals with ample power to case manage the obtaining of expert evidence if such evidence is required for the just disposal of the proceedings".

 

He went on further to hold at para 45 of the judgement:

 

The question which the Tribunal ought to have considered is whether in the circumstances GCHQ was unable properly to prepare its case without instructing an expert.  This was the critical question, as Lane v Willis shows. Although the Tribunal identified this question in its reasons, it did not answer it; and we think if it had answered the question, it would have been bound to conclude that GCHQ was significantly disadvantaged if it could not instruct an expert.
 

The EAT went on to reiterate some further guidance from the authorities in terms of medical evidence and made an Unless Order forcing the claimant to comply with the original obligation to attend the appointment with the medical expert.

In our view this would be a case which is quite fact sensitive; The Employment Tribunal would have first needed to establish that expert medical evidence was needed for a fair disposal of proceedings and the the Employer (Respondent) would need to be sufficiently disadvantaged by the Claimants non compliance/non cooperation.

In either breath, the message from this case is that Employment Judges have a duty to establish fairness and a level playing field in accordance with the Overriding Objective and have a wide discretion in terms of Case Management Orders.

It also establishes that where medical evidence is needed in disputed disability claims, the parties will need to comply with Case Management Orders in the spirit of fairness and transparency. To refuse to do so could be fatal to any case of Disability Discrimination.

California Supreme Court: Workers' Compensation Preemption of Loss of Consortium Claim

The Workers' Compensation Act preempts most civil lawsuits by injured workers. There are certain exceptions allowing civil lawsuits, such as for emotional distress due to sexual harassment. There are statutory exceptions, too, such as when a co-worker intentionally injures the employee.  One less-known provision, called the "power press" exception permits civil actions in addition to workers' compensation claims. As explained by the Supreme Court:

[Labor Code] Section 4558 authorizes an injured worker to bring a civil action for tort damages against his or her employer where the injuries were “proximately caused by the employer’s knowing removal of, or knowing failure to install, a point of operation guard on a power press,” where the “manufacturer [had] designed, installed, required or otherwise provided by specification for the attachment of the guards and conveyed knowledge of the same to the employer.” (§ 4558, subds. (b) & (c).)

 If an injured worker can sue in court in addition to filing a workers' compensation claim for injuries falling within the "power press" exception, can his spouse sue for loss of consortium, or is that claim barred by the Workers' Compensation Act exclusivity provisions?

The Supreme Court said:

notwithstanding the availability of a civil cause of action for workers who suffer power press injuries, claims arising from the industrial accident that caused those injuries fundamentally remain compensable under the workers’ compensation system. Consequently, under settled principles of workers’ compensation law, the exclusivity rule bars a dependent spouse’s claim for loss of consortium.  

This means that the loss of consortium claim is not actionable, even if the power press exception applies. 

The case is Lifiell Mfg. Co. v. Superior Court and the opinion is here.

California Pregnancy and Disability Regulations - Final Comments?

The Fair Employment and Housing Commission has issued nearly almost final regulations regarding disability discrimination and regarding pregnancy disability leave.  You may read them here. You may comment on the proposed regulations through August 30.
We will have articles on each of these regulatory changes.
DGV

Court of Appeal: Desperate Housewives Case

From the court of appeal's opinion:

Touchstone Television Productions (Touchstone) hired actress Nicollette Sheridan (Sheridan) to appear in the first season of the television series Desperate Housewives. The agreement gave Touchstone the exclusive option to renew Sheridan‟s services on an annual basis for an additional six seasons. Touchstone renewed Sheridan's services up to and including Season 5. During Season 5, Touchstone informed Sheridan it would not renew her contract for Season 6.

In case you hadn't heard about this, Sheridan sued for wrongful termination and other torts, claiming that

During the September 24, 2008 filming of a Season 5 episode of Desperate Housewives, an incident occurred between Sheridan and Cherry, the series‟ creator. Sheridan claims that Cherry hit her. Thereafter, Sheridan complained to Touchstone about Cherry‟s (alleged) battery.

Then, Touchstone decided not to renew Sheridan for the final season, killed her character, but had her return as a ghost.  Yes, I did not make this up.  No, I never watched an episode.

A jury deadlocked on whether Touchstone wrongfully terminated Sheridan in violation of public policy (retaliation for her complaint she was battered).   The trial court repeatedly rejected Touchstone's argument that non-renewal of annual contracts do not give rise to wrongful termination claims.

The Court of Appeal, however, disagreed: "Decisional law does not allow a plaintiff to sue for wrongful termination in violation of public policy based upon an employer‟s refusal to renew an employment contract. "

Like every good story, though, this one has a twist. The Court of Appeal permitted Sheridan to sue under Labor Code Section 6310(b):

(b) Any employee who is discharged, threatened with discharge, demoted, suspended, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because the employee has made a bona fide oral or written complaint to the division, other governmental agencies having statutory responsibility for or assisting the division with reference to employee safety or health, his or her employer, or his or her representative, of unsafe working conditions, or work practices, in his or her employment or place of employment, or has participated in an employer-employee occupational health and safety committee, shall be entitled to reinstatement and reimbursement for lost wages and work benefits caused by the acts of the employer. Any employer who willfully refuses to rehire, promote, or otherwise restore an employee or former employee who has been determined to be eligible for rehiring or promotion by a grievance procedure, arbitration, or hearing authorized by law, is guilty of a misdemeanor.

So, why is this important?  Because the statute allows for "non-renewal" of employment as a basis for a claim. But the statute only allows for "reinstatement and reimbursement for lost wages and work benefits . . .. "  So, in Ms. Sheridan's case, she would be entitled to the one-year contract fee and related benefits, but not to emotional distress, front pay, or punitive damages.

For a minute, employers may have become interested in entering into six-month contracts with employees. But, as you can see, statutes may provide remeides, even if the common law does not.  On the other hand, these contracts, if done right, could limit exposure on the lost wages measure of damages .... maybe?  Another day and another case...

The case is Touchstone Television Productions v. Superior Court and the opinion is here.

US Department of Labor Stats on Leaves

The DOL's Bureau of Labor Statistics just released data from a survey regarding leaves of absence.

You can read the full press release about the survey here.


Here's the summary.


In 2011, 90 percent of wage and salary workers had access to paid or unpaid leave at their main jobs, the
U.S. Bureau of Labor Statistics reported today. Twenty-one percent of wage and salary workers took
paid or unpaid leave during an average week. Workers who took leave during an average week took an average of 15.6 hours of leave. Fifty-six percent of wage and salary workers were able to adjust their work schedules or location instead of taking leave or because they did not have access to leave in 2011. Seven percent of workers made such an adjustment in an average week.

End of summary. Begin my annoyed rant.

Let's read it again: 1/5 of workers take leave in an average week.  20% of people cannot report to work in a given week. Yes, there are some people who need leave.  But the system is abused.

End rant.

Unpaid Work Scheme - Not Slavery

Is it slave labour and therefore unlawful to force an individual in receipt of Job Seekers Allowance ("JSA") to participate in a Work for Benefits scheme?

No, says the Administrative Court in
R (on behalf of Reilly & Wilson) v Department of Work and Pensions.

As you might already be aware, Article 4 of the European Convention on Human Rights prohibits slavery, servitude and forced labour.

Controversially the Government in an effort to help recipients of benefits back to work, individuals were required to participate in schemes that involved them working but not being paid anything more than benefits. A failure to participate in these schemes can and could have resulted in a loss of benefits.

In the instant case Miss Reilly was a geology graduate who was required to work in Poundland for two weeks. Mr Wilson was a HGV driver who was required to work for an organisation delivering refurbished furniture to the needy in the community. His placement was to be for 30 hours per week for a period of 26 weeks.

Both claimed this amounted to a breach of Article 4. The Court held that although views may reasonably differ about the merits of a scheme that requires individuals to 'work for their benefits' as a means of assisting them back into the workplace, such schemes could not be said to amount to 'slavery' or 'forced labour'.

Up Close With Gaultier

Lovelies,

Madewell Shirt, Gap Blazer and Pants, J. Crew Crystal Necklace, Longchamp 'Le Pliage' Tote.

Soon after I returned from Europe, my French exchange student Marie arrived. I met her parents last summer while staying at their château in Normandy. Her mom had mentioned she had a daughter who was eager to visit the United States, as she had never been. Over the course of the year, we exchanged emails and things just fell into place. Before I knew it, she was on her way to my hometown. I had an absolutely wonderful experience (I'll discuss more about it later) :)

While Marie was here, I couldn't pass up the opportunity to show her the best of the best in California. Our first stop? San Francisco. While in San Francisco, we visited the Jean Paul Gaultier exhibit at the deYoung museum. I'd read about it previously from a plethora of online bloggers who promised that it was an incredible and insightful exhibit. After visiting, I'm SO glad I took their advice! Besides the chance to view some pretty extraordinary couture pieces, the exhibit shed light on how Gaultier incorporated modern culture into his collections. Although this was similar to the Alexander McQueen Savage Beauty exhibit I saw at the Met in June, 2011, Gaultier's exhibit had it's own personality.

I shot most of these photos with my iPhone, since I didn't have my camera with me. Although the quality isn't the greatest, I feel like the softness almost mimics several themes seen through the collection. I took most of the photos up close, as the detail and craftsmanship was mind blowing and, for lack of a better term, EPIC. The leopard dress (above) required, if my memory serves me, 1,008 hours of construction. It's one of the best examples of the quality of haute couture I've seen. Besides the beaded leopard dress, I admired the cream colored chiffon dress (above) as well. I later read that it was Gaultier's first haute couture gown.  Pretty impressive, right?

If you have the chance to visit, I would highly recommend attending. The exhibit runs thru August 19th, so hurry! :)

XOXO,

Em

P.S. Gaultier even signed the wall at the entrance to the exhibit (last photo). Did I touch it? .....yes.... :)