Take 5: Views You Can Use - October 2011

by Epstein Becker & Green
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In This Issue:

1. California Imposes Obligations on Retail and Manufacturing Employers to Evaluate the Risk of Human Trafficking and Slavery in Its Product Supply Chain

On January 1, 2012, the California Transparency in Supply Chains Act of 2010 (the "Act") will go into effect. The Act is codified in California Civil Code § 1714.43. The legislation applies to every retail seller and manufacturer that is doing business in California and has annual worldwide gross receipts in excess of $100 million, even if the company is organized or domiciled outside of California. It is estimated that the Act will impact approximately 3,200 companies....

2. Class and Representative Action Arbitration Agreements and Waivers Remain an Open Issue in California after AT&T Mobility LLC v. Concepcion

In Gentry v. Superior Court, 42 Cal. 4th 443, 450 (2007) ("Gentry"), the California Supreme Court held that class arbitration waivers in employment agreements may not be enforced to preclude class arbitration to pursue overtime claims if the trial court determines that class arbitration would be a significantly more effective than individual arbitration at vindicating rights. This holding effectively terminated California employers' ability to preclude class and representative actions in wage and hour cases through the use of class and representative action arbitration waivers and arbitration agreements. In reaching its decision, the Gentry court relied heavily on the reasoning in Discover Bank v. Superior Court, 36 Cal.4th 148 (2005), where the California Supreme Court held that class action waivers in consumer arbitration agreements were unconscionable in certain circumstances (the "Discover Bank" rule)....

3. Court of Appeal Decision Gives California Employers More Flexibility to Make Pay Arrangements with Non-Exempt Employees

In Arechiga v. Dolores Press, Inc., 192 Cal.App.4th 567, 572-73 (2011) ("Arechiga"), the California Court of Appeal upheld an explicit mutual oral wage agreement that an employee could work 11 hours a day, six days a week for a total of 66 hours per week, at a flat salary of $880.00. This agreement included payment for 26 hours of overtime each week. The employee argued that, because he was a non-exempt employee, Labor Code § 515 governed and his regular hourly rate should have been 1/40th of his weekly salary. The employer, and ultimately the appeals court, disagreed and the appeals court held that California's "explicit mutual wage agreement doctrine" governed. Under this doctrine, the parties may agree to a guaranteed fixed salary as long as the employer pays the employee for all overtime at least one and one-half times the employee's base rate of pay....

4. California Non-Solicits and Overly Expansive Confidentiality Agreements Invite Employer Liability

In 2008, the California Supreme Court decided Edwards v. Arthur Anderson LLP, 44 Cal.4th 937 (2008) ("Edwards"), which signaled the death knell for customer non-solicits in California. The Supreme Court found such clauses to be void and contrary to the public policy of the State under Business & Professions Code ("B&P") § 16600 as contractual restraints on competition. The Supreme Court held that there were no exceptions to B&P § 16600, which renders void "every contract by which anyone is restrained from engaging in a lawful profession, trade or business of any kind" other than the statutory exceptions set forth in connection with the sale or dissolution of corporations (§ 16601), partnerships (§ 16602), and limited liability corporations (§ 16602.5)...

5. The Ninth Circuit Expands Application of Computer Fraud & Abuse Act

The Computer Fraud & Abuse Act ("CFAA"), 18 U.S. § 1030, is a criminal statute that allows an employer to assert civil claims if an employee accesses a computer without authorization or in excess of authorization, and then takes specific forbidden action, ranging from obtaining information to damaging a computer or computer data. See 18 U.S.C. § 1030(a)(1)-(7) (2004). The CFAA can be a valuable weapon in protecting trade secrets, particularly if it would be tactically advantageous to commence the action in federal court...

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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