Understanding Non-Compete and Non-Solicitation Agreements

In California, non-compete agreements are illegal and void for employees and independent contractors.

The three main types of restrictions are (1) a true noncompete where an employee cannot work for a competitor, (2) a non-solicitation of customers restriction, and (3) and non-solicitation of employee’s restriction.

The only exception in California is for the owners of a business, corporation, LLC, or partnership. If you sell your ownership in a business, you can be prevented from turning around and soliciting your former customers and taking them from the business you sold.

If an employer terminates an employee who refuses to sign such an agreement they may be liable for wrongful termination in violation of public policy.

An employee can be prohibited from using trade secret and confidential information.

For example, they can be prohibited from using a confidential customer list to solicit customers. However, the claimed protection of trade secrets cannot be used to impose a noncompete. A contract term saying an employee cannot use confidential company information to solicit customers post-employment is a valid protection of company information. This allows a former employee to compete, so long as they are not using confidential information.

What about Non-Solicitation restrictions?

Most states allow employers to ask employees to sign non-solicitation agreements, in which they agree that they will not solicit their coworkers for a given period after leaving the company. Some states will even allow a “no hire” agreement, in which the employee agrees not to hire former coworkers, even if the employee has taken no steps to actively seek out or encourage the coworkers to leave the company.

In California, the courts have generally held that “no hire” agreements are illegal. In other words, your employer cannot stop you from hiring co-workers who decide to leave of their own accord.

On the other hand, a non-solicitation agreement that merely prohibits you from actively reaching out to former coworkers about job opportunities is more likely to be enforced. However, even then, the agreement should be limited in time (for example, one or two years) and scope (for example, limited to coworkers with whom you worked).

What about a Non-Poaching agreement?

Careful, the federal government is starting to go after companies who have agreements with other companies not to “poach” or solicit their employees. The Department of Justice views this as violating Anti-trust laws is starting to file criminal charges against employers in these arrangements. 

The bottom line about non-compete and non-solicitation agreements is that in most cases they are illegal and are not enforceable in California. Even if you are an out of state employer who employs workers in California, they can still not be enforced. Many employers still have employees sign these agreements and think they are enforceable, which is surprising considering the stance that California has taken on the matter. 

Lauren Sims is the article’s author and the Director of Human Resources.

Whenever you require professional Human Resources or Payroll guidance to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no-obligation consultation.

eqHR Solutions offers professional, tactical and strategic human resources support; ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.

Summer Interns are Coming - Are you Prepared?

If you are planning on hiring summer interns this year, you should be aware of the issues involved. Employers always ask the question, should I pay my interns? The easiest and safest answer is yes, you should pay your interns at least the minimum wage and thereby avoid any potential claims and issues.

However, now that the Department of Labor has adopted a "primary-beneficiary test" for determining whether interns are employees, more employers are considering have unpaid internships.

This new text eliminates the prior rigid test whose six parts all had to be met for someone to be considered an unpaid intern and not an employee.

The new federal guidelines apply in California, as the state doesn't have policies or case law on the topic.

The new DOL test does not require each of its seven factors to be met. The new test includes consideration of the extent to which:

• Both parties understand that the intern is not entitled to compensation.
• The internship provides training that would be given in an educational environment.
• The intern's completion of the program entitles him or her to academic credit.
• The internship corresponds with the academic calendar.
• The internship's duration is limited to the period when the internship educates the intern.
• The intern's work complements rather than displaces the work of paid employees while providing significant educational benefits.
• The intern and the employer understand that the internship is conducted without entitlement to a paid job at the internship's end.

If an employer decides to offer unpaid internships, there must be clear communication and documentation that both the intern and the employer have agreed that the internship will be unpaid.

Employers should also connect the internship with the academic progression of the intern. If the intern can get academic credit for the internships, it will go far in supporting that the internship is to the primary benefit of the intern.

Employers should be cautious that managers do not view interns as potential free summer labor. Employers should provide interaction, learning, mentoring and other training opportunities to create a valuable experience for their interns.

Lauren Sims is the article’s author and the Director of Human Resources.

Whenever you require professional Human Resources or Payroll guidance to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no-obligation consultation.

eqHR Solutions offers professional, tactical and strategic human resources support; ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.

Do You Offer Makeup Time?

Makeup time gives employees who are entitled to overtime flexibility so that they can attend to personal matters without using vacation time.

Makeup time is available to California employees and allows the employee to “makeup” work hours during a week that would otherwise be lost because of some personal obligation. 

For example, an employee has a doctor’s appointment on a Friday afternoon that will take 3 hours. Makeup time allows the employee to work 3 extra hours earlier in the week so they will not have to use paid time off or take the hours as unpaid.

In this example, if the employee works 9 hours on Monday, Tuesday, and Wednesday, they would not be entitled of overtime for the ninth hour worked on those days, because those hours are applied to the hours lost on Friday afternoon.

Things to keep in mind:

• The employee needs to provide a signed written request to the employer for each occasion that they want to make up time 
• Employers should have a carefully drafted policy on makeup time and a system to document employee requests
• Any hours over 11 in a day or 40 in a week must be paid as overtime, even if makeup time is used during that week
• Makeup time for a recurring obligation can be requested up to 4 weeks in advance
• Makeup time must be for time missed during the same week
• Employers cannot solicit or encourage employees to request makeup time, but employers may inform employees of this option

Developing a compliant policy and procedure can be easy to administrate and would provide an excellent option to offer your non-exempt employees.

Lauren Sims is the article’s author and the Director of Human Resources.

Whenever you require professional Human Resources or Payroll guidance to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no-obligation consultation.

eqHR Solutions offers professional, tactical and strategic human resources support; ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.

California Pay Statement Requirements

According to the Labor Enforcement Task Force, the second most frequent violation among California employers between 2012-2017 was related to improper or missing pay statements.

Pay statement violations can be low hanging fruit for plaintiff attorneys looking for things to tack on to other complaints their clients bring against companies. We have seen simple workers’ comp disagreements balloon into class action lawsuits for something as simple as an employer not having their address on their pay statements.

Here is a checkup for California employers to make sure they are complying with pay stub laws:

Timing of Pay

California employees must be paid at least twice a month. Compensation earned between the 1st and the 15th of the month must be paid no later than the 26th day of the same month. Compensation earned from the 16th of the month through the end of the month must be paid no later than the 10th day of the following month.

If an employer pays employees weekly, every two weeks, or twice a month according to a different earning schedule, it may comply with the payday laws by paying employees for work performed within seven days after the end of the pay period.

Employers must notify employees of the time, date, and place they will be paid.

Executive, administrative, and professional employees may be paid only once a month, as long as they are paid by the 26th day of the month and their paychecks include their entire salary for the month. Employees who work for a farm labor contractor must be paid every week.

Pay Stub Requirements

California law requires employers to give employees an itemized written statement with every paycheck. This statement, which can be in the form of a detachable pay stub or a separate document, must include the following information:

1. Total gross wages the employee earned during the pay period
2. Total hours the employee worked during the pay period
3. The number of units and rate for any piece-work the employee performed
4. All deductions from the employee’s pay
5. Employee’s net pay
6. The dates included in the pay period
7. Employee’s name and the last four digits of the employee’s Social Security number
8. Employer’s full name and address, and

All hourly rates in effect during the pay period and the number of hours the employee worked at each rate

Employers who use a payroll company to prepare wage statements are responsible for providing the payroll company with all information that must be contained in the wage statement. Furthermore, employers should review wage statements for completeness and accuracy and not assume the wage statements are accurate. Accuracy is vital and minor mistakes can be costly, with employers facing large fines and penalties, even for minor omissions. California law imposes penalties on employers who do not comply with wage statement requirements:

• Failure to provide an employee with a wage statement may result in a penalty of $250 per employee for the initial violation and $1,000 per employee for subsequent violations
• Providing an employee with an inaccurate wage statement means facing a penalty of up to $4,000 per employee

Lauren Sims is the article’s author and the Director of Human Resources.

Whenever you require professional Human Resources or Payroll guidance to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no-obligation consultation.

eqHR Solutions offers professional, tactical and strategic human resources support; ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.

The NLRA Applies to Non-Unionized Employers

Employers must recognize that regulations under the National Labor Relations Act (NLRA) do not always apply exclusively to unionized workforces.

Both unionized and non-unionized employers should become familiar with the NLRA and ensure that their communication policies are compliant. 

The NLRA protects the rights of employees to engage in activity that is undertaken with respect to wages and working conditions, or for mutual aid or protection in the workplace. 

The National Labor Relations Board (NLRB), which generally enforces the NLRA, has become increasingly active in issuing rules and guidance that affect many employers in non-unionized workplaces. The risk to the employer is that it may enact policies or procedures that violate the NLRA, subjecting the employer to complaints, actions, fines and penalties from the NLRB.

Company communications that may be covered by the NLRA include e-mails, bulletin board materials, door-to-door solicitations, bumper stickers on employee vehicles in parking lots, T-shirts and pins, employee conversations, literary distributions, and company intranets. This list is not all-inclusive, but it is important to understand how broad the NLRA can be.

The NLRB has stated that policies prohibiting use of company e-mails and bulletin boards for non-job-related solicitations were enforceable. Employers must ensure that all e-mail and bulletin board policies must be uniformly enforced and may not specifically target union-related communications. 

Other types of solicitations and distributions, however, require a different set of rules. When it comes to non-email and non-bulletin board solicitations, such as in-person solicitations, the NLRA allows employer policies prohibiting such during working hours. However, union solicitations in particular must be permitted during non-working hours, even in work areas.

Then, under somewhat different standards, distributions of leaflets or other written material, which pose safety and littering concerns, may be prohibited during work hours and in work areas, but must be allowed during non-work time in non-working areas.

The NLRB has ruled against policies that prohibit wage discussions among employees, whether unionized or non-unionized, on the basis its considered a “protected concerted activity.” 

The pervasive use of social media has led to new Board rulings in connection with protected concerted activity in the context of social media postings and communications.

The NLRB found that an employer engaged in an unfair labor practice when it fired five employees who had posted comments on Facebook regarding poor job performance previously expressed by one of their coworkers. The NLRB held that the discharged employees were engaged in protected concerted activity. In fact, the Board found that this was a textbook example of concerted activity, even though the activity that took place was online. One employee reached out to her coworkers for assistance through Facebook regarding job performance and staffing issues in anticipation of a meeting with a manager. Thus, this activity, even through the internet, constituted concerted activity, as it related to working conditions. Similarly, the Board has found that Facebook postings protesting supervisory actions can constitute protected concerted activity.

In other rulings, the NLRB has also been asked to review blogging and internet posting policies of nonunion employers. The Board has found that blanket prohibitions on criticizing an employer violate the NLRA because it would prohibit employees from engaging in certain protected concerted activity.

The Board has found in other cases, however, that in order to be protected under the NLRA, this type of online activity must be engaged in with or on the authority of other employees, and not solely by and on behalf of the employee him or herself. Thus, Facebook postings, for example, that simply air individual gripes would not be considered concerted.

These are the primary ways in which the NLRA can apply to the private nonunion workplace. Generally speaking, what employers should keep in mind is that whenever employees engage in concerted activity that addresses wages and/or working conditions, there is a likelihood that such behavior is protected by the NLRA.

Lauren Sims is the article’s author and the Director of Human Resources.

Whenever you require professional Human Resources or Payroll guidance to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no-obligation consultation.

eqHR Solutions offers professional, tactical and strategic human resources support; ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.

Drug Testing in the Workplace

At a recent labor law seminar, a labor attorney shared how many of his clients in Colorado had to eliminate marijuana from their pre-employment drug screening because they found that none of their candidates were passing the drug screening and they were having difficulty hiring.

Now that marijuana has been legalized in California, I imagine that many employers are wondering how this will impact their drug testing policies. Those employers who don’t currently have drug testing policies may be considering implementing one. Either way, employers must understand the legal requirements that apply to workplace drug testing.

When can you test?

California’s Constitution contains a right to privacy that can be violated by workplace drug testing. Employers have to be very cautious about when and how they conduct drug testing so that they do not violate that constitutional right. A key issue related to drug testing is when the test occurs; your ability to conduct drug tests varies depending on whether you test in the pre-employment stage or during employment.

Employers can conduct pre-employment drug testing and require applicants to pass a pre-employment drug test. This type of testing is “suspicionless,” meaning it is not based on any suspicion that the person has used drugs. Pre-employment drug tests should be conducted pursuant to a drug-free workplace policy.

If you require pre-employment drug tests, communicate that requirement to applicants during the interview process. Also, obtain the applicant’s consent to the pre-employment drug test. You should not conduct pre-employment drug testing until after you make a job offer to an applicant. Provide the applicant with a clearly drafted offer letter which explains that the job offer is contingent on the applicant passing the drug test; i.e., if the applicant doesn’t pass the drug test, the offer will be withdrawn.

If you use pre-employment drug testing, you should be consistent in who you test. You can test all applicants for employment or all applicants for certain positions. Do not test some applicants and not others, and do not pick and choose which applicants you will test. Doing so could expose you to a claim that you are selecting applicants for testing based on discriminatory reasons, such as race or ethnicity.

The ability to conduct drug testing changes once someone begins working for the company. Once they are an employee, you can conduct drug tests only if you have a reasonable suspicion that the employee is impaired. What constitutes “reasonable suspicion” will depend on the circumstances. Generally, you should have specific, objective evidence that the employee is impaired. Possible signs of impairment could include an employee slurring his words or having trouble walking or performing job duties, smelling like alcohol or marijuana, or showing other physical signs of impairment. 

Reasonable suspicion is more than just a belief that someone may be using drugs or hearing from another employee that someone may be using. If you have a reasonable suspicion that an employee is impaired, you should send the employee to a facility to be tested. Do not let the employee drive him or herself to be tested; either drive the employee or arrange for transportation. If he/she fails the drug test, you may terminate employment.

Random or suspicionless, drug testing of current employees is not allowed except for employers who are subject to federal Department of Transportation regulations and for employers in certain highly regulated industries. In addition, random testing of employees in certain security or safety positions may be allowed if the employee’s privacy interests are outweighed by the employer’s safety interests.

Legalized Marijuana

Under California’s Compassionate Use Act (CUA), individuals can obtain and use marijuana for medical purposes as directed by a physician, and Proposition 64 made the recreational use of marijuana legal as well. However, neither the CUA nor Proposition 64 excuses an applicant’s marijuana use for the purposes of workplace drug testing. You can still deny employment to an applicant who tests positive for marijuana, even if the applicant has a medical marijuana card. 

Best Practices:

If you already have a drug-free workplace policy in place, you may want to recirculate it to employees with a reminder that marijuana use is still prohibited in the workplace. 

Your policy should explain that you prohibit drug and alcohol use by employees while working, discuss the consequences of not complying with the policy and explain the requirements of your drug testing policy. 

If you don’t have a drug- and alcohol-free workplace policy, consider whether such a policy may be appropriate for your workplace. 

Train supervisors about your policy, including how to identify signs of drug or alcohol impairment. 

Lauren Sims is the article’s author and the Director of Human Resources. 

Whenever you require professional Human Resources or Payroll guidance to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, contact us for a no-obligation consultation. 

eqHR Solutions offers professional, tactical and strategic human resources support; ADP payroll product implementation/training and payroll processing services for businesses throughout Southern California.

eqHR Solutions - Shelly Collet

We are pleased to announce the addition of Shelly Collett to our staff of senior level HR Generalist.

Shelly is a Human Resource Professional with 20 years of experience in providing guidance and leadership to staff and senior management in both small and large organizations. Her broad experience includes developing company specific HR policies and procedures, compliance, benefits, employee relations, payroll, talent acquisition, training, and management.

Prior to joining EQHR, Shelly’s professional experience was primarily in the hospitality industry where she held senior level directorships in HR. In her most recent position, as Director of Human Resources for an exclusive private golf club, Shelly organized the club’s transition and restructuring from a corporate owned business to a member-owned equity club. Shelly’s strong background and management leadership provide her with the ability to step into a business and successfully assist the onsite team in achieving and maintaining their HR goals including compliance, defining and implementing training programs, recruiting, employee engagement, worker’s compensation, benefits and more.

Shelly lives for problem-solving and her passion is employee relations, coaching, training and mentoring. An adventurer by nature, with a lifetime goal to travel to all the places on her bucket list, she also enjoys the challenge of venturing into any corporate terrain where there is a need for HR systems and practices.

Shelly earned her Bachelor of Arts degree from California State University, Fullerton. She is a member of the Society for Human Resource Management and the Professionals in Human Resources Association.