Court Holds that Attorney is Not Bound by Confidentiality Provision

On August 13, 2018, the California Fourth District of Appeal held in Monster Energy Company v. Schechter that an attorney who signed his client’s settlement agreement under the phrase “approved as to form and content” was entitled to the granting of an anti-SLAPP motion in a case against him for breaching the confidentiality provision of the settlement, finding that he was not a party to that agreement.

Richard Fournier and Wendy Crossland (the Fourniers) filed an action (the Fournier case) against Monster Energy Company (Monster) and a related defendant when their 14-year-old daughter went into cardiac arrest in 2011 after consuming two Monster brand energy drinks and died. The attorney in the case, Bruce Schechter, and his firm, the R. Rex Parris Law Firm represented the Fourniers in their lawsuit.

In 2015, Schechter negotiated a settlement for the clients, which included a confidentiality provision purporting to bind him and his firm. Schechter later gave an interview to the website, in which he mentioned that a recent case he had handled against Monster, involving a 14-year-old girl, had settled for “substantial dollars for the family.” then published an online article that included Schechter’s statements.

Monster then sued Schechter and his firm, alleging in part that they had breached the terms of the settlement agreement, asserting causes of action for: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) unjust enrichment; and (4) promissory estoppel.

Schechter and his firm then filed a special motion to strike under Code of Civil Procedure § 425.16 (SLAPP motion) arguing, among other things, that Monster could not show a probability of prevailing on its breach of contract claim because Schecter and his firm were not parties to the settlement agreement. In opposition, Monster argued: (1) Schechter’s statements were commercial speech and therefore unprotected; and (2) Schecter and his firm were “[c]learly” bound by the settlement agreement.

The trial court denied the motion with respect to the breach of contact cause of action but granted it with respect to the other causes of action. Schecter and his firm appealed.

On appeal, the Court of Appeals held that – when a settlement agreement provides that a plaintiff and his or her counsel agree to keep the terms of the agreement confidential – and the plaintiff’s counsel signs the agreement under the words “approved as to form and content,” the Court of Appeals held the plaintiff’s counsel could not be liable to defendant for breach of the confidentiality provision. The Court noted: “The only reasonable construction of this wording is that they were signing solely in the capacity of attorneys who had reviewed the settlement agreement and had given their clients their professional approval to sign it. In our experience, this is the wording that the legal community customarily uses for this purpose.”

Recognizing that confidentiality is often a material term of a settlement agreement, the Court noted that a way to avoid this issue is “to draft a settlement agreement that explicitly makes the attorneys parties to the agreement (even if only to the confidentiality provision) and explicitly requires them to sign as such.

In sum, although a settlement agreement may bind one or more parties to its confidentiality provision, an attorney’s signature under the words “approved as to form and content” does impose any specific obligation on the attorney to maintain the confidentiality of the settlement. In light of this holding, employers who wish to bind opposing counsel to the confidentiality provision of a settlement agreement should specifically draft the confidentiality provision to encompass opposing counsel as well as the party represented by the opposing counsel. For more information, please contact Ellen Cohen, Hazel Poei or the Jackson Lewis attorney with whom you regularly work.

Taco Bell’s Prohibition on Employees “Heading for the Border” With Discounted Meals Does Not Violate California Meal Break Law, Ninth Circuit Rules

Affirming a district court order dismissing a putative class action, the Ninth Circuit Court of Appeals has held that Taco Bell’s policy of requiring employees to eat employer-discounted meals in the restaurant does not convert the meal period into “on duty” time such that the meal period becomes compensable under California law. Rodriguez v. Taco Bell Corporation, 2018 U.S. App. LEXIS 19825 (9th Cir. July 18, 2018). Please find the rest of this article in our Wage & Hour Blog here.

No Tax Deduction for Sexual Harassment Settlements Subject to Confidentiality Provision

Congress recently passed the 2017 Tax Cuts & Jobs Act which includes Internal Revenue Code §162(q). Specifically, § 162(q) provides:

  • No deduction is allowed for any settlement or payment related to sexual harassment or sexual abuse if the settlement or payment is subject to a nondisclosure agreement.
  • No deduction is permissible for attorneys’ fees related to a confidential sexual harassment settlement or payment.

These payments remain tax-deductible, however, if they are not subject to a nondisclosure agreement.

Section 162(q) is relevant because most, if not all, settlement agreements tend to include confidentiality or nondisclosure clauses. Ostensibly, employers confront whether to forego tax benefits in the interest of maintaining confidentiality or deduct the associated fees as business expenses. The provision appears aimed at preventing companies and their executives from avoiding public scrutiny about unlawful sexual conduct in the workplace.

There are several questions left unanswered by this new provision:

  • What happens to the tax deduction for payments that settle more than one kind of employment claim? Employers are likely to structure settlements of multiple claims with an allocation of only a small amount to the sexual harassment claim in a non-confidential settlement agreement, with the remainder allocated to other claims under a separate, confidential settlement agreement.
  • Is the non-deductibility of attorneys’ fees under § 162(q) only applicable to employers or to employees/victims as well? Whether the Legislature provides guidance regarding how to navigate this new provision remains to be seen.

Given the ambiguity that remains with respect to settlement of sexual harassment claims, employers should seek counsel in settling these claims. For more information, please contact Anna Choi, Hazel Poei or the Jackson Lewis attorney with whom you regularly work.

California Clarifies Ambiguous Language of Salary History Ban

California has enacted new legislation aimed at clarifying its law banning an employer from inquiring about a job applicant’s salary history information.

Assembly Bill 168 (codified as Labor Code Section 432.3) prohibits employers from seeking salary history of applicants for employment. Designed to eradicate the wage gap, AB 168 also requires employers to provide applicants, upon reasonable request, with the pay scale for the position. Please find the rest of this article in our Pay Equity Advisor Blog here.

Cal/OSHA Publishes a Fact Sheet and Poster Regarding California’s Hotel Housekeeping Musculoskeletal Injury Program

Cal/OSHA just published a Fact Sheet and a Poster regarding Cal/OSHA’s new requirement for covered employers to create and maintain a Hotel Housekeeping Musculoskeletal Injury Program (“MIPP”) and also train their housekeepers with respect to the MIPP. We previously discussed California’s new requirement in our blog on June 25, 2018 called, California’s Hotel Housekeeping Standard: Ready or Not, Here it Comes.

By July 1, covered employers must establish, implement, and maintain a MIPP that addresses risk factors specific to housekeepers. The written MIPP may be incorporated into a California Injury Illness or Prevention Program (“IIPP”) or kept as a separate program. In addition to the MIPP, supervisors and housekeepers must be trained in:

  • Signs and symptoms of musculoskeletal injuries;
  • The elements of the MIPP;
  • The process for reporting safety and health concerns without fear of reprisal;
  • Good body mechanics and the use of controls in the workplace;
  • The importance of reporting symptoms early; and
  • Practice of using identified controls and tools.

Training must occur when the MIPP is first established, to all new housekeepers and supervisors, to all housekeepers given new assignments for which training was not previously provided, and at least annually thereafter. To ensure compliance with the new standard, covered employers in California should develop their MIPP and train housekeepers on its contents. In addition, employers should plan to begin conducting worksite evaluations to ensure that they are completed by October 1, 2018.

If you have any questions regarding Cal/OSHA’s new requirement, please feel free to contact Bradford T. Hammock in our OSHA group or Jonathan Siegel or the attorney you normally work with at Jackson Lewis.

Governor Brown Signed Bill Amending a Key Term in the California Arbitration Act

California Assembly Bill 3247 amends the California Arbitration Act (Cal. Code Civ. Proc. § 1280 et seq.) by replacing the current term revocation with rescission. The bill removes any potential ambiguity by inserting the proper terminology.

On July 16, 2018, California Governor Jerry Brown signed into law Assembly Bill 3247 (“AB 3247”), which amends the California Arbitration Act (Cal. Code Civ. Proc. § 1280 et seq.), specifically, section 1281.2 of the California Code of Civil Procedure.  Effective January 1, 2019, section 1281.2 will now state that a court may not enforce an arbitration agreement if “grounds exist for rescission of the agreement, [emphasis added]” as opposed to the prior language which called for “grounds [to] exist for the revocation of the agreement [emphasis added].” (Assem. Bill No. 3247 (2017-2018 Reg. Sess.) The bill also makes other non-substantive changes.

Existing law currently requires a court, on petition of a party to an arbitration agreement alleging: (1) the existence of a written agreement to arbitrate a controversy and (2) that a party to the agreement refuses to arbitrate the controversy, to order the petitioner and the respondent to arbitrate the controversy if the court determines that an agreement to arbitrate exists, unless the court makes other determinations, including, among other things, that grounds exist for the revocation of the agreement. (Code Civ. Proc. § 1281.2.)

As the California Supreme Court observed in Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 98, revocation of a contract is a misnomer because only offers to create a contract can be revoked. If an offer is revoked, there is by definition no contract or agreement. Once a contract has been formed, it is only undone by rescission.  Armendariz was further cited in the Assembly Committee analysis.  (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 3247 (2017-2018 Reg. Sess.) as amended April 30, 2018.) Moreover, if the current revocation language is taken literally, there may be situations where a court upholds an arbitration agreement when grounds for rescission exist (such as fraud, misrepresentation, mistake, or a lack of capacity to content), but which do not also constitute grounds for revocation. AB 3247 also resolves that potential issue.

Please contact Jessica Armijo with any questions or the Jackson Lewis attorney you work with normally.

Pending California Legislation Alert! Senate Bill 937 Seeks to Require California Employers to Provide Lactation Facilities in the Workplace

If passed, California Senate Bill 937: Lactation Accommodation, will require employers to provide a lactation room, or location, in close proximity to the employee’s work space, and it must include prescribed features such as access to a sink and refrigerator. SB 937 also would deem denial of reasonable break time or adequate space to express milk a failure to provide a rest period in accordance with state law. Please find the rest of this article in our Disability, Leave & Health Management Blog here.

New California Law Prohibits Refusing Entrance to a Business Because a Member is Wearing Their Military Uniform and Adds Other Protections

On July 16, 2018, Governor Brown signed into law SB 1500 which expanded protections for members of the Armed Forces of the United States and to members of the Federal Reserve components of the Armed Forces.

The new law makes clear that no business and other covered establishments may deny a member of the Armed Forces of the United States entrance when they are wearing their uniform. In the news, there have been different stories of businesses choosing to deny service or entrance for certain reasons. This new California law has made it clear that a business cannot deny entrance merely because a member of the Armed Forces is wearing their uniform.

This law also extends protections from discrimination, including discharge from employment, to members of the Federal Reserve components of the Armed Forces of the United States and members of the State Military Reserve. California law already protects members of the military or naval forces of the state or of the United States or a person ordered to military duty or training or by reason of being a member of the military or naval forces of the state or U.S.

Employers who regularly deal with the public and others may consider notifying their supervisors and employees about this new development. If you have any questions, please feel free to contact Jonathan A. Siegel or the Jackson Lewis attorney you normally deal with.

Employer Found Liable Where Supervisor Mocked Employee’s Stuttering Problem

In responding to claim of harassment, discrimination or retaliation based on protected categories, California employers must timely respond to and thoroughly investigate workplace complaints to avoid exposure. On July 9, 2018, a California Court of Appeal court found an employer liable where an employee was mocking a person for having a stutter on more than five, but less than fifteen occasions over a two-year period from 2006 to 2008.  In Caldera v. Department of Corrections and Rehabilitation, et al., the plaintiff brought suit after allegedly being subject to jokes over a two-year period of time.  The jury awarded plaintiff $500,000.  The trial court, finding the jury award excessive, granted a new trial as to damages.  Both parties appealed.

The Court of Appeal reversed the trial court’s decision to overturn the verdict. The Court noted that since two of the mocking incidents took place in front of several other employees and supervisors, and a psychologist testified that the mocking caused plaintiff to experience psychological disorders, a “totality of the circumstances” indicates that the harassing conduct was severe.  And even though neither plaintiff nor his witnesses could remember exactly how many times plaintiff was mocked or when exactly he was subject to any mocking the court found that the employer’s culture supported the jury’s finding that the harassing conduct was also pervasive. This case underscores the importance of being proactive to workplace concerns. California jurors and courts will not tolerate harassing conduct even when specifically linked to individuals mocking an employee’s stuttering problem. Please contact Jackson Lewis with any questions you may have about your harassment policies, procedures and practices.

What Employers Need to Know about San Francisco’s Salary History Ordinance

San Francisco’s “Parity in Pay Ordinance,” prohibiting employers from inquiring about a job applicant’s salary history, took effect on July 1, 2018. This post discussed significant provisions of the ordinance as well as key considerations for employers to ensure compliance with the new regulation. Click here to read our full article regarding San Francisco’s salary history ban.