In Golden v. California Emergency Physicians Medical Group 782 F.3d. 1083 (9th Cir. 2015), a California emergency department physician sued his former medical practice group for discrimination after losing his staff membership. Shortly before trial, the parties agreed to settle the lawsuit in exchange for a monetary sum and a release of claims. The parties recited the agreement in open court before the district court judge, including as one of the provisions an agreement that Dr. Golden would not seek future employment with the medical group or any facility owned by the medical group at any time, whether currently or in the future. The clause also permitted the medical group to terminate Dr. Golden at any time if it acquired a medical facility at which Dr. Golden was subsequently employed. When the parties eventually reduced the agreement to writing, Dr. Golden refused to sign because it included this provision. The district court ordered the physician to sign the settlement agreement, but Dr. Golden refused and appealed.
On appeal, Dr. Golden argued that the provision might impermissibly restrain his professional practice in the future, in violation of California Business & Professions Code § 16600, which prohibits contracts that restrain an individual from engaging in a lawful profession. Further, because the term was, in Dr. Golden’s view, material, the entire settlement agreement should be voided, and his lawsuit should be reinstated.
The Ninth Circuit Court of Appeals agreed that the provision could potentially create an impermissible restraint on Dr. Golden’s professional practice but did not have the facts to make that ultimate determination. The court remanded the case to the lower court, directing it to obtain additional facts to determine whether the restraint on Dr. Golden’s practice was of a “substantial character,” such that it actually violated § 16600. Notably, the court rejected the district court’s conclusion that § 16600 did not apply merely because the no-rehire provision was not a “covenant not to compete.” The court explained that California’s strong public policy against restraints on lawful employment applies to all agreements, not merely covenants not to compete.
This case serves as a cautionary reminder that employers should draft every agreement carefully and avoid broad language that could be interpreted as restricting an employee’s right to obtain employment elsewhere. This is particularly true where an employer owns several subsidiaries, has several affiliates, or otherwise controls a substantial portion of the labor market. While the court in Golden did not decide whether the employer had actually violated § 16600 or what the effects might be, it may be best practice for California employers to avoid such provisions altogether. If the provision turns out to be overly broad and in violation of § 16600, an employer could face substantial liability. Including unlawful or unenforceable non-compete provisions in an agreement (and apparently not just an employment agreement) could be held to be an unfair business practice under the Business and Professions Code.
Global Hawk Ins. Co. v. Le (1st Dist. 2015) 225 Cal.App.4th 593, a driver was sleeping in the truck when a second driver crashed it. The sleeping individual was severely injured, suffering a broken neck among other injuries, and he therefore sued the company for which he was working, and the company turned the case over to the insurance company to defend.
Prior to the accident, the company told the driver that he was not an employee, that he would not be eligible for workers’ compensation, that he would be paid a lump sum for the trip, and that no deductions would be made from his pay. They also claimed that he was not entitled to pay, since he did not “complete” the trip in its entirety.
The insurance company claimed that it did not have to compensate the driver for his injuries, since he was considered an employee for the purposes of coverage, and the policy explicitly excluded coverage for employees, since the terms assumed that such individuals would be eligible for workers’ compensation benefits. The insurance company moved for summary judgment, which the trial court granted, by resorting to the definition of an employee found in federal regulations, which were enacted for the benefit of the public and not explicitly mentioned in the insurance policy.
Thus, on appeal, the issue was whether the driver’s injuries were excluded from coverage under the insurance policy because he was an employee at the time of the accident.
Among other relevant decisions, the court of appeals discussed a relevant landmark employment case, which dealt with migrant workers. In that case, the California Supreme Court engaged in an exhaustive discussion of the differences between what constitutes an employee versus an independent contractor.
In this case, the court of appeals noted, the trial court did not engage in a discussion of the relevant California law considerations, but instead it discussed some federal regulations related to the trucking industry. The Court concluded the issue of whether Mr. Le was an employee or independent contractor raises triable issues of material fact.