Recent Developments from Around the States

Denise Harris requested family leave for lower back problems on an intermittent basis in the summer and fall of 1998. She was given the full time off (12 weeks), but was only paid for the first 4 weeks off. In August 1998, Harris, an hourly worker covered by a collective bargaining agreement, filed a grievance alleging that Verizon had violated the part of the collective bargaining agreement governing paid time off for sickness and disability. The grievance was settled with Verizon, and it paid Harris for any absence related to her back injury. In January 2000, the California Department of Fair Housing filed a complaint, alleging that its failure to pay Harris violated the California Family Rights Act. The trial court agreed, awarding Harris $1092 for lost pay and $1000 for emotional distress. The trial court specifically rejected Verizon's argument that the California Family Rights Act claim that Harris' seeking to be paid for her time off after 4 weeks was substantially dependent on an interpretation of the collective bargaining agreement. As such, it was subject to pre-emption under the Labor Management Relations Act. On appeal, the California Court of Appeal reversed. The court applied federal law to Harris' claim, which resulted in its dismissal on statute of limitations grounds.

Plaintiffs Janice Duran and Julia Ramos were salaried employees who worked between 50 and 60 hours per week, but were not paid overtime. Both alleged that they spent more than 50% of their time on non-managerial tasks, and contended that they had been misclassified as exempt employees in violation of California law. The plaintiffs sought to be declared as class representatives on behalf of more than 1600 area sales managers, arguing that all such employees performed the same standardized work as dictated by Robinsons-May. The trial court denied the plaintiffs' motion for certification on the grounds that the plaintiffs failed to establish: 1) that common questions of fact predominated over individual questions; 2) that there was a well-defined community of interest; 3) that their claims were typical of other class members; and 4) that they will fairly and adequately represent and protect the interest of the class.

On appeal, the California Court of Appeal affirmed, finding that the trial court did not abuse its discretion in denying class certification. The court cited evidence presented by Robinsons-May establishing that area sales managers made discretionary decisions and performed their job differently, depending upon what department they were in. The court also referred to a declaration by a former California State Labor Commissioner opining that the area sales managers were exempt, and declaration by 60 area sales managers who claimed to be autonomous managers.The Florida Supreme Court has held that a successor corporation, regardless of whether it was the survivor of a merger or the 100% purchaser of another company's assets, may enforce non-compete agreements with former employees originally entered into with the predecessor corporations. Corporate Express Office Prods., Inc. v. Phillips, 2003 Fla. LEXIS 521 (Fla. Apr. 17).

Three eventual defendants signed non-competition agreements naming their former subsequent consents to assignment. Then, in 1997, CES purchased 100% of Bishop's stock, and Bishop was merged into CES in 1998. CES then merged into its parent company, Corporate Express of the East Inc. (CEE), and CEE later changed its name to Corporate Express Office Products, the plaintiff in this case.

The three employees left Corporate Express in 2000 and began to work for a competitor. Corporate Express then sued the three and their new employer for unlawful use of trade secrets and breach of the non-competition agreements they had signed with their predecessor employers. Goff, Phillips and Farrell claimed that the non-compete agreements did not contain a clause authorizing assignment and were in fact never assigned to Corporate Express, and that therefore they could not be enforced by a new employer. The trial court agreed with the defendants and dismissed Corporate Express' claims.

The Florida Supreme Court overturned the decision of the trial court, holding that 'based on fundamental principles of commercial transactions,' neither a 100% stock sale nor a merger would affect the enforceability of a non-competition agreement. In so holding, the court reasoned that '[r]eliance on changes in corporate culture and mode of operation as a measure of whether an employer has changed identity and therefore must obtain a consensual assignment of a non-compete agreement would inject unnecessary uncertainty into corporate transactions.'A unanimous North Carolina Supreme Court has struck down a county civil rights ordinance passed with the state legislature's blessing because it permits local regulation of labor. Williams v. Blue Cross Blue Shield of N.C., 2003 N.C. LEXIS 428 (N.C. May 2).

The Orange County Board of Commissioners established a Human Relations Commission (HRC) in 1987. Soon after, the HRC conducted public hearings on discrimination in the areas of employment, housing, and public accommodation and determined that discrimination in those areas existed in Orange County on the basis of race, color, religion, sex, national origin, age, disability, familial status, marital status, sexual orientation, and veteran status. The HRC then petitioned the North Carolina General Assembly to adopt legislation that would allow Orange County to enact a comprehensive civil rights ordinance. Having obtained the General Assembly's blessing, the county implemented a civil rights ordinance. State legislators approved the request in 1991 and allowed the county to create a commission to implement the ordinance. Later, a state trial declared the ordinance's employment sections unconstitutional in the context of a suit between Blue Cross Blue Shield of North Carolina and an employment discrimination plaintiff.

The North Carolina Supreme Court upheld the decision of the trial court, noting that finding the statute to be a legitimate exercise of legislative power could lead to a 'balkanization of the state's employment discrimination laws, creating a patchwork of standards varying from county to county.' For instance, the court noted, the county ordinance apparently created protected classes that were not protected under North Carolina law. '[W]e must determine,' the court wrote, 'whether the General Assembly should have granted Orange County the power, rationally based upon some situation unique to that county, to create and enforce additional employment rights beyond those accorded any other county in this state.' The court concluded that no such situation existed sufficient to warrant the legislature's action. Citing its own precedent, the court also reasoned that a county should not make 'important policy choices that might just as easily be made by the elected representatives in the legislature.' The court thus held that the statute was unconstitutional.

Recent Developments from Around the States was prepared by the labor and employment department of Winston & Strawn's New York office.

CALIFORNIA

Labor-Management Relations Act Pre-empts California Family Rights Act Claim

he California Court of Appeal has ruled that the federal Labor Management Relations Act pre-empts a claim brought under the California Family Rights Act, which required an interpretation of a collective bargaining agreement. Department of Fair Employment and Housing v. Verizon California, Inc. , 108 Cal.App.4th 160, 133 Cal. Rptr.2d 258 (Cal. App. 4th Dist. 2003).

Denise Harris requested family leave for lower back problems on an intermittent basis in the summer and fall of 1998. She was given the full time off (12 weeks), but was only paid for the first 4 weeks off. In August 1998, Harris, an hourly worker covered by a collective bargaining agreement, filed a grievance alleging that Verizon had violated the part of the collective bargaining agreement governing paid time off for sickness and disability. The grievance was settled with Verizon, and it paid Harris for any absence related to her back injury. In January 2000, the California Department of Fair Housing filed a complaint, alleging that its failure to pay Harris violated the California Family Rights Act. The trial court agreed, awarding Harris $1092 for lost pay and $1000 for emotional distress. The trial court specifically rejected Verizon's argument that the California Family Rights Act claim that Harris' seeking to be paid for her time off after 4 weeks was substantially dependent on an interpretation of the collective bargaining agreement. As such, it was subject to pre-emption under the Labor Management Relations Act. On appeal, the California Court of Appeal reversed. The court applied federal law to Harris' claim, which resulted in its dismissal on statute of limitations grounds.

Plaintiffs Janice Duran and Julia Ramos were salaried employees who worked between 50 and 60 hours per week, but were not paid overtime. Both alleged that they spent more than 50% of their time on non-managerial tasks, and contended that they had been misclassified as exempt employees in violation of California law. The plaintiffs sought to be declared as class representatives on behalf of more than 1600 area sales managers, arguing that all such employees performed the same standardized work as dictated by Robinsons-May. The trial court denied the plaintiffs' motion for certification on the grounds that the plaintiffs failed to establish: 1) that common questions of fact predominated over individual questions; 2) that there was a well-defined community of interest; 3) that their claims were typical of other class members; and 4) that they will fairly and adequately represent and protect the interest of the class.

On appeal, the California Court of Appeal affirmed, finding that the trial court did not abuse its discretion in denying class certification. The court cited evidence presented by Robinsons-May establishing that area sales managers made discretionary decisions and performed their job differently, depending upon what department they were in. The court also referred to a declaration by a former California State Labor Commissioner opining that the area sales managers were exempt, and declaration by 60 area sales managers who claimed to be autonomous managers.The Florida Supreme Court has held that a successor corporation, regardless of whether it was the survivor of a merger or the 100% purchaser of another company's assets, may enforce non-compete agreements with former employees originally entered into with the predecessor corporations. Corporate Express Office Prods., Inc. v. Phillips, 2003 Fla. LEXIS 521 (Fla. Apr. 17).

Three eventual defendants signed non-competition agreements naming their former subsequent consents to assignment. Then, in 1997, CES purchased 100% of Bishop's stock, and Bishop was merged into CES in 1998. CES then merged into its parent company, Corporate Express of the East Inc. (CEE), and CEE later changed its name to Corporate Express Office Products, the plaintiff in this case.

The three employees left Corporate Express in 2000 and began to work for a competitor. Corporate Express then sued the three and their new employer for unlawful use of trade secrets and breach of the non-competition agreements they had signed with their predecessor employers. Goff, Phillips and Farrell claimed that the non-compete agreements did not contain a clause authorizing assignment and were in fact never assigned to Corporate Express, and that therefore they could not be enforced by a new employer. The trial court agreed with the defendants and dismissed Corporate Express' claims.

The Florida Supreme Court overturned the decision of the trial court, holding that 'based on fundamental principles of commercial transactions,' neither a 100% stock sale nor a merger would affect the enforceability of a non-competition agreement. In so holding, the court reasoned that '[r]eliance on changes in corporate culture and mode of operation as a measure of whether an employer has changed identity and therefore must obtain a consensual assignment of a non-compete agreement would inject unnecessary uncertainty into corporate transactions.'A unanimous North Carolina Supreme Court has struck down a county civil rights ordinance passed with the state legislature's blessing because it permits local regulation of labor. Williams v. Blue Cross Blue Shield of N.C., 2003 N.C. LEXIS 428 (N.C. May 2).

The Orange County Board of Commissioners established a Human Relations Commission (HRC) in 1987. Soon after, the HRC conducted public hearings on discrimination in the areas of employment, housing, and public accommodation and determined that discrimination in those areas existed in Orange County on the basis of race, color, religion, sex, national origin, age, disability, familial status, marital status, sexual orientation, and veteran status. The HRC then petitioned the North Carolina General Assembly to adopt legislation that would allow Orange County to enact a comprehensive civil rights ordinance. Having obtained the General Assembly's blessing, the county implemented a civil rights ordinance. State legislators approved the request in 1991 and allowed the county to create a commission to implement the ordinance. Later, a state trial declared the ordinance's employment sections unconstitutional in the context of a suit between Blue Cross Blue Shield of North Carolina and an employment discrimination plaintiff.

The North Carolina Supreme Court upheld the decision of the trial court, noting that finding the statute to be a legitimate exercise of legislative power could lead to a 'balkanization of the state's employment discrimination laws, creating a patchwork of standards varying from county to county.' For instance, the court noted, the county ordinance apparently created protected classes that were not protected under North Carolina law. '[W]e must determine,' the court wrote, 'whether the General Assembly should have granted Orange County the power, rationally based upon some situation unique to that county, to create and enforce additional employment rights beyond those accorded any other county in this state.' The court concluded that no such situation existed sufficient to warrant the legislature's action. Citing its own precedent, the court also reasoned that a county should not make 'important policy choices that might just as easily be made by the elected representatives in the legislature.' The court thus held that the statute was unconstitutional.

Recent Developments from Around the States was prepared by the labor and employment department of Winston & Strawn's New York office.