Proposition 19 and the Real Workplace Consequences if the Measure Passes
The Goldstein Law Firm
October 2010 Newsletter
By: Charles H. Goldstein, Esq.
“Proposition 19 and the Real Workplace Consequences if the Measure Passes; Employees who promote but who cannot sell products are not exempt under federal/state law; and Employers can be liable for Honoring a Prior Employer’s Non-Compete Agreement”
I. Proposition 19 – If the Marijuana Initiative Passes – The Real Workplace Consequences for California Employers
A. Current Rights of Employers in Dealing with Drugs in the Workplace
Under current law, an employer can terminate any employee for use, possession, and sales of any controlled substance, including marijuana. In addition, an employer can drug test new employees as a condition of employment and require present employees to submit to a drug test if an employer has “reasonable suspicion” that the employee is under the influence of drugs or alcohol, Lastly, under current law, an employer does not have to prove that the employee was actually impaired in the ability to do the employee’s job because of the illegal substance in the employee’s body.
B. Employers’ Rights To Maintain Drug Free Workplace Called into Question by Proposition 19
If Proposition 19 becomes law, the basic rights that employers now have to maintain a safe, drug free workplace would be called into question because employers who exercised these rights would be subject to legal action under the language of Proposition 19. Section 11304 (c) of Proposition 19 states: “No person shall be punished, fined, discriminated against or be denied any right or privilege for lawfully engaging in any conduct permitted pursuant to Section 11301. Provided, however, that the existing right of an employer to address consumption that actually impairs job performance by an employee shall not be affected.”(emphasis added)
How do you prove before an accident or a serious performance problem occurs that an employee’s job performance would be actually impaired by the employee’s use of marijuana? You can’t prove that the employee was actually impaired. What do you do when an employee reports to work and looks “a little spacey” and/or “smells of marijuana”? Do you let him or her get into a company truck and drive away? Do you allow the employee to make a trade, buy or sell your product, operate your computer system, and/or record your financial transaction? At present, employers can take action to prevent the serious problems that could be caused by allowing an employee under the influence of drugs or alcohol to work.
C. If Proposition 19 becomes law, the following consequences may occur:
1. Employers would have to permit employees to smoke marijuana at work because the ban on smoking in the workplace only applies to smoking tobacco products.
2. Employers in California would lose valuable federal contracts that call for the maintenance of a drug free workplace.
3. Employers would not be able to make workplace decisions such as hiring, promotions and firing because they could be charged with discriminating against marijuana users under Section 11304 (c) of Proposition 19.
4. Employers would have to provide reasonable accommodations to marijuana users who have medical marijuana cards.
5. Employers would be required to pay for marijuana-related accidents through workers compensation insurance premiums and liability insurance policies for third party injuries.
6. Employers would have to warn others about marijuana use in the workplace through the Prop. 65 warning.
7. Employers would be unable to comply with their obligations under OSHA to provide a safe workplace.
8. Employers will face lawsuits for discrimination when they seek to treat marijuana users differently than other employees or fire a marijuana user for poor performance.
II. Employees Who Merely Promote Products Without the Ability to Close a Sale are Not Exempt from the Wage and Hour Laws:
Outside sales persons are one of the four employee classifications that are exempt from federal and state wage and hour laws. In re: Novartias Wage and Hour Litigation, the U.S. Court of Appeals for the Second Circuit held that pharmaceutical representatives who visit doctors’ offices to sing the praise of a particular drug, are not exempt from the federal wage and hour laws.
In reaching its decision, the Court found that pharmaceutical representatives were not exempt from federal and state wage and hour laws because they could not make sales and that it was only after the drug representative had left the doctor’s office that the doctor might write prescriptions of the drug for patients. In arriving at its decision, the Court found that these drug representatives could transfer nothing more than free samples.
Tips For Keeping Your Outside Salespeople Exempt:
1. If you have any employees who travel to your customers to merely promote your products and they do not have the authority to sell products, they should be converted to hourly employees to comply with applicable federal and state law.
2. If you wish to maintain the outside sales person exemption for employees who have previously only promoted your products, you must give them the ability to take orders and make sales of your products in addition to their marketing duties.
3. In addition, if you wish to maintain the outside sales person exemption for these employees, you should change these employees’ job description and training to include sales training.
4. Lastly, if you wish to maintain the outside sales person exemption for these employees, you should reshape your policies to show that employees who previously worked promoting your products now have sales responsibilities.
III. Employers Can Be Liable for Honoring a Prior Employer’s Non-Compete Agreement
California has long held that agreements not to compete with a former employer after an employee leaves his or her employment are against public policy. In Silguero v. Creteguard, Inc. the California Second District Court of Appeal recently ruled that an employer who enforces against an existing employee, a prior employer’s confidentiality/non compete agreement, can be held liable for wrongful termination in violation of public policy.
Silguero has signed an agreement with her former employer which prohibited her from all sales activities for 18 months following either her departure or termination. After she was terminated, Silguero found employment with Creteguard. Silguero’s former employer “requested the cooperation and participation of Creteguard” in enforcing the confidentiality agreement, including those provisions prohibiting Silguero from all sales activities for 18 months following Silguero’s departure or termination from the former employer. Thomas Nucum, Creteguard’s chief executive office informed Silguero in writing that: “it has been brought to my attention … that you have signed a confidentiality/non-compete agreement with your past employer. We regret to inform you that Creteguard is unable to continue your employment…. Although we believe that non-compete clauses are not legally enforceable here in California. Creteguard would like to keep the same respect and understanding with colleagues in the same industry.”
As a result of her termination, Silguero filed a lawsuit against Creteguard claiming termination in violation of public policy and seeking damages for violation of the Cartwright Act. Silguero claimed that Creteguard and her former employer violated the Cartwright Act by joining forces to restrain her ability to seek employment. A lower Court sustained Creteguard’s claim that Silguero did not allege facts to state claims for wrongful termination in violation of public policy and a violation of the Cartwright Act.
However, the Court of Appeals reversed the lower court’s ruling and found that Nucum and Creteguard’s enforcement of the prior employer’s unlawful non-compete agreement “is tantamount to a no hire Agreement.” In the Court’s view, the “understanding” between Creteguard and Silguero’s former employer, as referenced in Nucum’s letter, would be void and unenforceable under California law, Business and Professions Code Section 16600 because it unfairly limits the mobility of an employee and because the former employer should not be assisted by Silguero’s present employer to accomplish indirectly that which it could not have accomplished directly. The Court further concluded that permitting a claim for wrongful termination in violation of public policy furthers the interest of employees in their mobility and betterment.
Tips for Dealing with Non-Competes and Confidential Information/Trade Secrets
1. Non-compete agreements are clearly illegal and therefore should never be included in any agreement with an employee in California.
2. If you receive a threatening letter from a former employer of a current employee asking that you enforce the terms and conditions of a non-compete agreement that the former employee entered into, do not enforce the agreement and immediately contact counsel.
3. You can protect your organization’s confidential information and trade secrets from disclosure in California by having a Confidentiality/Trade Secret Agreement with Arbitration Agreement drafted by counsel.
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