$180,000 warning against employee-poaching suits.

Silicon Valley is competitive, and employees feel the brunt, Any company hiring a competitor’s employees will more often than not find itself on the wrong end of a lawsuit, facing allegations by hiring the employees it was really trying to steal the competitor’s trade secrets. The high possibility of facing these difficult and extensive cases will deter employers from hiring away each others’ employees

Cypress Networks learned the hard way that a trade-secrets suit could be the wrong response to  a competitor hiring away its employees. Cypress and Maxim Integrated Networks compete in touchscreen technology. Maxim hired a headhunter who sent emails to nine Cypress employees asking if they would be interested in working for Maxim. Cypress sued Maxim, claiming that Maxim was trying to steal its trade secrets. Less than six months after filing suit, Cypress dropped the case, and Maxim demanded its attorney’s fees.

The superior court awarded Maxim over $180,000 in fees because Cypress had sued in bad faith. Cypress never had any evidence that Maxim did anything more than solicit its employees, which Maxim had every right to do. (Cypress argued that even which employees worked on touchscreen technology was a trade secret; the headhunter pointed out that he easily learned the information on LinkedIn.)

Last month a California Court of Appeal affirmed. It made very clear that anyone suing a competitor for stealing trade secrets had better make sure that the competitor did more than hire away employees.

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A reason for lawyers to love mediation . . .

. . . and for clients to be wary. A California court has held that an attorney cannot be liable to a client whom he gave bad advice during a mediation. John Amis, along with the corporation of which he was an officer and minority shareholder, got sued for breach of contract. During mediation, his attorney advised him to accept a settlement in which the corporation agreed to pay $2.4 million. He agreed to guarantee the corporation’s debt: anything the corporation could not pay, he would.
The whole point of a corporation is limited liability—its debts are not its owners’. But when this corporation could not pay anything, Amis found himself under a $2.4 millon  judgment. He sued his attorney who advised him to agree to the settlement, to which the court responded, “Nope.”
California law has a “privilege” for communications in mediation. Nothing said in one is admissible in court. The idea is that encouraging frank discussion of a case’s merits and difficulties will more likely produce a settlement. But the court said that the privilege covers not just what the parties say to each other or to the mediator but what they say to their own lawyers. So the attorney can tell the client anything at all without fear of getting sued for it.
In the court’s defense. it did not think this attorney’s mediation immunity was a good idea. In fact, it found the result unjust. But it had no choice given the statute and precedent.

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Getting paid for sleeping at work

California workers who spend the night as part of their job won a big victory last week. According to our state supreme court, an employer that makes its employees spend the night on the job must pay them for sleeping.

That’s not what happens under federal law. Employees who work a 24-hour shift may “agree” that their employer does not have to pay them for time they spend sleeping, even though they may have to work at a moment’s notice. And employees who have to reside on the employees’ property for more than a few days may “agree” that they are not working the whole time that they are on duty, even though they can’t leave. They can still, the argument goes, sleep, eat, watch TV, and do all the other things people do at home (except go to a neighbor’s, drink a couple beers, or have friends over). Some California courts said that employees here can agree not to get paid, too.

CPS Security Solutions, Inc. learned that California workers actually can’t. CPS provides guards for construction sites, deterring theft and vandalism when the contractors have stopped work. Weekdays, its guards spend eight hours in uniform and another eight on call, and then get eight hours off. Weekends, they spent sixteen hours in uniform and eight on call. When on call, they stay on-site in house trailers.

CPS said it didn’t have to pay its guards for the time they spent sleeping while on call, but the California Supreme Court put its foot down. CPS makes them stay on the property so that they can be ready if anyone comes around who shouldn’t. CPS’s  customers, in turn, pay it to have guards on site constantly. It has to pay the guards for doing what CPS gets paid for making them do.

Even in California, not all employees have to get paid for sleep time. The Industrial Wage Commission, which is the California agency that sets wage-and-hour rules, specifically says that ambulance drivers and attendants don’t have to get paid for sleeping at work. Nor do healthcare workers who spend the night in an employer’s or client’s home. And if you just work swing or graveyard, sleeping on the job will still get you canned.

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Do this site’s terms and conditions mean anything?

When you buy something online, do you read the site’s terms and conditions? Of course not, but why not? The answer to the second question makes a difference whether the site owner can hold you to them as a contract.

One of the big issues in internet law is when a website operator can enforce terms and conditions that no one really reads. Twice recently the Ninth Circuit Court of Appeals has refused to enforce particular ones. In the first case, Donovan Lee bought a background report from Intelius. A year later, he learned that he had unintentionally also subscribed to a “Family Safety Report” that, for $19.95 a month, would tell him if sex offenders moved into his neighborhood. (Washington, where Lee lived, like California, has a website where he could get the same information free). He also learned that not Intelius but Adaptive Marketing, a completely separate company, was charging his credit card every month. Lee responded with a class-action suit against both.

Adaptive Marketing claimed that Lee could not sue it because the terms and conditions on Intelius’s site said that he had to arbitrate.  But to get to the terms and conditions, Lee first would have to read the gray print next to the button he clicked, which would direct him to two long paragraphs, written in gray on a beige background. At the end of those paragraphs, he would find a link to a different page with the terms and conditions. Paragraph 10 of the terms and conditions had the part about arbitration. Nowhere did the website even mention Adaptive Marketing, only Intelius.

The court held that Adaptive Marketing was just not a party to the contract, so it could not enforce the arbitration agreement. What’s more, the entire website was so confusing that Lee could hardly have known he was agreeing to buy a Family Safety Report, much less that he was agreeing to arbitrate any dispute. As a result, the terms and conditions were not a contract.

Yesterday, in a second case, the court held that Barnes & Noble’s browsewrap agreement was not a contract. Kevin Nguyen ordered two HP TouchPads advertised at fire-sale prices from B&N. B&N confirmed the sale but, citing unexpected demand, canceled it the next day. Like Lee, Nguyen brought a class action suit, saying that he lost the opportunity to buy the tablets elsewhere. B&N, like Adaptive Marketing, said that its site’s terms and conditions prevented Nguyen from suing.

Wait a minute, you should say, how can Barnes & Noble cancel Nguyen’s purchase but still stick him with the contract? Because its terms of use say that they apply to anyone visiting its website, even to browse. The court disagreed. People browsing websites do not look at the terms of use without some reason to think that they are supposed to.

In both cases, the court suggested that the terms might be enforceable under other circumstances. It only lightly touched on the real problem with them. The whole point of a contract is to allow people signing it to know what to expect. If you don’t read it, it’s your fault if there’s something in it you don’t like. But no one can be expected put the time and energy into reading a website’s terms and conditions before making a small purchase.

A report from Intelius costs between $4.00 and $50.00. Its terms and conditions come to three pages, single spaced, in twelve-point type. No one would pay $4.00 to buy a pen or an ice cream cone from their local store if they first had to read and sign a three-page contract. The only reason that ecommerce companies can require these contracts is because they know their customers will ignore them.

Even more egregious are Barnes & Noble’s terms of use. (Warning: who knows what you’ve agreed to by clicking.) Again, printed in twelve-point type, it comes to over eleven pages. Add on the copyright and privacy policies, and it’s fourteen. Who would go into a store to browse if they first had to read and sign a fourteen-page agreement? A writing that one party cannot reasonably expect the other to read just should not be a contract.

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BYO? No, no.

According to a California court yesterday, employers may not require employees to use their own cell phones for work. Or at least not without paying them. That paying-them part may prove hard.

The California Labor Code requires an employer to reimburse its employees for any thing that they spend discharging their duties or following the employer’s orders. So for example, California employers cannot require employees to buy a uniform, and a mall retailer that makes its employee dress in the clothes it sells must pay for them. The idea is that being an employer means paying the costs of running the business.

Schwan’s Home Services, like many businesses, makes its employees use their own cell phones while working. It thought that it did not have to pay them for doing so because it was not making them buy the phones. The employees, after all, would have had the phones even if they did not have the job. The court pooh-poohed this argument: “Otherwise, the employer would receive a windfall because it would be passing its operating expenses onto the employee.”

What remains to be seen is how the employers will pay for the employee’s phones. Will they require the employees seeking reimbursement to turn in their cell-phone records every month? Those employers will then pay their employees the proportionate cost of using the phone for work rather than for private matters. They can also see just how much time their employees are making personal calls when they should be working.

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Caregivers to get overtime

Big changes are under way for caregivers and their employers. Up until now, caregivers in disabled people’s homes have been exempt form overtime under California and federal law so long as they spend the bulk of their time actually giving care. On September 23, Governor Brown signed Assembly Bill 241, under which, starting January 1, 2014, most in California working more than 9 hours in a day or 45 in a week will get time and a half. That’s still one more hour at regular pay every day than everyone else, who get overtime after eight. And caregivers paid by government agencies, including those paid by In Home Support Services, will still be exempt.

But not for long. But not for long. A year later, even bigger changes kick in under federal law. Caregivers will get overtime after forty hours from an agency that employs them. Most caregivers are considered employed by both the person and by an agency, and only the agency will owe overtime to these jointly employed caregivers.

The new federal rules will not make a family employing a caregiver pay overtime. But they will limit what the family can have the caregiver do. A too-helpful caregiver who washes everyone’s dishes or changes the disabled person’s bandages gets overtime.

Under the new rules, exempt caregivers will have to spend most their time “elder sitting”: talking, playing games, reading out loud, going on drives or walks, or just being there in case something happens. Caregivers can also spend up to twenty percent of their time doing things like cooking for their charges, cleaning, washing their clothes, and bathing them.

Any one doing much more than that gets overtime. They cook, clean, or do laundry for the rest of the family, and they get time and a half.

Many caregivers do little things that ordinarily a nurse does. They might dress wounds, take blood pressure, check insulin levels, give medications, even give shots. Under the new rules, a caregiver doing anything like that is a regular employee.

Anyone hiring a caregiver for a disabled relative should talk to an attorney about what they can ask the caregiver to do without having to pay overtime. A good rule of thumb is that if a housekeeper or if nursing-home staff would do it, the caregiver can’t. Housekeepers and nursing-home staff get overtime, and a caregiver doing the same work should, too.

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The courts finally side with homeowners against banks

For a while, homeowners having trouble with their mortgages were not faring well in the courts. A couple of years ago, one even held that homeowners who had received a formal foreclosure notice could not challenge the bank’s authority to sell their house. They could not make the bank show that it owed the mortgage or that they owed as much money as it said they did. They had to choose either to pay up or to risk losing their home.

At least in one area, the tide seems to be turning. Every lawyer working with homeowners has heard stories of banks promising to offer mortgage modifications but not following through. The bank would give the homeowners a trial payment period and tell them that if they paid on time for four months or so, it would offer them a loan mod. The homeowners paid right on time, but upon asking the bank about the modification, they got nothing back. Instead, the next they heard, the bank was selling the house.

For a while, homeowners challenging these foreclosures in court did not do well. The banks argued, and the courts agreed, that the bank’s promises were not an enforceable contract. The homeowners promised to do nothing but pay their mortgage, which they were already supposed to do. Also, the banks promised to do no more than make an offer.

In any other cases, the banks’ arguments would be perfectly sound. Every contract requires both parties to give something up and get something back, and the homeowners weren’t giving up anything they hadn’t already promised. And the courts only enforce what the parties have agreed to; they can’t force the parties to agree. An agreement to agree, or to make an offer, is no agreement at all.

But now the banks are losing. By accepting money under the Troubled Asset Relief Program (or TARP), they subject themselves to HAMP, the Home Affordable Modification Prorgrams. And HAMP requires them to make a good faith offer.

Any homeowner who has lost a home, or is threatened with foreclosure, after the bank offered a loan mod should see an attorney right away.

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