Requiring Employees to Reimburse Training Costs May Be Prohibited Under California Labor Code Section 2802

Plaintiffs challenged a Los Angeles Police Department (LAPD) policy In re Acknowledgement Cases, (2015) 239 Cal.App.4th 1498, that required new recruits to agree that if they left employment within 60 months of graduating from the Police Academy, then they would reimburse a corresponding portion of their training costs.  The California Court of Appeal held that California Labor Code Section 2802 requires that employers must remain financially responsible for all training costs, except for those costs incurred by the employee to obtain a legally required license.  While the trial court’s record established that the LAPD required 644 hours of training directly related to meeting statutory licensing requirements, as well as an additional 420 hours of non-statutory "department required" training, the Court of Appeal did not decide whether, in such a hybrid program, it would be permissible to apportion the training costs between the employer and employee.  This is because the case had been litigated by the parties under an "all-or-nothing" theory in which the pay-back policy would either be fully enforceable or entirely void.  Any equitable apportionment defense had therefore been waived.   Since the LAPD’s program purported to require employees to repay some training costs in violation of Labor Code Section 2802, the entire repayment program was found to be unenforceable as "null and void."

United States Supreme Court Finds California Law Preempted by the Federal Arbitration Act

DIRECTV, INC. v. Imburgia 577 U.S. ____ (2015) involved the interpretation of an arbitration clause and class action waiver in the service agreements between DIRECTV and its customers.  The agreement stated that it was governed by the FAA.  In DIRECTV, INC. v. Imburgia, two consumers sued DIRECTV for various claims based on allegations that DIRECTV had improperly charged early termination fees to its customers.  DIRECTV, relying on an arbitration agreement, moved to compel the case to arbitration.  The state trial court denied the motion, DIRECTV appealed, and the California Court of Appeal affirmed.  The California Court of Appeal relied on Discover Bank v. Superior Court (2005) 36 Cal.4th 148, which held that, under certain circumstances, class action waivers in consumer contracts were unconscionable and hence unenforceable.  Although Discover Bank had since been overturned in 2011 by AT&T Mobility LLC v. Concepcion 563 U.S. 333 (2011), which held that the Federal Arbitration Act pre-empted Discover Bank , the Court of Appeal held that Discover Bank was the applicable “law of [the parties] state” in determining whether the class waiver was enforceable under the arbitration agreement.  The United States Supreme Court disagreed with the Court of Appeal’s analysis and holding.  It questioned the court’s finding that the parties would intend the words “law of your state” to encompass “invalid” law (i.e., Discover Bank).  The language was not ambiguous and the plain meaning encompassed valid state law.  Further, general contract principles applied in California provide that reference to “California law” encompass changes to the state’s laws.  The Supreme Court found the California court created a special rule for arbitration agreements; however, the Court emphasized that the “Supremacy Clause forbids state courts to dissociate themselves from federal law because of disagreement with its content or a refusal to recognize the superior authority of its source.”  Accordingly, the Court found that the California court’s interpretation of the terms of the agreement clearly disfavored arbitration and, therefore, the special rule was preempted by the FAA.


Workplace Injury Can Support Claim for Discrimination Under FEHA In Spite of Exclusive Remedy Rule Under Workers Compensation Laws

While workers compensation claims are intended to be the exclusive remedy for any workplace injury, there is an exception to this rule when a workplace injury also results in a disability covered by the Fair Employment and Housing Act.  In Prue v. Brady, an employee alleged that his supervisor terminated him rather than allow him to return to work with restrictions after he suffered a hernia at work.  The trial court granted summary judgment in favor of the employer based on the employer's argument that the employee’s claim was really a workers compensation claim for which no additional remedy should be allowed.  The Court of Appeal reversed, explaining that the legal duties imposed by the Fair Employment and Housing Act would support not only a statutory claim under that law, but also a common law claim for "termination in violation of public policy."