14 | 2025 Cal-Peculiarities ©2025 Seyfarth Shaw LLP www.seyfarth.com Most Judicial Developments Create More Challenges for Employers During 2024 and the first part of 2025, California courts continued the general trend of expanding employer liability to employees through opinions holding that: Employee’s claim for loss of future earnings was not speculative. Employee demonstrated that damages were not speculative based on length of time with employer, employee’s promotion history within the department, and testimony that he would have remained with the employer until he was 60 years old. (See § 5.9.1.) Liability for misrepresentations is imputed to employer where at least one agent has knowledge of the misrepresentation. Even though the primary managing agent lacked actual knowledge of a misrepresentation in the compensation package offered to a prospective employee, knowledge of the misrepresentation is nevertheless imputed to the employer when another agent of the company had knowledge of the misrepresentation at the time the job offer was made. (See § 5.9.1.) PAGA does not require specific definition of “aggrieved employees” in prelitigation notice. PAGA prelitigation notice sufficiently alleged Labor Code violations against four named defendants and sufficiently identified the aggrieved employees under Labor Code section 2699.3(a)(1)(A) even though the notice only addressed one employee’s particular situation. (See § 5.15.3.) The availability of “headless” PAGA claims is unclear. One division of the Court of Appeal endorsed “headless” PAGA claims, allowing the aggrieved employees to sidestep arbitration of individual PAGA claims, but another division clarified that based on the unambiguous, ordinary meaning of PAGA, every PAGA action necessarily includes an individual PAGA claim. (See § 5.15.4.) A coworker’s use of a single racial epithet can create a hostile work environment. Even the single use of a racial epithet can create a triable issue of fact, thereby precluding summary judgment. (See § 6.11.2.) Some Judicial (and Legislative) Developments Provide Glimmers of Hope Employees cannot intervene in settlement of overlapping PAGA claims. PAGA does not bestow employees with the right to intervene in the settlement of overlapping claims brought by other employees. (See § 5.15.4.) Employer’s in-house counsel was acting in a legal capacity when investigating cause of fire. Even if in-house counsel’s involvement in investigation was to ensure compliance with regulatory reporting requirements, the provision of legal advice concerning regulatory action, government claims, and civil litigation still afforded work-product protection for investigation documents. (See § 5.19.) Noncompetition clause tied to partial business sale subject to reasonableness test. A noncompetition provision in an LLC operating agreement executed in connection with a partial sale of ownership interest was not void per se under California Business and Professions Code section 16600, but must be evaluated under a reasonableness standard due to the seller’s continued ownership and involvement in the business. The arbitrator’s application of the per se standard was legal error requiring reversal of the arbitration award. (See § 12.1.5.) Registered securities broker-dealers and investment advisers may not rely on the ABC test to prove misclassification. The statutory exemption for securities dealers and investment advisers under AB 5 is constitutional. Therefore, these professionals must establish claims of misclassification through the multi-factor Borello test rather than under the ABC test (Court of Appeal). (See § 19.7.) Statutory provisions prohibiting staff of long-term care facilities from referring to residents by other than resident’s self-identified name or pronoun are subject to strict scrutiny. Name and pronoun provisions legislation was not narrowly tailored to achieve government's compelling interest in
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