USS-POSCO Industries v. Floyd Case

Majority - Banke, J.

No, the voluntary employer-sponsored training reimbursement agreement does not violate the asserted statutory provisions, lack consideration, or constitute an unconscionable contract of adhesion, therefore the summary judgment for UPI is affirmed. Yes, the amended version of Labor Code section 218.5, which requires a finding of employee bad faith for a prevailing employer to recover attorney fees, applies to attorney fee motions filed after its effective date in pending litigation, thus the attorney fees award is reversed and remanded. The court reasoned that the reimbursement agreement did not violate Labor Code sections 2802, 2804, or 450 because the Learner Program was voluntary, and Case did not incur a 'necessary' expenditure or suffer a loss 'in direct consequence of the discharge of his duties' or 'in obedience to the directions of UPI.' The expenses were a matter of personal choice, distinguishing this case from situations involving employer-mandated training. Likewise, sections 401 and 402 concerning employee bonds were not implicated as Case did not put up cash, and UPI fronted the expenses. Regarding Business and Professions Code section 16600, the court affirmed that the agreement did not restrain employment. Citing City of Oakland v. Hassey, the court stated that repayment of fronted costs for a voluntarily undertaken educational program, whose benefits are transferable, is not a restraint on employment. It distinguished the reimbursement agreement from classic non-compete clauses or those that impose penalties for working for a competitor, as found invalid in Edwards, Muggill, and Chamberlain. The court found no violation of the National Labor Relations Act, title 29 United States Code section 159(a), because the reimbursement agreement was consistent with the union-negotiated MOU, which expressly authorized such an agreement, and did not diminish UPI's obligations or increase Case's beyond the MOU. Valid consideration existed for the agreement. Case received continued wages and fronted education costs while in the Learner position, and UPI received Case's agreement to repay those costs if he left before UPI could benefit from its investment. The agreement was not an unconscionable contract of adhesion. There was no procedural unconscionability because the MOU was negotiated with the union (implying parity in bargaining power), the reimbursement terms were clearly disclosed, Case had realistic alternative options to become an MTE, and the contract was for an optional, advanced educational program, not necessities. As procedural unconscionability was absent, the court did not need to address substantive unconscionability, but noted that the $30,000 obligation was reasonable compared to UPI's substantial investment in the three-year program. The court also found that Labor Code sections 221, 222, and 223, which address proper payment of wages, were not violated, as UPI's lawsuit sought reimbursement for training costs, not recoupment of wages. Concerning attorney fees, the court held that the amended version of Labor Code section 218.5, effective January 1, 2014, applies to this case. Citing Stockton Theatres, Inc. v. Palermo and Woodland Hills Residents Assn., Inc. v. City Council, the court established that statutory provisions affecting attorney fee recovery are procedural and apply to actions pending at the time of enactment. Therefore, the trial court erred in applying the pre-2014 version and must determine if Case brought his wage claims in 'bad faith' under the new statute. Finally, the court concluded that Case did not properly plead a PAGA claim, as his cross-complaint lacked a separate PAGA cause of action, compliance allegations, or specific underlying Labor Code violations for PAGA, rendering the PAGA one-way fee-shifting statute inapplicable.