Labor Employment Law Blog

In an effort to satisfy customers and maintain a desired company image, many employers have dress and grooming policies. As a general rule, employers are legally allowed to establish reasonable dress and grooming requirements that serve legitimate business interests. However, two recent cases remind employers that there are limits on what grooming standards employers can impose on employees.

The American Recovery and Reinvestment Act of 2009 (ARRA or the "Stimulus Bill") was enacted on February 17, 2009, and Section 1611 - the Employ American Workers Act (EAWA) - severely limits certain employers, namely banks and other financial institutions, who receive funding under the 2008 Trouble Assets Relief Program (TARP) from hiring H-1B foreign national employees.

The Second Circuit's ruling in Westrec Marina Management v. Arrowood Indemnity Co. is a warning to employers to report potential claims to their insurance carrier as soon as possible or face denial of coverage.  In Westrec, an employee filed a charge of discrimination against Westrec with the California Department of Fair Employment and Housing (DFEH) and requested an immediate right to sue letter.  Subsequently, her attorney sent a demand letter to Westrec asserting claims and seeking possible early settlement prior to filing a lawsuit.  At the time of the letter, Westrec failed to inform its insurer, Arrowood, of the claim.  The employee later filed a civil action, and when Westrec tendered the claim, Arrowood denied coverage.

In VL Systems, Inc. v. Unisen, Inc., a California Court of Appeal recently held that a broad "no-hire" provision in a consulting contract was unenforceable as an impermissible restraint on trade.  "No-hire" clauses are common in the consulting industry (and other similar industries such as the temporary services industry) in which the consulting companies provide specialized labor to their clients.  The reason for the "no-hire" provisions is that the consulting companies fear that the clients will hire their employees directly as employees and thereby eliminate the need for the consulting company.

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In September 2005, we reported on the California Court of Appeal's decision in Ross v. Ragingwire Telecommunications Inc., 132 Cal. App. 4th 590, finding that an employer may refuse to employ a person who is using marijuana in accordance with the Compassionate Use Act of 1996. (See, "Court Holds That A Company May Terminate A Medical Marijuana User," September 14, 2005.) However, on November 30, 2005, the California Supreme Court granted review of the case, rendering the prior decision invalid. As a result, employers are again left to question their rights and obligations under the State's disability accommodation laws versus the federal ban on marijuana use.

by Greg S. Labate

The purpose of this article is to show employers how to avoid liability when hiring, disciplining, and terminating employees.