Judge: Gail Killefer, Case: 23TCV02034, Date: 2023-12-07 Tentative Ruling

Case Number: 23TCV02034    Hearing Date: January 9, 2024    Dept: 37

HEARING DATE:                 Tuesday, January 24, 2035

CASE NUMBER:                   23TCV02034

CASE NAME:                        Robert Alvarado v. Hood Manufacturing, Inc., et al.

MOVING PARTY:                 Defendant Hood Manufacturing, Inc.

OPPOSING PARTY:             Plaintiff Robert Alvarado

TRIAL DATE:                        11 June 2024

PROOF OF SERVICE:           OK

PROCEEDING:                      Motion for Judgment on the Pleadings

OPPOSITION:                        21 November 2023

REPLY:                                  30 November 2023

RECOMMENDATION:        Defendant’s Motion for Judgment on the Pleadings as to the first cause of action is denied.

Background

On January 31, 2023, Robert Alvarado (“Plaintiff”) filed a Complaint against Hood Manufacturing (“Defendant”) and Does 1 to 5. The Complaint alleges violation of Labor Code § 1102.5 and wrongful discharge.

On June 29, 2023, Defendant filed a Motion for Judgment on the Pleadings. Plaintiff filed opposing papers on November 21, 2023. The Defendant filed a reply on November 30, 2023. On December 7, 2023, the court denied Defendant’s motion for judgment on the pleadings on the second cause of action and requested supplemental briefing on the first cause of action alleging a violation of Labor Code § 1102.5.  This issue is now before the court.

motion for judgment on the pleadings

I.         Legal Standard

“A motion for judgment on the pleadings performs the same function as a general demurrer, and hence attacks only defects disclosed on the face of the pleadings or by matters that can be judicially noticed.” (Burnett v. Chimney Sweep (2004) 123 Cal.App.4th 1057, 1064.) “In deciding or reviewing a judgment on the pleadings, all properly pleaded material facts are deemed to be true, as well as all facts that may be implied or inferred from those expressly alleged.” (Fire Ins. Exchange v. Superior Court (2004) 116 Cal.App.4th 446, 452.) When considering demurrers and judgment on the pleadings, courts read the allegations liberally and in context. (Wilson v. Transit Authority of City of Sacramento (1962) 199 Cal.App.2d 716, 720-21.)

A motion for judgment on the pleadings does not lie as to a portion of a cause of action. (Id.) “In the case of either a demurrer or a motion for judgment on the pleadings, leave to amend should be granted if there is any reasonable possibility that the plaintiff can state a good cause of action.” (Gami v. Mullikin Medical Ctr. (1993) 18 Cal.App.4th 870, 876.) A non-statutory motion for judgment on the pleadings may be made any time before or during trial. (Stoops v. Abbassi (2002) 100 Cal.App.4th 644, 650.)

II.        Discussion

Having considered the supplemental briefs, the court concludes that the cause of action for whistleblower retaliation in violation of Labor Code § 1102.5 can be premised on an employee’s belief that an employment contract violated Bus. & Prof. Code § 16600.  In other words, Bus. & Prof. Code § 16600 is a statute that is violated when the alleged contract is “void” or “unlawful” if it contains a non-compete clause. (See Order of 12/7/23.)

“Under CBPC § 16600, it is well established that broad covenants not to compete are void unless they involve a situation where ‘a person sells the goodwill of a business [or] where a partner agrees not to compete in anticipation of dissolution of a partnership,’ [citations], or ‘they are necessary to protect ... trade secrets.’[Citations.]”  (Comedy Club, Inc. v. Improv West Associates (9th Cir. 2009) 553 F.3d 1277, 1290.) Consequently, one of the questions considered by the Ninth Circuit in Comedy Club, was whether “the arbitrator's award violates CBPC § 16600.” (Id. at 1284 [italics added].) Similarly, in Beatty Safway Scaffold, Inc. v. Skrable (1960) 180 Cal.App.2d 650, the appellate court held that certain portions of an agreement were “properly held by the trial court to be in violation of section 16600, Business and Professions Code[.].” (Id. at p. 656 [italics added].) The Beatty Safway Scaffold, Inc. case suggests that section 16600 can be violated even if the other portions of an agreement are valid.

When a contract is rendered “void,” it means the contract has “no validity” or is a “void contract” meaning “A contract that is of no legal effect, so that there is really no contract in existence at all.” (Black's Law Dictionary (11th ed. 2019).)

When a contract is rendered void due to offending the provisions of Bus. & Prof. Code § 16600, the section is violated. That the contract is void does not negate the fact that section 16600 is violated. Accordingly, the court sees no reason why the Plaintiff’s first cause of action for whistleblower retaliation cannot be predicted on an alleged violation of section 16600. Whether the contract at issue in this action in fact violates section 16600 is a question of fact not considered by the court at this stage in the proceedings. (See Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113-114.)

As explained by the California Supreme Court, Labor Code § 1102.5(b) “prohibits an employer from retaliating against an employee for sharing information the employee ‘has reasonable cause to believe ... discloses a violation of state or federal statute’ or of ‘a local, state, or federal rule or regulation’ with a government agency, with a person with authority over the employee, or with another employee who has authority to investigate or correct the violation.” (Lawson v. PPG Architectural Finishes, Inc. (2022) 12 Cal.5th 703, 709.) That Plaintiff reasonably believed the proposed contract violated the non-solicitation provision violated the Bus. & Profs. Code is sufficient to state a cause of action for violation of Labor Code § 1102.5(b). (See Compl. ¶¶ 10, 14, 15.)

Lastly, Defendant’s reference to Bus. & Prof. Code § 16600.1 fails to show section 16600 cannot be violated. Section 1600.1 states:

(a) It shall be unlawful to include a noncompete clause in an employment contract, or to require an employee to enter a noncompete agreement, that does not satisfy an exception in this chapter.

(b)(1) For current employees, and for former employees who were employed after January 1, 2022, whose contracts include a noncompete clause, or who were required to enter a noncompete agreement, that does not satisfy an exception to this chapter, the employer shall, by February 14, 2024, notify the employee that the noncompete clause or noncompete agreement is void.

(2) Notice made under this subdivision shall be in the form of a written individualized communication to the employee or former employee, and shall be delivered to the last known address and the email address of the employee or former employee.

(c) A violation of this section constitutes an act of unfair competition within the meaning of Chapter 5 (commencing with Section 17200).

Nothing in § 16600.1 suggests that section 16600 is a statute that cannot be violated by the fact that it renders a contract void rather than unlawful.

Based on the above, the Defendant’s Motion for Judgment on the Pleadings as to the first cause of action is denied.

Conclusion

Defendant’s Motion for Judgment on the Pleadings as to the first cause of action is denied.

Defendant to give notice.