USS-POSCO Industries v. Floyd Case
244 Cal. App. 4th 197
Cal. Ct. App.2016Background
- Floyd Case voluntarily entered UPI’s three-year Learner Program, which fronted wages, benefits, and training; he signed a written reimbursement agreement promising to repay up to $30,000 (prorated over 30 months) if he voluntarily left within 30 months of completion.
- Case completed the program, became an MTE, and left UPI two months later for another employer; UPI sued for breach of contract and unjust enrichment to recover $28,000; Case cross-complained asserting multiple statutory and common-law defenses and sought class/PAGA relief.
- The trial court granted UPI summary judgment on both the complaint and Case’s cross-complaint; the parties stipulated to judgment for $28,000 plus interest and costs.
- UPI moved for attorney fees under Labor Code § 218.5 for prevailing on wage-related claims; the trial court awarded fees, applying the pre-2014 version of § 218.5 and awarding $80,000 (half of requested fees).
- On appeal, the court affirmed summary judgment (agreement enforceable; not wages, not unconscionable, not a non-compete, not an NLRA violation), but reversed the fee award and remanded to apply the post-2013 amendment to § 218.5 (which awards employer fees only if employee sued in bad faith).
Issues
| Issue | Plaintiff's Argument (Case) | Defendant's Argument (UPI) | Held |
|---|---|---|---|
| Enforceability of reimbursement agreement under Labor Code (2802/2804/450) | Agreement unlawfully shifts employer operating costs to employee; training costs are expenses of employment/wages | Program was voluntary; employee incurred no necessary expenditures; training was optional and transferable | Agreement valid; §2802/2804/450 not violated |
| Violation of Business & Professions Code §16600 (restraint on employment) | Repayment provision functions as a restraint on future employment | Agreement does not bar or limit Case from working elsewhere; it simply conditions reimbursement for voluntarily-leaving employees | No §16600 violation; not a covenant not to compete |
| NLRA/direct bargaining claim | Agreement resulted from improper direct dealing with employee, bypassing collective bargaining | MOU with union authorized the program and reimbursement; no evidence of inconsistency with collective agreement | No NLRA violation; MOU authorized reimbursement feature |
| Attorney fees under Labor Code §218.5 | New (post-2013) §218.5 applies; employer fees allowed only if employee acted in bad faith, so UPI not entitled absent bad-faith finding | New statute should not be applied retroactively; trial court correctly applied pre-2014 two-way fee rule | New §218.5 governs pending litigation as procedural; fee award reversed and remanded for bad-faith determination |
Key Cases Cited
- Edwards v. Arthur Andersen LLP, 44 Cal.4th 937 (Cal. 2008) (§16600 bars restraints that limit ability to practice a profession)
- Hassey v. City of Oakland, 163 Cal.App.4th 1477 (Cal. Ct. App. 2008) (reimbursement agreement not a restraint on employment under §16600)
- In re Acknowledgment Cases, 239 Cal.App.4th 1498 (Cal. Ct. App. 2015) (distinguishing employer-mandated training from voluntary/transferable training for §2802 purposes)
- J.I. Case Co. v. NLRB, 321 U.S. 332 (U.S. 1944) (individual contracts consistent with collective bargaining agreements may be enforceable)
- Palermo v. Stockton Theatres, 47 Cal.2d 469 (Cal. 1956) (new statutory rules for costs/fees may apply to pending proceedings)
- Woodland Hills Residents Assn. v. City Council, 23 Cal.3d 917 (Cal. 1979) (statute authorizing attorney fees applies to pending cases unless manifest injustice)
- Martin v. Hadix, 527 U.S. 343 (U.S. 1999) (federal rule: fee-related statute amendments may not apply to pre-enactment work where reliance and expectations exist)