September 09 Labor & Employment Law Update

Written by: Crystal M. O'Brien, Esq.

Co-Author: Mark Brooks


Employees Owed A Fiduciary Duty In All 401K Transactions

In Harris v. Amgen, the Ninth Circuit, reviewed a matter involving a retired Amgen employee who brought a suit with others against the biotechnology giant.  Harris alleged, among other claims, that the Amgen Retirement and Savings Plan was used to purchase Amgen stock that was knowingly inflated due to questionable Amgen business practices. Once practices were unearthed, the stock fell sharply, losing shares and substantial retired employee contributions from the Amgen Retirement Plan.  To limit his losses, Harris cashed out remaining funds and sued Amgen under a theory that they had breached their fiduciary duties by not anticipating how their business practices in the current economy would impact plan participants.  At the federal district court level, Amgen won by demonstrating that Harris’s withdrawal of sums held in the plan prevented him from having legal standing to sue.  On appeal, however, the Ninth Circuit reversed the lower court’s decision finding that Harris and others similarly situated in a class action had sufficient rights to question Amgen’s management of retired employee funds. 

It is no secret that the financial stability of 401K plans are under careful scrutiny.  In fact, the current economy may signal a greater duty on the part of employers managing funds on behalf of employees to treat and guard these funds as if the future of their businesses depended on sound decisions.  ERISA guidelines require employer decisions which weigh on plan stability to demonstrate fairness and equity, risky decisions will reflect potential violative practices.  To read the full Amgen decision, click here.


Appeals Court Considers Competing Strands of Cal’s Non-Compete Agreements

In Retirement Group v. Galante et al., an August 20, 2009 (Div.One) decision, a California Court of Appeal reviewed a matter involving an increasing trend in the sales/securities arena poaching of clients.  In an effort to clarify what is the state of law on this issue, the Galante court considered whether California’s refusal to enforce noncompete agreements in favor of free competition is equitable when state courts also seek to protect employers who suffer economic advantage when trade secrets are misappropriated by former employees.

California’s policy against noncompetition agreements has existed since 1872.  Only where specifically and narrowly provided at law, the state will not enforce employer contracts imposed on employees, as a condition of employment, to restrain former employees from engaging in their profession, trade, or business--- unless agreement falls in a specific statutory exception.  On the other hand, misuse of trade secrets, such as through the use of confidential proprietary information, client lists, to redirect the business of a former employer’s existing customer base is without a doubt unlawful.  Where the employer has “expended time and effort identifying customers with particular needs or characteristics” and not a list of “readily ascertainable through public sources . . . [or] business directories” information is lawfully protected. To read this decision in full, click here.

Go back to MMC September 09 HR E-Newsletter

MMC HR E-Newsletter Archive

MMC Human Resources Tips