Tentative Ruling
Re:
Netafim v. Eurodrip
Superior Court Case No. 13CECG02085
Hearing Date:
January 23, 2014 (Department 402)

Motions:
Demurrer to the third cause of action of the First Amended
Complaint; Request for Judicial Notice

Tentative Ruling:

To sustain the demurrer to the third cause of action with leave to amend. (Code
Civ. Proc. Sect. 430.10, Subd. (e).) Plaintiff is granted 10 days’ leave to file the first
amended complaint. The time in which the complaint can be amended will run from
service by the clerk of the minute order. New allegations in the first amended complaint
are to be set in boldface type.

To deny the request for judicial notice.

Explanation:

Statute of Frauds

Under Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, “for cause” provisions
are the type of contingency which indicates the employment contract could be
performed within one year. (Id. at 672-673.) Here, the First Amended Complaint alleges
that, “[d]uring that three years, Plaintiff continued to have the right to terminate the
employment agreement for good cause and the parties expressly agreed to this
condition.” (FAC, ¶27.) As a result, the contract could have been fulfilled, by any
number of contingencies, within one year. The existence of such a contingency
renders the statute of frauds defense inapplicable.

Illusory Consideration

While 8 USC 1184(c)(1) required Netafim to pay the petition fee, the actual visa
cost remained Maradana’s responsibility. Consequently, Netafim’s subsequent offer to
pay the visa costs was not illusory as they had no duty to do so.

Penalty

20 CFR 655.731(c)(10)(i)(A) prohibits an employer from penalizing an employee
who resigns prior to fulfilling the term of the employment:

A deduction from or reduction in the payment of the required wage is not
authorized (and is therefore prohibited) for the following purposes (i.e.,
paragraphs (c)(10)(i) and (ii)):

(i)A penalty paid by the H–1B nonimmigrant for ceasing employment with
the employer prior to a date agreed to by the nonimmigrant and the
employer.

(A) The employer is not permitted to require (directly or indirectly) that the
nonimmigrant pay a penalty for ceasing employment with the employer
prior to an agreed date. Therefore, the employer shall not make any
deduction from or reduction in the payment of the required wage to
collect such a penalty.

20 C.F.R. 655.731(c)(10)(i)(A), emphasis added.

Holding Maradana liable for the cost of obtaining the visa is indirectly requiring
Maradana to pay a penalty for ceasing employment with Netafim in violation with 20
CFR 655.731(c)(10)(i)(A). The tentative ruling from the October 2, 2013 hearing stated
this reasoning for the sustaining the demurrer. However, the FAC did not include new
allegations. Moreover, Netafim’s opposition did not address how repayment of the visa
is not an indirect penalty under 20 C.F.R. §655.731(c)(10)(I)(A) after the defendants
once again raised that issue in their demurrer. Similarly, while 20 C.F.R.
§655.731(c)(10)(i)(C) allows for the parties to include a liquidated damages clause in
the contract, here no such provision is alleged. Accordingly, the demurrer is sustained
on this ground with leave to amend.

Right to Engage in a Lawful Professions, Trade or Business

California Business and Professions Code § 16600 provides that, “every contract
by which anyone is restrained from engaging in a lawful profession, trade or business of
any kind is to that extent void.” (Cal. Business and Professions Code § 16600.) Thus,
“following the Legislature, this court generally condemns noncompetition agreements.”
(Edwards v. Arthur Anderson, LLP (2008) 44 Cal.4th 937, 946 citing, e.g., Armendariz v.
Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 123, fn. 12, [such
restraints on trade are ‘largely illegal’].)

Restraint, for purposes of Business and Professions Code § 16600, has been found
where an ex-employee was forced to forfeit pension rights (Muggill v. Reuben H.
Donnelley Corp. (1965) 62 Cal.2d 239, 243) and the forced sale of stock (Chamberlein v.
Augustine (1916) 172 Cal. 282, 288.) Essentially, restraint is found where the employer’s
demand for payment acts as a deterrent. (Chamberlein, supra, 172 Cal. At 288.)
In the present case, like the forced forfeiture of pension rights in Muggill and the
forced sale of stock in Chamberlein, here too Maradana is deterred from seeking
employment with another employer. Accordingly, the demurrer can be sustained
under this ground as well.

However, as with penalty discussion above, if the contract eventually survives
scrutiny under 20 C.F.R. §655.731 repayment of the visa looks less likely a deterrent and
more of a factor contemplated by the parties at formation. Thus, leave to amend is
granted.

Judicial Notice

At the demurrer stage, “the contents of a document may only be accepted
‘where there is not or cannot be a factual dispute concerning that which is sought to
be judicially noticed.’” (C.R. v. Tenet Healthcare Corp. (2009) 169 Cal.App.4th 1094,
1104 quoting, Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th
97, 114.)

Here, the Dept. of Labor webpage does more than summarize 20 C.F.R.
655.731(c)(10)(i)(A). The webpages’ examples and state characteristics are essentially
intended to assist employers rather than recite legislation verbatim. While perhaps
helpful to employers, the factual examples stated in the webpage lend themselves to
dispute and are not a substitute for the actual language of the statute. Thus, the court
declines to take judicial notice of the webpage.

Pursuant to Code of Civil Procedure section 1019.5, subdivision (a), no further
written order is necessary. The minute order adopting this tentative ruling will serve as
the order of the court and service by the clerk will constitute notice of the order.

Tentative Ruling
Issued By:
JYH
on
1/22/2014
.
(Judge’s initials)
(Date)