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California Labor Code Amendment Protects Employee Off-Duty Conduct

December 30, 1999

The California Labor Code gives the Labor Commissioner the authority to enforce a number of provisions of state labor and employment law, primarily involving wage and hour questions. Effective January 1, 2000, the Labor Code extends the Commissioner's authority to address "Claims for loss of wages as the result of demotion, suspension, or discharge from employment for lawful conduct occurring during nonworking hours away from the employer's premises." The effect of this amendment is to prohibit employers from taking adverse personnel action against an employee on the basis of his or her lawful off-duty conduct.

The amendment raises questions concerning the continuing legality of employer policies against moonlighting, personal relationships between managers and subordinates, and even conflicts of interest. Moreover, while the statute's terms are limited to decisions involving lost wages and to proceedings brought by the Labor Commissioner (in which emotional distress and punitive damages are generally unavailable), plaintiffs' attorneys will undoubtedly use the statute as a springboard in bringing common law wrongful termination or invasion of privacy claims.

The amendment provides the latest reminder that California courts and legislatures employ an expansive interpretation of employee privacy rights. As early as 1984, a California appellate court affirmed an award of damages to a former IBM employee fired for dating someone who worked for a competitor. Rulon-Miller v. International Business Machines Corp., 162 Cal. App. 3d 241, 208 Cal. Rptr. 524, (1984). The recent amendment demonstrates that this emphasis on employee privacy persists.

New York employers have been subject to a similar prohibition since 1993. The New York off duty conduct law prohibits adverse employment actions based on an employee's off-duty political or recreational activity, legal use of consumable products, or membership in a union. Unlike the new California law, however, the New York statute expressly excludes from its scope employee conduct which creates a "material conflict of interest" with the employer; this exception would likely permit an employer to maintain a policy prohibiting moonlighting for a competitor. In addition, the New York statute's reference to "recreational" activity has been construed not to prohibit an employer's policy barring dating by coworkers. State of New York v. Wal Mart Stores, 207 A.D.2d 150, 621 N.Y.S.2d 158 (3d Dep't 1995). As a consequence of the exception contained in the statute, and the narrow construction given the law by the courts, the New York off-duty conduct law has had limited impact. It remains to be seen whether the effect of the new California law will be as limited.