Facts

First Class Nurses, Inc. is a California corporation engaged in the business of providing healthcare staffing solutions to client hospitals. FCN hires nurses and nursing assistants for placement with hospitals on a travel or per diem basis.

When FCN hired a nurse, they would enter into a nurse employment agreement that laid out the terms of the nurse's assignment. Some of the agreements, however, contained liquidated damages clauses in the event the nurse ended the employment before the end of the assignment: The basis for the damages was the costs of orientation and training according to the employment agreements.

FCN filed or threatened to file lawsuits against nurses that terminated their employment agreements before the end of the assignment period, and some nurses paid to resolve FCN's claims after separating from employment.

The City Attorney of Los Angeles filed suit on behalf of the People against FCN in Los Angeles Superior Court.

PLAINTIFF'S CONTENTIONS: The People contended that FCN's liquidated damages clauses violated Labor Code Section 2802.1, which requires employers to indemnify training costs for employees providing direct patient costs; and Civil Code Section 1671, which sets forth the requirements for liquidated damages clauses.

DEFENDANT'S CONTENTIONS: FCN denied any wrongdoing or liability and all the plaintiff's material allegations.

Result

The parties agreed to a stipulated judgment that required FCN to pay restitution to nurses who had paid the liquidated damages; enjoined FCN from including the provision in future contracts or enforcing the provision in current contracts; and mandated FCN alert its employees that the liquidated damages provision is void and unenforceable.