Contract analysis

I. Meal and Rest Break Policies

II. Timekeeping System Modifications

III. Restrictive Covenant Best Practices We address each in turn below.

I. MEAL AND REST BREAK POLICIES The meal and rest break claims constituted the core of the Fuentes class action and accounted for the substantial majority of the class settlement value. While the settlement resolves all released claims for the class period, AMA's ongoing compliance posture in this area will be the single most important factor in determining whether AMA faces similar litigation in the future. The foll

1. First Meal Period. All non-exempt employees are entitled to a thirty-minute uninterrupted, duty-free meal period for any shift exceeding five hours of work. The first meal period must commence no later than the end of the employee's fifth hour of work (i.e., before the employee begins the sixth hour). During the meal period, the employee must be relieved of all duties and must be free to leave the premises.

2. Second Meal Period. A second thirty-minute uninterrupted, duty-free meal period is required for any shift exceeding ten hours of work. The second meal period must commence no later than the end of the employee's tenth hour of work (i.e., before the employee begins the eleventh hour).

3. Waiver of First Meal Period. If the total work period for the day will not exceed six hours, the first meal period may be waived by mutual consent of the employer and the employee. Any such waiver must be documented in writing.

4. Waiver of Second Meal Period. If the total work period for the day will not exceed twelve hours, the second meal period may be waived by mutual consent of the employer and the employee, but only if the first meal period was not waived. Any such waiver must be documented in writing.

5. Meal Period Premium. If an employee is not provided a compliant meal period as required by this policy, the employee shall receive one additional hour of pay at the employee's regular rate of compensation for each workday on which a meal period violation occurs, in accordance with California Labor Code section 226.7. The revised policy should be distributed to all non-exempt employees at all seven California facil

1. Mandatory Scheduling Prompt in TimeTrack Pro. AMA should work with NovaPay Solutions to implement a mandatory scheduling prompt in the TimeTrack Pro system that is triggered when an employee's shift approaches the ten-hour mark. The prompt should be delivered to both the employee and the responsible supervisor — typically the Unit Production Manager ("UPM") or Line Producer for production-day operations — alerting

2. Daily Call Sheet Integration. AMA should require that each daily call sheet for production days include a designated second meal period time for any crew expected to work beyond ten hours. This should be a mandatory field on the call sheet template, and UPMs and Line Producers should be trained that the omission of a second meal period from the call sheet for a crew scheduled to work beyond ten hours is a complian

3. Particular Attention to High-Risk Show Units. Certain show units present elevated risk due to the logistical challenges of their production environments. Field-based show units — including, for example, "Summit Challenge," which is coordinated from AMA's Burbank facility at 3800 W. Alameda Avenue, Burbank, California 91505 — frequently involve remote shooting locations where the provision of uninterrupted, duty-fr

1. Entitlement. Non-exempt employees are entitled to a net ten-minute paid rest period for every four hours worked, or major fraction thereof. The phrase "major fraction thereof" means any period exceeding two hours. Accordingly, an employee working a shift of three and one-half to eight hours is entitled to one rest period; an employee working a shift of more than six hours and up to ten hours is entitled to two res

2. Timing. Rest periods should, insofar as practicable, be scheduled in the middle of each four-hour work period. While exact mid-point scheduling is not always feasible in a production environment, supervisors should make good-faith efforts to provide rest periods at or near the midpoint and should not routinely schedule rest periods at the very beginning or end of a work period.

3. Duty-Free. Rest periods must be duty-free. During a rest period, the employee must be relieved of all work duties and must be free from employer control. Supervisors may not require employees to remain "on call" or "on standby" during rest periods, carry radios or communication devices in a manner that effectively prevents the employee from resting, or perform any work tasks.

4. Production Culture. The training should directly address the production-day culture prevalent in the entertainment industry, in which stopping production for breaks may be perceived as disruptive to filming schedules, costly, or impractical. Supervisors must understand that, regardless of production pressures, the legal obligation to authorize and permit rest periods is non-negotiable. Production schedules must be

5. Premium Pay. If an employee is not authorized and permitted to take a compliant rest period, the employee is entitled to one additional hour of pay at the employee's regular rate of compensation for each workday on which a rest period violation occurs, pursuant to California Labor Code section 226.7. Because rest periods are paid time, they are not tracked in the TimeTrack Pro system, which is consistent with indu

II. TIMEKEEPING SYSTEM MODIFICATIONS The configuration and operation of the NovaPay Solutions TimeTrack Pro timekeeping system was the central factual issue in the Fuentes litigation. The automatic meal period deduction — and, critically, the inconsistent activation of the Missed Meal Attestation feature across AMA's California facilities — was the primary vulnerability that drove the Court's class certification orde

1. Auto-Deduction Policies Are Disfavored. Automatic meal period deduction policies are disfavored by California courts and are a primary target of plaintiff-side wage-and-hour counsel. Even where an auto-deduction system includes an attestation or override feature, the auto-deduction creates a presumption that operates against the employer: the employer is effectively assuming compliance and placing the burden on th

2. The *Fuentes* Litigation Record. The core finding that drove the class certification order and the settlement in Fuentes was the combination of the auto-deduction and the inconsistent activation of the Missed Meal Attestation feature. Specifically, the Missed Meal Attestation feature was deactivated at three of AMA's seven California facilities — Facility 2 (Studio City, 4024 Penmark Strategy Partners Avenue, Stud

3. Shifting the Burden. An affirmative acknowledgment system fundamentally shifts the evidentiary framework. Rather than the employer assuming compliance and relying on employee-initiated override, the employee affirmatively confirms compliance at the end of each shift. This creates an affirmative record — a contemporaneous, shift-by-shift attestation — that the employer can rely upon in the event of a subsequent cla

1. Quarterly Audits. AMA should conduct quarterly audits to confirm the continued activation of the Missed Meal Attestation feature at all seven facilities. These audits should include a review of system configuration settings, verification that the feature is functioning as intended on all time clock terminals, and a review of attestation usage data for the preceding quarter. Audit results should be documented and r

2. Designated Compliance Officer. AMA should designate a specific individual as the compliance officer responsible for monitoring attestation data and ensuring the continued functioning of the feature. We recommend assigning this responsibility to Karen Fong, Payroll Manager, or, if resources permit, creating a dedicated HR compliance role with this as a core function. The designated compliance officer should receive

3. Investigation of Anomalous Data. The designated compliance officer should investigate any facility or show unit exhibiting attestation rates that are either abnormally low or abnormally high. Abnormally low attestation rates (substantially below the expected range given historical data) may indicate that employees at that facility are unaware of the attestation feature or are being discouraged — explicitly or impl

4. Formal Training on the Attestation Feature. Formal training on the existence, purpose, and operation of the Missed Meal Attestation feature should be incorporated into the onboarding process for all new non-exempt employees and into annual refresher training for all existing non-exempt employees. The absence of formal training materials specifically addressing the attestation feature was identified as a significan

III. RESTRICTIVE COVENANT BEST PRACTICES The Aldrich matter highlighted the significant risks associated with AMA's current restrictive covenant practices, particularly the inclusion of non-competition clauses in employment agreements with California-based employees. The following recommendations are designed to bring AMA's restrictive covenant practices into compliance with current California law, to minimize litiga

1. California Business and Professions Code Section 16600. Section 16600 provides, in relevant part, 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." This prohibition is broad and is not subject to a "reasonableness" analysis; unlike many other states, California does not recognize an exception for non-compete agreements t

2. Edwards v. Kraft Quill CPAs LLP. The California Supreme Court confirmed the breadth of section 16600 in Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937, holding that section 16600 invalidates non-competition agreements except for the narrow statutory exceptions set forth in sections 16601 through 16602.5 (which apply to the sale of a business, the dissolution of a partnership, and the dissolution or sale of

3. AB 1076 (Cal. Bus. & Prof. Code § 16600.5). Effective January 1, 2024, AB 1076 codified as section 16600.5 expressly prohibits employers from entering into or attempting to enforce any noncompete clause or noncompete agreement with an employee or prospective employee, regardless of where the agreement was signed or where the employer is headquartered. Section 16600.5 further provides that any such clause or agreem

4. SB 699 (Cal. Bus. & Prof. Code § 16600.7). Also effective January 1, 2024, SB 699, codified as section 16600.7, makes it unlawful for an employer to enter into or attempt to enforce a noncompete agreement "regardless of whether the contract was signed and the employment was maintained outside of California." This provision extends the reach of section 16600 to agreements executed in other states or countries and i

1. Individualized Communication. The notification must be sent by individualized written communication. A general mass email or a posting on an internal company bulletin board or intranet is not sufficient to satisfy the statutory requirement. We recommend that the notification take the form of a personalized letter or email addressed to each affected individual by name, referencing the specific employment agreement

2. Scope of Affected Employees. The notification obligation extends to both current and former employees who were employed after January 1, 2022, and whose employment agreements contain non-compete clauses. AMA should cross-reference the results of the audit described in Section III.A above to identify the full universe of affected individuals.

3. Retention of Records. AMA should retain copies of all notifications sent, together with proof of delivery (e.g., email delivery receipts, certified mail return receipts, or electronic acknowledgment of receipt), for a minimum of four years. These records will be necessary to demonstrate compliance in the event of any regulatory inquiry or private litigation.

4. Consequences of Non-Compliance. Failure to provide the required notification may expose AMA to claims under section 16600.5(b), which provides for injunctive relief and an award of attorney's fees to the prevailing employee. Given the relatively low cost of compliance — drafting and sending individualized letters — and the significant potential exposure for non-compliance, prompt action is warranted. We are prepar

1. Robust Contractual Provisions. All employment agreements should include comprehensive confidentiality provisions that clearly define the scope of "Confidential Information." The definition should include, without limitation: proprietary content (including show concepts, pilot scripts, series bibles, and format documents); show formats and production methodologies; audience analytics and viewership data; revenue pr

2. Annual Acknowledgment. Employees should acknowledge receipt and understanding of AMA's confidentiality obligations upon hire and annually thereafter by signing a written acknowledgment form. The acknowledgment form should reference both the employee's contractual confidentiality obligations and AMA's Acceptable Use and Confidentiality Policy. Annual acknowledgment serves two purposes: it refreshes the employee's a

3. Survival Provisions. All confidentiality provisions should include a clear survival clause providing that the confidentiality obligations survive the termination of the employment relationship, regardless of the reason for termination, for the duration specified in the agreement (or, for trade secrets, for so long as the information qualifies as a trade secret). D. Narrow Non-Solicitation Clauses Employee non-soli

1. Employee Non-Solicitation. Employee non-solicitation clauses (such as section 9.2 of the Aldrich Employment Agreement, which prohibited Aldrich from soliciting or recruiting AMA employees for twenty-four months following termination) have generally been upheld by California courts as consistent with section 16600, on the theory that a restriction on soliciting former co-workers does not restrain the individual fro

2. Business/Client Non-Solicitation. Business and client non-solicitation clauses (such as section 9.3 of the Aldrich Employment Agreement, which prohibited Aldrich from soliciting or doing business with AMA's clients for twenty-four months following termination) are more vulnerable to challenge. In The Retirement Group v. Galante (2009) 176 Cal.App.4th 1226, the California Court of Appeal struck down a customer non-

1. Duration. Non-solicitation periods should not exceed twelve months following the termination of employment. This is consistent with the modified terms negotiated in the Aldrich settlement, which reduced both the employee non-solicitation clause (section 9.2) and the business non-solicitation clause (section 9.3) from twenty-four months to twelve months. A twelve-month period is generally viewed as reasonable by Ca

2. Scope — Employees. Employee non-solicitation clauses should be limited to employees with whom the departing individual had material, substantive professional contact during the six months preceding termination. This is a narrower scope than the twelve-month lookback period in the original section 9.2 of the Aldrich Employment Agreement and is designed to ensure that the provision is limited to relationships in whi

3. Scope — Clients/Business Partners. Business non-solicitation clauses should be limited to clients and business partners with whom the departing individual had material, substantive professional contact during the six months preceding termination, and should be further limited to the specific lines of business or projects on which the individual worked. This narrower scope is designed to avoid the Galante problem o

4. Severability. All restrictive covenant provisions should include a severability clause that expressly authorizes a court to reform any provision found to be overbroad, rather than voiding the provision in its entirety. While California courts are not uniformly receptive to "blue pencil" reformation of restrictive covenants, the inclusion of a severability clause preserves the argument and may persuade a court to n