Smooth Transitions

Smooth Transitions

addressing the Legal issues arising from the departure of employees & Business breakups

Hawaii Non-Compete Legislation

Posted in Non-Compete Agreements, Non-Solicitation Agreements, Trade Secrets, Uncategorized

It’s always interesting to take a look at other states to see how they deal with non-compete legislation.  We’ve discussed Masschusetts and most recently doctor non-competes in New Mexico.  Hawaii is the latest state to enact new noncompete legislation targeting workers in a “technology business”.  This is how the Hawaii legislature defined “technology business”:

Hawaii

 

Basically, folks that work in a technology business can no longer be subjected to a non-compete and can also solicit other “technology business” workers to come and work with them somewhere else.  Now of course, those employees cannot use their previous employer’s trade secrets at their new job.  The statute does not prohibit non-solicitation clauses that prevent a former employee from calling on previous customers.

Tailoring non-compete legislation to certain professions is neither new nor novel.  Texas has sepcific requirements for doctors that include buyout provisions.  The Hawaii statue basically eliminates any barriers to job change for technology business workers but still prevents them from using trade secrets or calling on former employees.  The inside story on the language in the statute, the carve out of broadcast/phone companies, and the why/how behind the legisation would be interesting to hear.  We’ll continue to montior these types of changes on our end.  No changes appear to be in the pipeline for Texas non-compete statute.

 

5 Injunction Non-Compete Lessons

Posted in Injunction, Non-Compete Agreements, Non-Solicitation Agreements, Trade Secrets, Trial and Pre-Trial Procedure, Uncategorized

For the last few months I’ve been involved in a number of temporary restraining order/preliminary injunction cases in state and federal courts in a number of different industries/professions. Some general reminders/lessons from non-compete/non-solicit fights:

  1. Signed Agreements – Make sure the non-compete agreements at issue are signed.  Some companies have their employees execute agreements on line and there is an electronic signature.  How is that going to be proved up in litigation? (Usually, there is an electronic signature document that the company has.)   Obviously, a written signature is easier to use but not always available these days.
  2. Consistent Agreements – Often times agreements may be old or prepared by a predecessor company.  Make sure they are consistent.  Look at the key terms here – choice of law, venue, non-solicit, non-compete etc. etc.  Unforuntately, these types of agreements are sometimes only reviewed at the outset of a lawsuit.
  3. Choose venue wisely – Sometimes the agreement itself may dictate where a suit is filed (hopefully it does).  If not, where should the suit be filed?  What state? (where is the employee located/where is the company located)  State or federal court?
  4. Evidence – In some cases the company may have evidence of “bad things” the former employee did or is doing.  This may range from using the former company’s proprietary information to contacting clients/customers.  In some cases the company may only know that the former employee is working for a competitor and that’s it.  So how do you get the evidence necessary to support a TRO or preliminary injunction?  In Texas the pre-suit deposition may be an option or a motion for expedited discovery requesting documents and depositions.  The point is strong evdience is necessary to support an injunction.
  5. Resolution – Most post-employment covenant cases that are resolved by settlement do not inolve the employee ending his/her employment with their new company.  Most of these cases are resolved by a non-solicit agreement.  What do I mean?  An employee and their new company (in most instances) is not going to simply agree that the new employee will no longer work for the new company.  That type of relief is difficult to get and most defendants are willing to go the distance on the non-compete issues.  The fertile ground for this type of resolution is defining the customers/clients the former employee will not contact and ensuring they are not using proprietary information.

Packing Heat in Texas – What employers can do.

Posted in HR Issues, Uncategorized

Texas-30.06-sign

 

This past legislative seesion Texas joined other states in passing open carry legislation for gun owners.  In short, as of January 1, 2016, qualified individual will be permitted to openly carry firearms.  The qualifications of gun owners and other frequently asked questions are addressed here.  Just like for concealed carry, businesses/employers can restrict individuals from bringing guns into their place of business.  Texas Penal Code Chapter 30.06 provides the “how” for concealed-carry.  The new provisions for open carry will follow the same requirements, which contains very specific notice requirements.  An article in the Dallas Morning News forecasts a new debate over open carry signs in the future.  For now, the sign requirements:

— Must appear in contrasting colors with block letters at least one inch in height.

— Must be in both English and Spanish.

— Must be displayed in a “conspicuous manner” at the property’s entrance.

— Must say: “Pursuant to Section 30.07, Penal Code (trespass by license holder with an openly carried handgun), a person licensed under Subchapter H, Chapter 411, Government Code (handgun licensing law), may not enter this property with a handgun that is carried openly.”

Employers that want to restrict access should follow the statute

Get the deal signed – DeAndre Jordan Punches Dallas in Its Collective Gut

Posted in Hiring and Firing, HR Issues

1532129

Here in Dallas this morning we are trying to recover from what went from a fairy tale NBA free agent signing to a team on the decline that is still on the decline.  You might not be an NBA fan or sports fan for that matter but picture this:  The Dallas Mavericks are several years out from an NBA championship so the expectations remain high here.  The problem is the Mavericks have not drafted well or been able to sign high end free agents.  Drum roll – and then DeAndre Jordan comes into the picture.  Even while the playoffs were still on, rumors of Jordan’s signing with the Mavericks were out there.  Jordan is a Houston native and attended Texas A&M.  He could sign with the Mavericks and return to his native Texas.  By the way, Jordan is a great rebounder, young, and very good.

The Mavericks and Dallas for that matter move into full on recruitment.  In addition to the Mavericks other Dallas luminaries like Tony Romo were involved in the push to get Jordan to Big D. Fast forward to last week and the celebration in Dallas.  Jordan agrees in prinicple for four years and $80 million.  All the Mavericks/Jordan had to do was paper the deal and they were on their way.  This is typically how NBA deals are done.  Except here, the LA Clippers (his former team) put on their own full court press.  I’ll spare you with the details but the Dallas Morning News has a good recount here. Late last night Jordan confirmed he is resigning with the Clippers and didn’t give the Mavericks a chance at changing his mind.  Word is Clippers representatives won’t leave Jordan’s side until he signs his new deal.  Wow.

This post is not critical of the Mavericks, Jordan’s move to go back to LA is not typical.  But, it does illustrate the point of having a signed employment agreement.  Whether if it’s a an $80 million NBA contract or non-compete agreement with a star employee.  Unless there is a signed deal an agreement in principle is merely an agreement to agree.  An agreement to agree in most circumstances is not enforceable.  Typically the agreement in principle will lead to the contract with all the lawyer provided bells and whistles, but always get it in writing.  Both to cement the deal and to ensure all the parties are clear on the terms as memories fade.

So for the Mavericks its back to the drawing board.  Unfortunately, it might be a tough season next year in Big D.

Non-Compete Legislation – The Jimmy John’s Backlash

Posted in Non-Compete Agreements, Non-Solicitation Agreements

findaJJLanding

When news of the Jimmy John’s non-compete came out last October my concern was the impact it would have on businesses with legitimate non-competes.  There is always a populist theme that is anti-non-compete.  Employees should be able to come and go as they please and a non-compete agreement prevents that.  “Bad” non-competes undermine “good” non-competes.  There are situations where non-competes make sense and there is an interest worthy of protection.  But when bad non-competes are in play and receive attention, the discussion of why we have non-competes in the first place follows.

As I said then, I doubt anyone from Jimmy John’s ever contemplated enforcing a non-compete against the guy or gal behind the sandwich counter but nevertheless they included the non-compete language.   Now Congress has gotten involved with the Mobility and Opportunity for Vulnerable Employees Act – the “Move Act”.  The Move Act prohibits non-competes for employees that make less than $15 an hour and is sponsored by Minnesota Senator Al Franken.  There is a good discussion by lawyer Robert Milligan about prospects for success of the legislation here.

There always seems to be a battle to pass non-compete legislation.  The employee usually doesn’t have lobbyists at work while businesses do.  Regardless, there are some heavy hitters behind the bill and there has been a significant amount of press about the Jimmy John’s Non-Compete and the Move Act.  We’ll continue to monitor progress of the legislation.  The takeaway is businesses that use non-competes to deter employee migration, without any intent to enforce the agreement, ultimately undermine post-employment covenants accross the board.

 

Recruiter Tips/Links

Posted in Placement Professionals

sd_wsNCPTomorrow, I have the privilege of speaking to the DFW Texas Recruiters Network. Over the years I have had the privilege of representing placement professionals in a number of circumstances. Some tips:

  1. Make sure your engagement agreements/contracts make sense and are enforceable;
  2. Remember that non-competes and non-solicitation agreements in Texas can be enforceable;
  3. Screen your candidates to determine if they have entered into a non-compete or non-solicit;
  4. Remember that if someone you placed is sued it is likely that their new employer will be as well;
  5. Protect your candidate and client information – that information can be a trade secret;
  6. Make sure you are in compliance with the Texas Occupations Code;
  7. A little money spent on an attorney up front can save a lot of money down the road;
  8. Be factual when you talk about a potential employer;
  9. Don’t give legal advice; and
  10. If you sign an agreement prepare to have to comply with it.

Below are some resources and previous writings placement professionals might find of use:

Recruiter not on the hook for placing a thief.

Posted in Placement Professionals

In a case from last week the Fifth Circuit found upheld a district court’s judgment ruling that a recruiting firm was not liable for placement of a medical group’s office manager who embezzeled $60,000.  The case provides an interesting analysis of a recruiter’s responsibility in terms of presenting a candidate who turns out to be a thief and the validity of a refund provision.  A brief summary of the facts:

  • the medical group needed a new office manager and the recruiter provided five resumes for review;
  • the medical group interveriew four of the five and asked for references for two including the thief;
  • the recruiter performed a background check on the thief that did not reveal any records from the national database;
  • the recruiter was paid $7,275 for the referral;
  • the thief worked for the medical group for six months until it was determined she was embezzling money;
  • the thief did not have an undergraduate degree and was not an RN;
  • the thief had a deferred adjudication in 2007; and
  • the recruiters guarantee provided for: (1) full refund if the placement left within 30 days of employment (regardless of reason); (2) a prorated refund or free placement if the placement was employed for 30-90 days; or (3) a replacement for half-price if the placement was employed from 90 days to 5 years.

The medical group sued the recruiter under the Texas Deceptive Trade Practices Act alleging the recruiter was the producing cause of its damages and wanted its placement fee back.  The district court held that the recruiter was not the producing cause and the Fifth Circuit agreed.  Specifically, the district court found:

  1. the medical group interviewed the the thief;
  2. the medical group made the decision to hire the thief;
  3. the medical group relied on the thief’s resume;
  4. the medical group relied on its interview of the theif and feedback from the former office manager; and
  5. the recruiter’s representation that the thief was an RN was not what caused the medical group to hire her.

In addition to its DTPA claim, the medical group claimed the recruiter’s refusal to refund the placement fee was unconsionable.  Again, the Fifth Circuit disagreed and affirmed, holding that it was not “unconscionable for [the recruiter] to follow its clear-cut express warranty rather than refunding the full fee and providing restitution.”  It’s unclear whether the medical group will take the recruiter up on a half-price placement.  After several years of litigation and an appeal to the Fifth Circuit I suspect the answer is no.

The takeaways for the recruiter: (1) make sure your engagement/guarantee agreement is enforceable and follow it; (2) be careful on what is represented to a client in terms of the background of a candidate; and (3) always make factual representations.  For the employer – don’t rely on a recruiter’s background check and conduct your own due diligence.

Thanks to our friends over at 600camp for pointing out this case and here is link to the opinion.

Sports Employment Law Issues Vol. 2

Posted in HR Issues

So much has been underway in the world of sports employment issues since our first installment I’m just going to focus on items related to the Dallas teams.  No, I’m not a Cowboys fan but they provide plenty of fodder that is magnified by our local and national media. So without further adieu:

  1. The signing of Greg Hardy:  Hardy, formerly with the Carolina Panthers, provides a ferocious pass rush.  Unfortunately, he has also beaten his girlfriend.  In short, Hardy was originally convicted, demanded a jury, and the conviction was thrown out after the girlfriend did not appear to testify.  Somehow the NFL conviced the prosecutors to let them look at pictures of the girlfiend (after it filed a lawsuit) and suspended him for 10 games next season.  Hardy signed with Dallas and has proceeded to: (1) abandon his Bentley during a flash flood episode; and (2) make an inapporptiate 9/11 – Twin Towers joke during the draft.  It’s hard to be fan of Hardy considered his past and current conduct.  The Cowboys have even taken some heat in the media over the issue.  Highly unlikely an average employer would make such a higher but neitther the Cowboys or NFL are average.  We’ll see what happens with Mr. Hardy next season.  The tweet under the name Kraken Kennedy:              The Tweet
  2. Josh Hamilton – Hamilton left the Rangers a few years ago after being MVP and propelling the Rangers to two World Series.  Hamilton was a can’t miss prospect with a serious drug addiction.  Over the years he has struggled to remain clean and has had some fairly publicized relapses.  Hamilton has gained the ire of Ranger fans by some anti-Ranger comments after his departure to the California Angels.  Hamilton has issues – they probably fall within the scope of the ADAAA or FMLA.  He’s with the Ranger’s AAA affiliate and should be back in the big leagues this month.
  3. Randy Gregory – Another Cowboy’s story here.  Gregory is a linebacker from Nebraska.  Before news of his positive marijuna test came out he was projected to be a top 10 pick.  Positive test means a slide in the draft to second round.  The Cowboys have a history of dealing with troubled players.  There’s no doubt there is somone on the payroll right now to make sure Gregory stays out of trouble – not many employers like that.  Of course, the Cowboys had a similar set up for wide-receiver Dez Bryant.
.