Smooth Transitions

Smooth Transitions

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

Non-Compete legislation – New Mexico limits medical non-competes.

Posted in Uncategorized

 

Though non-comepte legislation always seems to be in the news, signed legislation is rare.  Last week, however, the governor of New Mexico signed a non-compete bill that limits post-employment covenants in the medical profession.  Here is the New Mexico Medical Society’s take on the new law:

Governor Martinez signed SB325 which limits enforceability of contractual conditions involving certain healthcare practitioners who are under contract to health businesses. Declares a non-compete provision void, in a contract that restricts the right of a health care professional to provide health care services, upon the termination of the agreement (or extension) or the practitioner’s employment with a party seeking to enforce the agreement. Applies to agreements entered into on or after July 1, 2015.

Here is a link to the final bill that was signed.  A few takeaways from the law:

  1. It is not retroactive and only applies to agreements entered into after July 1, 2015;
  2. If the agreement is already in place and is extended or renewed (after July 1) it is unenforceable;
  3. It does not restrict an employer from making an employee pay back certain expenses like a loan, relocation expenses, etc. if they have worked for less than three years;
  4. Non-disclosures for confidential information/trade secrets are permitted;
  5. Non-soliciation provisions for patients/employees for a one year period or less are permitted; and
  6. Liquidated damage provisions are permitted as long as they are not unreasonable.

The last provision is interesting.  My guess is that a medical employer could tie liquidated damages to any violation of the non-solicitation provision which keeps a departing doctor from taking patients or employees for a year.

There is always a policy argument in favor of banning non-competes for doctors.  It doesn’t seem like medical care should fall within these types of restrictions.  But, states like Texas permit non-competes for MDs.  Here, there has to be a buy out provision that the MD can pay to get out of the agreement.  We’ll keep an eye out for any other post-employment covenant laws.

 

 

Another bad non-compete bites the dust.

Posted in Non-Compete Agreements

 

A few months ago we considered the Jimmy Johns non-compete that received national attention and was even the subject of a class-action lawsuit.  The short of it was the non-compete applied to the nice sandwich maker that filled your order and most folks didn’t think a non-compete for those folks made sense.

Up to bat next was a recent Amazon non-compete that applied to its hourly workers.  It provided in typical non-compete speak:

During employment and for 18 months after the Separation Date, Employee will not, directly or indirectly, whether on Employee’s own behalf or on behalf of any other entity (for example, as an employee, agent, partner, or consultant), engage in or support the development, manufacture, marketing, or sale of any product or service that competes or is intended to compete with any product or service sold, offered, or otherwise provided by Amazon (or intended to be sold, offered, or otherwise provided by Amazon in the future) that Employee worked on or supported, or about which Employee obtained or received Confidential Information.

Amazon made the right move and dropped the non-compete for its hourly workers.  In many instances there are stituations where non-compete or other post-employment covenants makes sense and designed to protect the employer’s interests.  There are other situations where agreements don’t make sense the employee signs it because he or she has no other option and wants to work.  The problem is a bad non-competes undermine the perception of non-competes accross the board.  The media never picks up stories about “good” non-competes, it only reports on “bad” non-competes.

A non-compete in Texas has to be reasonable in time and scope and ancillary to an otherwise enforceable agreement.  Neither the Jimmy Johns’ nor Amazon hourly worker non-compete would seem to pass the test and do you actually think either company was actually going to enforce these agreements against a warehouse worker or sandwich maker?  The answer is no.  In retrospect both companies are probably considering why they ever included such a provision in their agreements in the first place.

 

The Army weighs in on tatoos.

Posted in HR Issues

A few months ago we discussed tatoos in the work place and general acceptance of tatoos in society.  The Army has weighed in on the tatoo discussion relaxing its tatoo policies indicating that policies limiting the number and size of tatoos will be a thing of the past.  Basically, tatoos are okay as long as they can’t be seen when the solider is wearing the Army Service Uniform.  A solider still can’t have derogatory tatoos or tatoos on the neck.

Like other employers, the Army has to adapt to changes in society and tatoos are no exception.

The pain tatoo.

The pain tatoo.

 

Never Ending And Always Dangerous: The Independent Contractor/Employee Debate

Posted in HR Issues

Marco Rubio Speech On Innovation At Uber's DC Offices

 

It’s been a long week and you and your friends decide to go out on the town Friday night.  Instead of driving, you make the decision to use Uber (the driving service) to get from point A to point B and to ultimately get home safely.  Good decision, but did you know those drivers are independent contractors?  Or are they?  A current class action lawsuit in California addresses that very issue.

My friend Jon Hyman recently wrote an article about two class action lawsuits dealing with the alleged misclassification of employees as independent contractors. One of the cases involves the drivers for Uber (popular here in Dallas) and in both cases the judges denied summary judgment.  The IRS provides fairly detailed guidance on how to classify but it requires a case by case analysis – there are no hard and fast rules.  Of course the IRS is concerened with unpaid employment taxes and even offers an amnesty program.  Some factors to consider:

  1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
  2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Your friendly neighborhood class action lawyer is going to assert claims for violations of the labor code, other unfair practices, and attorneys’ fees.  The Uber lawsuit has a nice website and the original complaint has the plaintiffs seeking reimbursement for expenses Uber should have paid for along with other violations of the California labor code. According to their lawyers, Uber should pay drivers for overtime, unemployment insurance, workers compensation and, possibly drivers’ expenses, including gas and vehicle wear and tear. There is a good article about the case here.

Obviously employers want to stay out of the cross-hairs of class action lawyers.  Making the correct decision from the outset on employment classification is critical as the Uber case demonstrates.  The question that pops into my mind is whether Uber’s business model works if it is forced to classify its drivers of employees?  If it is wrong, not only will Uber have to pay its drivers, but the IRS would be knocking on the Uber door as well.

 

 

Texas Non-Competes – The More Things Change…

Posted in Injunction, Non-Compete Agreements, Non-Solicitation Agreements

It’s been 3 and a half  years since the Marsh opinion that redefined what could constitute consideration for a Texas non-compete and courts have bee relatively quiet on non-competes since then.   That’s not surprising from the Texas Supreme Court as Marsh was the third of a trilogy of opinions dealing with the subject.  Appellate courts have continued to address the enforceability of non-competes from time to time but there have not been any cutting edge opinions.

Frankly, I thought we would see cases where employers were using signing bonuses, stock options (like Marsh), or other financial incentives to support non-competes.  Those types of things may be happening out in the field but have not made their way to appellate courts, yet.  Employers should definitively be considering them.  From an anecdotal standpoint (my view from the courthouse and discussions with employers/employees) it appears that folks in Texas are more resigned to the fact that the non-compete that was signed at the outset of employment is enforceable but the new employer or former employee is willing to take the risk of breaking it.

My high level thoughts on non-competes haven’t changed and were most recently covered in a Texas Lawyer article last summer that you can read here.  Some highpoints:

  1. The Texas non-compete statute has not changed in years – follow it;
  2. Make sure the non-compete is reasonable in time and what it covers;
  3. Remember that at some point the former employee is going to be able to compete;
  4. If the employer is going to put in the time to draft a non-compete then enforce it;
  5. Think about items such as jury trial waivers, forum provisions, choice-of-law provisions, and even arbitration;
  6. Courts like to enforce non-solicits over non-competes because they are “fairer” – you’re not putting the employee out of business, but they can’t contact your customers; and
  7. If you are an employee remember you can never “unsign” a non-compete.

We’ll continue to monitor the non-compete front here in Texas.

Some Good Non-Compete Stories

Posted in Non-Compete Agreements, Uncategorized

A little light reading for everyone:

  1. Here’s an analysis of a recent Nike/Adidas dispute.  Nope, not over signing the latest basketball phenom to a shoe contract.  Instead, a lawsuit against several Nike designers who bolted for Adidas.  Nice breakdown by Florida lawyer Jonathan Pollard.  The link.
  2. A quick blurb on a Kentucky court’s refusal to enforce a non-compete against car dealers.  The link.
  3. Another Jonathan Pollard discussion of a non-compete fight between two staffing agencies.  The link.
  4. A lawsuit against four former Gillette employees alleging trade secret misappropriation.  The link.
  5. Finally, state legislatures are in action so we have the requesite non-compete legislation.  The link.

We’re off to a busy year in 2015 and the non-compete/trade secret lawsuits aren’t going away.

 

 

So, is non-compete litigation on the rise?

Posted in Uncategorized

Sales-Drop

 

Determining whether non-compete litigation is on the rise or declining is a tough question to answer.  There is certainly anecdotal information – a lot of people have called me about enforcing a non-compete, but that’s not accurate.  A lawyer from Boston named Russell Beck puts together a nationwide chart every year that addresses this issue based on decisions from state and federal that involve non-compete and trade secret cases.noncompete-and-trade-secret-cases-survey-graph-201501171 Without getting into how his analysis works, his conclusion is that non-compete litigation has remained about the same the last few years and trade secret litigation has continued to increase.  Of course there is a mix between the two types of cases so there is some overlap.

Russell’s review is the closest thing I have seen to a real analysis of this issue.  We’ll never really know because a significant amount of cases are resolved without and opinion and could be decided at the temporary restraining or temporary injunction level or may just settle.  But Russell’s approach at least gives us some information in terms of trends.

So to answer the question, non-comepte litigation is not on the rise on a national basis.

 

Tatoos and Potential Employees

Posted in HR Issues
The pain tatoo.

The pain tatoo.

I read an interesting article in the Dallas Morning News about folks getting tatoos and bias against tatoos in the workplace. Some of the highlights:

  • a lot more younger people are getting tatoos and piercings;
  • some employers have outright bans on tatoos on the neck or face;
  • some of the older folks that run companies and hire people don’t like tatoos; and
  • by excluding potential employees based on tatoos, employers risk lawsuits and are excluding a large portion of applicant pools.

First, I haven’t run into any companies that exclude persons simply based on having a tatoo but I’m sure it’s something that might be considered or at least contribute to an interviewer’s impressions about a potential employee.  Second, employers have a lot of leeway in terms of hiring foks based on their appearance as long as it is not discriminatory.  For instance, I might make the decision not to hire you becasue you don’t dress appropriately or that hot pink dyed hair is not appropriate for the workplace.  Now if a tatoo is tied to religion we’re talking about an entirely different situation.

The article’s main point is that as social norms change so must workplace policies.  I don’t disagree with that, but we’re just not to a point where tatoos have reached total acceptance in the workplace, especially the more traditionally conservative occupations (doctors, lawyers, bankers, consultants etc.).  If a potential employee was really talented and qualified and had a tatoo that was on the wrist and not noticeable, it’s probably not a big deal.  Of course if it’s a tatoo with letters “pain” across the knuckles we have a different situation.

There are no hard and fast rules on tatoos and hypothetically an employee’s or applicant’s tatoo could invoke the protection of some state, federal, or local laws.  Of course this would be in very limited situations.  The point is it probably doesn’t make sense to have per say rules that exclude applicants becasue of a tatoo these days.

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