Smooth Transitions

Smooth Transitions

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

Respect for a Well Written Non-Compete

Posted in Non-Compete Agreements

I really enjoyed an article about Madison, Wisconsin based Epic Systems’s non-compete agreement and the comments of those former employees who were abiding by it.  There was some scuttlebutt about whether Epic was going to extend the term from 1 to 2 years.  Epic is big in the healthcare IT world and its ex-employees go on to consult for other companies on Epic software and make good money.

Based on the article it appears that most Epic employees respect the enforceability of the non-compete.  I would guess that some have tried to challenge it in the past and have been unsuccessful.  There is a signficant amount of time in the article devoted to Epic’s seriousness in protecting its intellectual property and the training it invests in its workers – hence the non-compete.  It’s not often you see an article focusing on the merits of a non-compete.  It seems like every story or article out there is about a non-compete that doesn’t make any sense.  Probably because a lot of them do not – see Jimmy John’s for example.

The point is a well-written, well-thought-out, and enforced non-compete agreements can go a long way to protecting a business. Too many times I see agreements that meet none of the cited criteria.  But when I am evaluating a well written agreement that I know the employer has a history of enforcing it goes a long way to informing my opinion on the enforceability of the agreement.  Most employeees and prospective employers don’t want to get into litigation over a non-compete.  If a business is going to use them, put the time and money necessary into preparing and if need be enforcing the agreement.  Once a company develops the reputation, like Epic, of enforcing an agreement it goes a long way towards thwarting a possible breach of the agreement.

Here is a link to the article I wrote for the Texas Lawyer earlier in the year providing non-comepte reccomendations.

Sports Employment Issues Vol 1

Posted in HR Issues

I like sports.  Some more than others.  The great thing about professional sports is that they provide us high profile and in some instances highly scrutinized employment situations.  Just look at the NFL this year.  We have had: (1) a suspension/reinstatement for Ray Rice related to domestic violence; (2) the suspension/appeal of Adrian Peterson for taking a switch to his son; and (3) the suspension of Cleveland wide receiver Josh Gordon for drug use.  These things run the gamut.  In addition to the employment relationships between the player and team, there is the overarching supervision of the National Football Leauge.  To make matters even more complicated there is the player’s union.

So I am going to attempt to identify some interesting anecdotes/stories from the world of sports.  Let me know your thoughts.

1.  Marshawn Lynch plays running back for the Seattle Seahawks.  He is very good.  He also doesn’t like giving interviews.  After a few fines from the NFL Lynch spent one week simply answering questions with the word “yea” and went with “nope” this past week.  No one knows what to do with him.  Obviously the intent of the league and team is to get players to provide information to the media and promote the game.  I’m not sure how you can force a player to provide better answers but we shall see.

2.  Liverpool striker Mario Balotelli is in hot water again over an instagram post.  Though the post was titled “Don’t Be a Racist!”  It went on to provide some racist commentary below.  Here is a link.  Seriously though, has something good ever come from an athlete’s social media post?  Balotelli has apologized but is being investigated.

3.  Coaching changes are in full swing now in the college ranks.  Bo Pelini was ousted at Nebraska over the weekend and others are to follow.  Firings aren’t always limited to head coaches to.  Case in point is Texas A&M letting go of its defensive coordinator.    This article has a great breakdown of the money college coaches make these days.  The interesting thing for Pelini and other high profile coaches is the buyout – Nebraska will have to pay him $7.65 million for the right to fire him.  Basically, these types of coaches have some serious serverance built into their agreements.

FitBit Data, Apple watches, what’s next in terms of possible evidence?

Posted in Trial and Pre-Trial Procedure, Uncategorized

The FitBit

 

A few years ago there was much discussion about the use of social media evidence in lawsuits.  The use continues and ranges from criminal prosecutions through non-compete disputes.  It’s amazing what will people will put in the public domain and gives social media can provide strong, sometimes permanent, information about whereabouts, communications, and even the physical condition of someone.  The use of this type of evidence continues and our courts continue to adapt to it.

Over the last couple of years we have also seen the rise activity trackers like Fitbits.  The technology allows folks to track how many steps they take in the day, whether they’re standing or sitting, heart rates, and even sleeping patterns.  Some companies even provide these types of devices as part of wellness programs and reward employees if they reach certain levels of activity.   The new Apple watch will have all of these activities built in as well as other workout information and feed it into a user’s iphone.

Recently, there was some press about a personal injury plaintiff using Fitbit evidence to compare the physical activity of the injured plaintiff with an uninjured person.  That could be pretty poweful evidence when a plaintiff could compare their “raw data” to that of someone who had not been injured.  Typically, Plaintiff’s are left with their own testimony and maybe some video or other evidence of what their day to day life is like.  The Fitbit data could actually bring somewhat objective data to the jury.  Of course a defendant could use the same data to disprove or minimize an injury.

The Apple Watch

Regardless of what party uses the evidence there is going to be more and more of it.  Apple’s latest device, its watch, will feature many of the data points offered by a Fitibit that will then route through a user’s Iphone or other Apple device.  The watch actually includes a heart rate monitor.  Just think of the data an Apple product user generates.  This could include: (1) communication data like email, text messages, or even information about phone calls; (2) location data from the Iphone; and (3) health/activity data as discussed above.

All of this information serves to recreate days and time periods at many different levels.  In non-compete disputes we can recreate what a defendant did in setting up a compeiting business or soliciting customers.  In a car wreck case we can recreate the events leading up to accident at the intersection.  The challenge for lawyers will be (1) knowing what data is out there; and (2) getting it through the discovery process.  Get ready for the discovery requests designed to obtain Fitbit data – it’s going to happen.

Have a Happy Thanksgiving.

 

Now is a good time to check those employment agreements.

Posted in HR Issues, Uncategorized

 

 

The end of 2014 is almost here.  Next week Thanksgiving and before you know it New Years.  Back in 2012 I made the following year end reccomendations:

  1. Is the company employee manual up to date – any changes necessary? – The end of the year is always a good time to review those policies and procedures and see how they worked in 2012. Often the year will show some deficiencies or problems with policies as they are applied.
  2. Are employee files up to date? Make sure all employees have acknowledged receiving the most recent HR manual or any changes to the manual.
  3. Are company employment agreements up to date? Make sure any employment agreements are updated or amended to reflect changes in ownership or term expiration. Quite often those agreements are forgotten about and there is no agreement in place.
  4. Make sure employees have signed off on all non-compete, non-solicit, or confidentiality agreements.
  5. Frequently the end of the year involves reviews. Make sure those reviews are acknowledged by the employee and make it to their employment files.

These remain good suggestions.  The law hasn’t changed that much and the traditional HR/Legal items employers should cover remain the same.

End of year is also a good time to have conversations with employees about where they are going.  If there is a poor peforming employee it might be time to discuss a transition.  There is never a good time for these discussions but employers owe it to their employees and it will be best for everyone in the long run.

Finally, end of year is also a good time to take stock of security.  I don’t necessarily mean whether the locks on the doors are strong (though that’s a good place to start).  What I mean is cybersecurity.  Are the companies’ trade secrets treated like trade secrets?  Is access restricted to this type of information and does the company keep track of who accesses this type of information?  These are all good things to consider as we move into 2015.

 

 

 

 

 

Texas Employers and Ebola

Posted in HR Issues

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We have been at ground zero here in Dallas the last few weeks as the Ebola scare began with Thomas Eric Duncan and spread to two Presbyterian nurses that treated him.  (It was quite surreal to see a news helicopter hover over the home of one of the nurses’ which is only a few blocks from my house.)  Thankfully, Nurse Nina Pham and Amber Vinson beat Ebola and we have no active cases (knock on wood) here in Dallas.  Unfortunately there are ongoing cases in the US and the epidemic in Africa.

Ebola and other disesases present a number of issues for employers both in terms of protecting employees from the disease and protecting the privacy rights of the employee.  The scary thing is how many people a single person can come in contact with both from day to day activities and if they travel. Luckily, we have not seen a child come down with a case and then potentially expose a school.

So to begin with, what does an employer need to do in terms of protecting its employees?  What if an employee tests positive for Ebola?  What if an employee travels on an airplane with someone who has Ebola?  What can I tell my employees about employees who either have Ebola or were exposed?  All of these things have happened here.  The answers are not easy as we attempt to balance the priviacy rights of employees with the welfare rights of employees.

The first issue for any employer is what can it ask the employee about his or health condition?  Generally, an employer cannot ask anything about an employee’s health condition unless it relates to the job and there is a business necessity or (here is the key one) the employee’s medical condition poses a direct threat to the health or safety of the employee or others. Otherwise, the employer risks an ADA claim.

Unfortunately, we have no guidance from the EEOC on  Ebola yet but there was a Pandemic Preparedness article put together for the H1n1 Virus. The advice turns on whether a pandemic has been declared by the World Health Organization.  With respect to the African ebola outbreak in 2014, a pandemic has not been declared.  Instead the WHO has declared it to be a “Public Health Emergency of International Concern”.

As described in the guidelines, the employer is fairly limited in what it can do vis a vis an employee pre-pandemic.  For example an employer cannot:

  1. Ask if the employee has a compromised immune system that would make the employee susceptible to influenza; and
  2. Rescind a job offer if the applicant has a medical condition that would make the applicant susceptible to influenza.

Once the pandemic is declared the employer has a few more options.  For example:

  1. An employer may send home an employee if they display influenza-like symptoms.
  2. Ask an employee if they experiencing influenza-like symptoms.
  3. In some circumstances ask if an employee is returning from travel to locations where there is an outbreak; and
  4. Encourage telework and require infection control practices like handwashing.

There are a number of scenarios and questions contained in the article that would appear to relate to EBOLA as well.  Obviously, this a developing topic and the employer has to balance the privacy/health of the employee with that of the employer – not easy!  There is no one size fits all on this issue and I reccomend reaching out to a lawyer to consider before taking any action.

Today Texas announced its guidelines with respect to observing individuals with potential exposure.  It remains to be seen how these new guidelines will play out in the workplace.  Hopefully, we won’t find out in the near future.

 

When the employer goes too far: The Jimmy John’s Non-Compete

Posted in Non-Compete Agreements

findaJJLandingI like Jimmy John’s sandwiches.  Fast service and a decent sandwich.  Unfortunately it pains me to reflect on the non-compete that they are apparently using with their workers.  Yes, the gentleman or lady behind the counter is now subject to the following:

Employee covenants and agrees that, during his or her employment with the Employer and for a period of two (2) years after … he or she will not have any direct or indirect interest in or perform services for … any business which derives more than ten percent (10%) of its revenue from selling submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches and which is located with three (3) miles of either [the Jimmy John's location in question] or any such other Jimmy John’s Sandwich Shop.

Seems a little over the top? Basically a court that actually enforced such an agreement would have to prevent a Jimmy John’s worker from working in the sandwich business anywhere within 3 miles of a Jimmy John’s store.  In Dallas that would mean you couldn’t work for any sandwhich shop in all of the Dallas Ft.Worth Metroplex.  You might be able to find something in a more rural area.

The Jimmy John’s non-compete is symbolic of something more troubling than a bad non-compete agreement.  It’s a bad non-compete agreement that I would suspect Jimmy John’s never intends to enforce.  Non-competes are desinged to protect interests worthy of protection.  This could include training, proprietary information, trade secrets, good will, and other financial considertation in Texas.  I find it hard to believe that a low level Jimmy John’s sandwhich maker ever received any of these things as part of his employment.  Maybe I’m wrong.

The power of the Jimmy John’s non-compete is that it might make a employee rethink moving to a competitor or from leaving Jimmy John’s in the first place.  It is highly unlikely that a lower level entry worker is every going to challenge the non-compete in court.  The same probably also holds true for Jimmy John’s.  Do they really envision a scenario where the individual sandwich maker is able to leave with the secrets of Jimmy John’s or takes customers with him?   I think not.  I doubt there are few documented cases of a Jimmy John’s employer went to a competitor in a lower level position.

I represent employers that enforce non-compete and other post-employment covenants.  They have interests that are worthy of protection.  When employers use non-competes in the wrong circumstances it undermines the employer who is trying to enforce a legitimate non-compete agreement.  Jimmy John’s has gotten a lot of bad press over its non-compete.  I suspect they might be reconsidering its use.

But I didn’t sign that non-compete.

Posted in Uncategorized

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In Cameron International Corp. v. Guillory, a case very similar to the Drennen opinion we discussed last week, the Houston Court of Appeals examined a trial court’s denial of a temporary injunction involving an oil field services employee.  Jeremy Guillory, like the Exxon employee in Drennen, was a participant in a restricted stock program that included a “detrimental activity” policy.  Detrimental activity was defined to mean:

  • engaging directly or indirectly in any business, which is or becomes competitive with [Cameron];
  • soliciting, interfering, inducing, or attempting to cause any employee of [Cameron] to leave his or her employment; and
  • directly or indirectly soliciting the trade or business of any customer of [Cameron].

So the language is very similar to a non-compete and the court of appeals characterized it as such.  Guillory went on to start a competing venture and Cameron sued to stop him. The trial court denied the injunction request.  The appeals court focused on two issues: (1) choice of law; and (2) the fact the employee did not physically sign the non-compete.  After determining that Delaware law controlled, the appeals court moved on to the siganture issue.

Guillory never physically signed the agreement.  Instead, he was presented with the agreements on his computer.  In order to move to each individual agreement Guillory had to click on an “accept” button that indicated he reviewed and understood the documents.  Guilory did not dispute that he clicked the accept button but asserted some type of claim that either didn’t understand the agreement or read it.  The appeals court rejected that argument.   The court then noted that both  Texas and Delaware have adopted the Uniform Electronic Transactions Act which contains a provision that prevents a party from claimining an agreement is not enforceable when the record of signature is in electronic form. Because of that, Guillory could not claim that the agreement was uneforceable.

The appeals court went on to examine the agreement under Delaware law and proceeded to reverse the trial court and enter an injunction.  The takeway is courts are going to enforce electronic agreements, which are seen more and more in both the employment and commercial contexts. Guillory signed the agreement and wasn’t going to get out of it simply because there was no physical signature.

 

A new tool for the Texas employer? The Exxon Incentive Plan

Posted in HR Issues, Non-Compete Agreements, Uncategorized

Screen Shot 2014-09-15 at 8.55.05 AM

 

From the employer’s perspective it’s always nice to have something new to use to prevent an employee from competing or using proprietary/confidential information once the employment relationship ends.  Of course we talk all the time here about the standard post-employment covenants like the non-compete and non-solicitation provision.

One item we haven’t addressed previously is an incentive plant that contains a forfeiture provision.  What is that? Basically, it’s a provision that ties continued benefits (usually cash or stock) to continued compliance with some type of post-employment condition.  It’s not quite a non-compete but arguably has the impact.  Which brings us to the Texas Supreme Court’s latest opinion in Exxon v. Drennen.

Basically, the employee was entitled to participate in an incentive program that provided for stock options.  The former employee agreed  among other things not to engage in detrimental activity. Detrimental activity was defined to mean:

acceptance . . . of duties to a third party under circumstances that create a material conflict of interest, where a ‘material conflict of interest’ includes when a grantee ‘becomes employed . . . by an entity that regulates, deals with, or competes with the Corporation or an affiliate’

That language is pretty close to a non-compete and the former employee went to work with a competitor and Exxon said he could no longer participate in the program and forefeited his stock.  The key question was would the Texas Supreme Court require athe agreement to comply with the non-compete statute and if so would this provision be enforceable?  (Meaning it would have to be reasonable in time and scope and ancillary to an otherwise enforceable agreement.)  The Texas Supreme Court answered the first question and held the incentive program was not a covenant not to compete.  It then held that whether the agreement was an unreasonable restratint of trade was an issue to consider for another day because the Court determined that it would consider the provision under New York law (there was a choice of law provision for New York.)

So, we never got an answer as to whether the provision passes under Texas law.  We only know that it does not rise to the level of the non-compete.

Bench Trial Lessons

Posted in Uncategorized

After a trial it’s always good to take inventory on the process.  My thoughts from my latest trial:

  1. When the Judge says she’ s heard enough – she’s heard enough (always take your cues from the judge – sometimes you won’t get any but when you do pay attention);
  2. You never get a second chance to make a first impression;
  3. Credibility of witnesses sometimes turns on issues that seem tangential to the case (it’s not always the key issue in the case that will lead to a credibility decision on a key witness);
  4. You can never prepare a witness enough (preparation – preparation – preparation);
  5. Some witnesses have it – some don’t (but see item 4 above);
  6. It is really hard to get called to trial (everything is stacked against you – the judge’s schedule, other cases, and fees);
  7. Trials will take longer and be more expensive than you think;
  8. Sometimes trials are necessary but usually not;
  9. Most cases go to trial because one side has misevaluated the case.
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