Smooth Transitions

Smooth Transitions

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

Texas Non-Competes Without Geographical Restrictions

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

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A Texas non-compete must satisfy two main components to be enforceable. The non-compete has to be ancillary to an otherwise enforceable agreement and be reasonable in time and scope. Before the Texas Supreme Court this week was a case where the court was asked to consider a non-compete without a geographical restriction and consider whether such an agreement was per se unenforceable. I discussed the issue in a recent Law 360 article that you can find here.

My short answer to the question was no on two counts. First, there is no Texas requirement that the geographic restriction appear in the non-compete. Second, it is unlikely the Texas Supreme Court would impose such a requirement. A geographic component is pretty basic. Tell me where I as an employee cannot compete with my former employer. (The same analysis could also impact non-solicitation and anti-raid agreements.) At its essence that could be a lot of things including: (1) cities, states or counties; or (2) a mileage restriction like a 10 mile radius from the employees office.

But sometimes there are agreements that don’t have a specified geography though it is implicit from the agreement itself and it is possible the restriction is nationwide. For instance, an agreement that prevents competition in any state where the employee worked with company customers or a restriction that was tied to a list of competitors. Are these unenforceable because there is no explicit geography?

The defendants in the case before the Texas Supreme Court did some bad things and got caught as they tried to compete with their former employer in the healthcare industry – a psychiatric management company. The non-compete prevented the ex-employee from working for a psychiatric management company that was in direct competition with the employer. No specific geographic restriction, right? But does that matter? Not if the non-compete is “reasonable” according to the Plaintiff and they are probably right.

First, each non-compete requires a case by case analysis. Here the non-compete was limited to 1 year – usually reasonable. Second, the Plaintiff argued the non-compete language was limited to the niche market of psychiatric management and the former employees could still work in other healthcare businesses. The trial court agreed and ruled the non-compete was enforceable.

It would seem unlikely that the Texas Supreme Court impose a bright-line geography requirement in this case. Fist, the non-compete statue requires a case by case analysis so bright-line tests really don’t work. Second, the restriction was limited to a niche market. Third, and finally, the defendants weren’t exactly the most sympathetic defendants based on their conduct.

We’ll monitor the case going forward.

EEOC’s 2016 Stats in Texas

Posted in HR Issues

2016 EEOC Stats

 

As a lawyer who frequently deals with EEOC charges/responses the EEOC’s yearly statistics always provide some interesting information on what folks are filing claims over these days.  Here is a link to a state by state breakdown of claims in 2016.  So what were some key Texas numbers?  Here are a few:

  1. 9,308 Total Claims
  2. 3,244 Race Based Claims
  3. 2,765 Sex Discrimination Claims
  4. 1,190 National Origin Claims
  5. 358 Religion Based Claims
  6. 4,633 Retaliation Claims (Based On All Statutes)
  7. 2,000 Age Claims
  8. 2,775 Disability Claims
  9. 90 Equal Pay Act Claims
  10. 24 GINA Claims

Texas was down by about 200 claims from 2015 but 9,308 is still a lot of claims for the EEOC to address.  Why does that matter?  Because employers who face a claim want the the claim resolved in a timely manner.  If you have had any recent experience with EEOC claims in Texas you know that resolution of the claims takes some time.  Why?  In part because there are a lot of other claims ahead of you.  The EEOC is limited in terms of the number offices and investigators it has to resolve claims.  As long as Texas continues to see close to 9,000 claims a year it will be a long process.

 

 

 

Nothing Like A Hair Stylist Non-Compete Case

Posted in HR Issues, Injunction, Non-Compete Agreements, Non-Solicitation Agreements, Recent Cases, Uncategorized

white hatThe details are slim from a recent article from the New York Post about a $3 million dollar non-compete/breach of contract case against a New York City hair stylist.  What we know:

  • Stylist Annie Rush worked at the salon for 6 years;
  • Apparently she is alleged to have signed a 1 year non-compete (that is a guess based on the article);
  • The suit alleges Rush started handing out business cards a month before her departure from the salon;
  • Rush moved on to another salon and took all of her clients with her; and
  • Her former salon sued her for a lot of money and to keep her from working for a year.

The facts from this case aren’t all that different from the facts of most non-competes.  Employer claims it spends a lot of money developing employee – employee leaves and takes customers with her – employer reacts with lawsuit to enforce non-compete.  That said, the one fact I didn’t like was the allegation that Rush set up her move/transition by allegedly handing out new business cards for her new venture while still employed by the former employer.  That’s bad news and great evidence if you are trying to enforce a non-compete or non-solicitation agreement.

Judges, like most people, are going to have some natural reaction and assign roles to litigants.  What do I mean by that?  Someone is going to be the good guy and someone is going to be the bad guy.  It may be a close call, the judge or jury may be unsure, but in most cases someone will be good and someone bad.  Better to be the good guy.  We sometimes call that  person the party with the “white hat”.  (In the recent HBO series WestWorld, one of the key characters wears a white hat implying he is a good guy.  Without spoiling the series, his role transitions over time along with the color of his hat.)

Assuming Rush decided to hand out business cards on the premises of her employer – pre-move that would be a major no-no.  First, we’ll assume that action violates numerous provisions in her well-drafted employment agreement including a non-solicitation agreement and some species of a duty of loyalty provision.  Second, it just looks bad.  Most employment moves like these are premeditated, but an employee can do certain things to make the move “clean”.  This includes not soliciting current customers to a new place of employment while you’re still employed by the employer who may sue you.  Put another way, be smart.  Don’t solicit customers while still employed, don’t take customer lists, and don’t take confidential/proprietary/trade secret information.

Happy New Year!

 

 

Don Mattingly – The Yankee Who Refused to Cut His Hair

Posted in Uncategorized

Don Mattingly

My favorite baseball player growing up was Yankees’ first baseman Don Mattingly.  Mattingly was an outstanding left handed hitter who never won a title with Bronx Bombers.  In the summer of 1991, Mattingly refused to get his haircut and the Yankees benched and fined him.  Employee dress code and appearance policies are nothing new, not even for high-paid athletes.

One of the more interesting posts from a few years ago was the Army’s tattoo policy.  Years ago, the Army had a policy that prevented soldiers from having tattoos.  That doesn’t work now, there aren’t enough prospective soldiers out there to simply exclude all folks that have them.  The Army is no different than many other employers.  Of course what is acceptable in certain professions doesn’t work in others.

I remember interviewing a potential candidate for a receptionist position in our law firm.  The candidate had a the infinity symbol on their wrist.  It wasn’t obnoxious and hardly noticeable but it did stand out and we actually discussed it.  The candidate was hired and did a fine job.

A high tone ski resort I know of doesn’t permit its employees to have facial hair, non-traditional piercings,  or tattoos that are visible.  Most ski resorts don’t have those types of policies.  But the high tone ski resort is trying (successfully) to appeal to a higher end demographic in what already an economically selective customer base.

These types of policies normally don’t violate the law and the employer can impose these types of restrictions.  Of course, they may be excluding potentially good candidates for employment.  As tattoos and piercings become more acceptable, employers (like the Army) have to adapt.  The challenge for the employer is balancing what is balancing what is appropriate in the workplace with what is culturally acceptable.  They are not always the same.

End of Year Employment Checklist

Posted in HR Issues

As we creep up on the end of the year employers should be considering/doing a  number of things:

  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 2016.  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.
  6. Get your lawyer to take you out for lunch so they can update you on any new employees issues coming in 2017 and so you can pick their brain about any other issues.

All the best in 2017!

 

Delay on overtime rules?

Posted in HR Issues

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A few months ago the new overtime rules came out and were supposed to go into effect on December 1, 2016.  Here is our discussion of the rules.  Since that time there were a number of lawsuits filed by states attorney generals (including Texas) to challenge/delay the rules.  The House of Representatives then passed a bill delaying implementation until late June 2017.

So as I recall from my high school government days it is now up to the Senate to pass a substantially similar bill.  It did so in late September as well and it was referred to committee.  Two problems, the Senate is out on recess for the elections and President Obama has promised to veto any bill delaying the act. According to its calendar, the Senate will be back the week of November 14th.  We’ll continue to monitor the situation but at this point employers should plan on complying with the rules effective December 1.

 

Another Recruiter v. Lawyer Lawsuit

Posted in Placement Professionals

Recruiters and lawyers always seem to get tangled out. The Texas Lawyer had an interesting piece about a recently filed Harris County Lawsuit where a recruiter is suing a lawyer at Holland and Knight.  According to the article, the recruiter called the lawyer and told him he had a position to discuss, but he would not reveal what it was until after the lawyer agreed he would exclusively use the recruiter. The recruiter alleges the lawyer agreed and the recruiter revealed information about the Holland & Knight position. The discussion was allegedly recorded. The recruiter attempted to contact the lawyer about the position several times after the initial discussion to no avail. A few months later the recruiter learned the lawyer was now with Holland & Knight and another recruiter received the placement fee from the law firm.

So, after a few demands and some back and forth, the recruiter sued the lawyer (not Holland & Knight) for the fee alleging breach of contract, fraud, and a few other causes of action. The article does not mention a signed placement agreement between the recruiter and lawyer so I assume there was not one. Conceivably an oral recruiting contract could be enforceable, but of course the better practice is to have the agreement in writing. So it sounds like we are in for a “he said – he said” fight between the parties. Every recruiter’s goal is to get paid and stay out of court. How could this situation have been avoided?  Number one suggestion was is to get the placement agreement signed in writing. Number two suggestion is to at least try and confirm the conversation with an email and attempt to have the agreement signed. Notifying Holland & Knight probably isn’t a real option from a business perspective, clients don’t want to hear about your disputes. We’ll monitor this case and see how it turns out. No lawyer likes getting sued (well most don’t) and the recruiter doesn’t sound like he is going away.

New Overtime Rules

Posted in HR Issues

clock-899205_960_720Thee new “Whit Collar Rule” for exempt/non-exempt from the Department of Labor kicks in on December 1, 2016.  In short, employers will no longer be able to treat “white collar” employees that make more than $47,476 per year as exempt and will pay overtime once they work over 4o hours a week.  The DOL suggests three options to employees:

  • Raise salary and keep the employee exempt from overtime: Employers may choose to raise the salaries of employees to at or above the salary level to maintain their exempt status, if those employees meet the duties test (that is, the duties are truly those of an executive, administrative or professional employee). This option works for employees who have salaries close to the new salary level and regularly work overtime.
  • Pay overtime in addition to the employee’s current salary when necessary: Employers also can continue to pay their newly overtime-eligible employees the same salary, and pay them overtime whenever they work more than 40 hours in a week. This approach works for employees who work 40 hours or fewer in a typical workweek, but have occasional spikes that require overtime for which employers can plan and budget the extra pay during those periods. Remember that there is no requirement to convert employees from salaried to hourly in order to calculate their overtime pay!
  • Evaluate and realign hours and staff workload: Employers can ensure that workload distribution, time and staffing levels are all managed appropriately for their white-collar workers who earn below the salary threshold. For example, employers may hire additional workers.

Here is a link to general guidance from the DOL.  Employers have options but need to be vigilant in complying with the law to avoid FLSA collective actions a.k.a. class action lawsuits over overtime.

Recruiter Tips

Posted in Uncategorized

Today, I have the privilege of speaking to the Executive Search Owners Association. 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:

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