I recently finished a hard fought non-compete case that settled the day before trial.  Unlike most non-compete cases that resolve themselves early on during the temporary injunction fight, this non-compete contained a liquidated damages provision that specified the damage number in the event of a non-compete breach.  The terms of the non-compete prevented the employer from seeking injunctive relief – the only remedy was the liquidated damages clause. The trial court ruled the non-compete was enforceable and the amount of the liquidated damages provision was never challenged.  Even with those rulings/facts the case dragged on to the point of trial.

Continue Reading Latest Texas Non-Compete Lessons

As the New Year begins a couple of things to consider:

 

  1. Is the company employee manual up to date – any changes necessary? – The beginning of the year is always a good time to review those policies and procedures and see how they worked in 2018.  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.  Make sure you have signatures!
  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. Do you have job descriptions for your employees?  Do you even need them?
  7. Are your independent contractors really employees?
  8. Is it time for some employees to move elsewhere?
  9. Get your lawyer to take you out for lunch so they can update you on any new employees issues coming in 2019 and so you can pick their brain about any other issues.

All the best in 2019!

I remember when I was a younger lawyer the difficulty I had with clients settling lawsuits that factually and legally had little merit.  I remember the partner I worked for telling me that was the cost of doing business.  While I knew he was right that comment still bothers me to this day.  But the reality is lawyers cost money and the time and expense defending lawsuits can be distracting, especially when a company doesn’t have a legal department or is a routine player in employment disputes.

No matter how distasteful, at the same time a company is getting together all of the documents and identifying the witnesses that are key to defending a claim, the powers that be also need to evaluate the possibilities of settlement.  What does mean?  Defense counsel should be reaching out to plaintiff’s counsel early on in the process to determine what the plaintiff wants.  There are two things I tell my clients that I am generally certain of: (1) a dispute will cost more then you think; and (2) it will also take up more of your time then anticipated.

Now there are certain times where the company may need some discovery to be in a position to evaluate the claims of a plaintiff. But in many situations, dialogue with opposing counsel may give the other side a read into what the lawyer actually believes the merits of the case may be.  Trust me, a lawyer on a contingency fee does not want to spend time on a case that is marginal.  If it’s marginal they are going to want to resolve it, if not maybe the case as not as marginal as the company thinks.

Most cases are never going to trial.  That means there could be a summary judgment or more likely a settlement at some point in the process.  The earlier in the process that can be reached the better.

For some time Texas has been a hot market for lawyers.  Big firms from other parts of the country who want to shop here not surprisingly will hire lawyers from other big firms that are already here.  Many of the partners in these firms have notice provisions in their partnership agreements that require them to provide notice to their firm of their departure.  A recent Texas Lawyer article highlighted the issue:

Continue Reading Notice Provisions for Texas Lawyers

Non-compete cases that are well lawyered should be resolved early in the litigation process.  Why do I say that?  If the plaintiff is an aggressive former employer it will in most instances move for a temporary restraining order followed by an application for a temporary injunction in Texas state court.  In that process a lot of things can happen.  First, the parties will have appeared before a judge and gotten a flavor for how the judge will rule and what the judge thinks of each parties’ claims and defenses.  Second, there may be expedited discovery including document productions and depositions.  The judge may even order the case to mediation to avoid having to spend court time on a temporary injunction hearing – which is like a mini-trial.

Continue Reading Getting Out of the Way of A Settlement

Tomorrow, 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:

Whenever I draft or review an employment agreement (or for that matter any contract) one of the first things I look for is a venue provision.  Usually there is one, but if not you fall back on the laws of the state the party would like to bring suit in to see if venue works.  There is nothing that will take the steam out of a lawsuit then the contention it was filed in the wrong place. Drafting tip – make sure there is a venue provision.

So, assuming there is a venue provision it’s likely there is a choice of law provision as well.  Often times the venue provision will require an employee to agree to venue in the state/city where the employer is located.  The idea from the employer’s standpoint is it would rather enforce its agreements in the place where it is located and in most cases under the same laws.  The provision will look something like this:

Continue Reading Where are we going to fight? – Venue provisions in employment agreements.

For whatever reason an employee leaves, the exit interview (if that’s what the company calls it) or instance when the HR person in charge collects the employees building badge and any company property is an excellent time to remind the employee of their post-employment covenants.  We talked about agreements at the end of employment during the last post.  Let’s assume here that the employee has signed some type of post-employment covenant.  What should be on the employer’s checklist”

  1. Provide the employee with any previous agreement(s) – remind them of any obligations under the agreement(s) – ask them if they have any questions about the agreement?
  2. Tell the employee that the company takes these obligations very seriously and will enforce them.
  3. Obtain all company property, keys, phones, etc. and tell them their access to company email or remote-in processes are cut-off.
  4. Make sure they are being paid what they are owed in accordance with company policies – that payment may take place during the next pay day.

I have been involved in cases where an ex-employee “forgot” about their non-compete.  I believed the defendant because they did everything possible to violate the agreement as-if they had no idea it existed.  It would have saved everyone time and money if at the time of departure the agreement(s) and obligations associated with it were raised with the employee.  Even if a sit-down is not possible, put the agreement(s) in the mail or email.  Remove any excuses a departing employee might have if they decide to violate a post-employment covenant.

Strictly speaking under Texas law it is hard to make a non-compete stick when it is first introduced at the end of employment.  Assume a situation where an employee signed a confidentiality agreement and non-disclosure agreement but didn’t sign a non-compete, non-solicit (customers), or anti-raid (employees).  Is the employer out of luck?  Maybe not.

For purposes of this discussion, assume that what I am about to suggest is not legally enforceable under the Texas non-compete statute.  Put another way, the employer is never going to sue the agreement and the employee is under no requirement to sign the agreement. They can simply walk – a non-compete based on past consideration doesn’t work.

Continue Reading Non-Competes At the End of Employment

Happy New Year!

As we move into 2018 get ready for some employee movement.  We usually see less employee movement at the end of year because many employers pay out bonuses and other metric related compensation as the year ends.  The same also holds true for a company making a hiring decision – they wait.  Because less folks are likely to move (see above) there is less hiring.  Of course there are always exceptions to the rule.  So what does this mean?  Dust off those old employment agreements because they may apply to an employee move.  There are always those starting a new job on January 1.

Over the next few posts will go back over some of the key Texas post-employment covenants.  To start off with, here is a link to a article I wrote for the Texas Lawyer a few years ago.  Texas non-compete law has not changed and the advice in that article remains the same.  We’ll discuss garden leave/notice provisions in our next installment.