We’re humbled that Texas Lawyer has signed up Alan as a freelance contributor. His latest article, “Behind Enemy Lines: Employee-Side Lawyer Tactics,” appeared on May 14 in the In-House Texas pullout.
Here’s what Alan had to say about how he stays one step ahead of employee-side opposing counsel:
Solid intelligence matters. Leaders strive to anticipate and undermine their opponents’ moves. Football coaches study an opposing team’s play calling. Generals track the enemy with satellites, spies and the Special Forces. Business executives monitor competitors.
In-house counsel’s role with HR is no different. Spotting a plaintiffs lawyer’s line of attack in advance puts the company in the driver’s seat. The trick is thinking like a plaintiffs lawyer.
I once worked at a firm that mainly sued employers. Now I’ve switched camps. No more plaintiffs work for me. Yet, having seen the enemy’s tactics tightens my counterattack.
Plaintiffs lawyers have less access to documents and coworker witnesses than the company, so they must win another way. They often adopt guerilla tactics — working from behind the scenes before the company realizes it’s dealing with opposing counsel. Let’s expose a few of their covert tactics.
Read the full article for more: Behind Enemy Lines – Texas Lawyer.
Union Sneak-Attack Election Rule Void – For Now
Remember the NLRB’s new sneak-attack union election rule? The rule lets unions surprise complacent companies with fast-track union elections. A federal court in DC just invalidated the rule. That’s good news for employers. For now, at least…
The court nailed the rule on a technicality. The two Democratic members of the NLRB basically passed the rule over e-mail without any reply from the NLRB’s lone Republican member. That wasn’t a quorum, said the court.
Still, the court emphasized that its ruling “need not necessarily spell the end of the final rule for all time.” The door is open for President Obama’s newly-appointed NLRB to pass the rule again. The court put it this way:
[I]t may well be that, had a quorum participated in [the rule's] promulgation, the final rule would have been found perfectly lawful. As a result, nothing appears to prevent a properly constituted quorum of the Board from voting to adopt the rule if it has the desire to do so.
Expect the NLRB to take a second bite at the apple. I think it’s just a matter of time. But what should employers do while we wait?
You might take steps now to resist a union organizing drive in short-order. Unions thrive on the element of surprise, even under the current union election rules. We’ve written about it before. That puts advance preparedness at a premium. For example, you might:
- Identify employees who qualify as “supervisors” in the NLRB’s eyes, so they can be trained how to spot and react to covert union activity.
- Ask you employees about their job satisfaction and address any concerns before a union does.
- Task a rapid deployment team who is armed with an action plan to execute if you detect union activity.
- Check your employee handbook for provisions that could trigger an unfair labor practice charge, such as an overly broad social media policy.
I doubt we’ve heard the last from the NLRB.
Alan Bush often speaks at seminars for business leaders—such as line executives, finance executives, human resource professionals, CPA’s and lawyers. You can hear Alan at:
Houston CPA Society | Spring Accounting Expo
Independent Contractors: More Than You Bargained For
May 21, 2012
Using independent contractors has its advantages. But if you call the wrong worker an independent contractor, you’re in for it. The IRS, DOL and plaintiff’s lawyers will all want a piece of you. Worse still, you could be on the hook with personal liability. So who’s really an independent contractor? How do you fix a classification mistake? We’ll talk it out.
Where: Reliant Center
When: 8a
Businesses flock to Texas for many reasons. One reason: the strong tools available here to protect your intellectual property, or “IP,” from employee theft.
Patent and copyright are fundamental, but what about IP that doesn’t fit either mold? Customer data, profit margins and management-level discussions about business strategy all fall into that no-man’s land. You don’t want your ex-employees carting your secret playbook off to a new job with your direct competitor. The info is IP, but the feds can’t help you.
Non-compete and non-solicit agreements fill the gap. For an ex-employee who knows your IP, working in certain jobs or soliciting certain customers is too dicey. IP theft is all too tempting. Call those jobs and customers off limits in a non-compete or non-solicit.
A few points from our earlier posts on non-competes and non-solicits:
- Non-competes have teeth.
- Reasonableness is the new battleground.
- Venue selection is key.
Even without a paper agreement, Texas law says that an ex-employee cannot take, use or disclose your business secrets. Here’s the scenario—your VP Sales accepts a new job with a competitor, downloads your customer list and order history to a jump drive, then resigns. Foul ball.
The stolen info is probably trade secrets or confidential information. So long as you took some basic measures to keep the info secret and an ex-employee took it, you’ve got him in your crosshairs.
Just keep in mind:
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You can pursue an injunction against a data thief as you would against an ex-employee who broke a non-compete or non-solicit.
- When a key employee leaves, a forensic image should be taken immediately of any computer or smart phone issued to the employee.
- Use discretion when investigating data theft.
You might even make a federal case out of it. That is, proprietary data theft in violation of your written policies can trigger a federal claim. The Computer Fraud and Abuse Act, says the Fifth Circuit, can be used to prosecute an ex-employee data thief in a civil suit. Very helpful when filing in state court would land you in front of a judge who may be unfamiliar with trade secret protections.
We’ve written a tidbit on the CFAA too.
So there are your tools to protect the soft IP in your secret playbook. Are your tools sharp?
NLRB Poster Delayed Again
Strike that, reverse it. After a key court loss, the NLRB has indefinitely postponed the effective date for its union rights poster rule. The NLRB says it will pick the rule back up once the legal challenge has been resolved. No need to put up the poster now.
The NLRB’s press release is here.
NLRB: Thumb Tacks Ready?
Looks like union and non-union companies must post a union rights notice by April 30. A federal district court recently upheld the NLRB’s new poster rule. Here’s the NLRB detail on the poster which includes a downloadable version of the poster.
We’ve written about this one before. Check out more details here.
Want to push back? We’ve also written on union avoidance countermeasures here.
Gulf Coast Symposium: Upcoming Speaking Gig
Alan Bush often speaks at seminars for business leaders—such as line executives, finance executives, human resource professionals, CPA’s and lawyers. You can hear Alan at:
HR Houston | Gulf Coast Symposium
Overtime Claims: Save Your Company and Your Own Skin
May 10, 2012
Overtime disputes can blossom into class action-like lawsuits over eye-popping dollars. And you may be personally liable. Brace yourself—nail down the employment policies that are ground zero for the most expensive (and common) overtime lawsuits. For example, we’ll look at job descriptions and independent contractor agreements, then cover any gaps with defensive measures designed to reduce your damages exposure.
Where: Reliant Center
When: 1:15p
RSVP: http://www.hrhouston.org/displaycommon.cfm?an=1&subarticlenbr=235
Rising Stars
Super Lawyers recently named Alan Bush to its Rising Stars list. Huge thank you to all our clients, colleagues and buddies for your incredible support. Never would have seen this coming.
Here’s the link to Alan’s Rising Stars profile. Please feel free to pass this along. You share the credit for our success.
BBQ and Non-Compete Lawsuits: Better in Your Own Backyard?
What you get depends on who you’re asking. Know that injunction you want against an ex-employee who’s breaking his non-compete agreement? A judge makes the call. You guessed it—your result may depend on the judge you ask.
Think carefully about what your non-compete says on venue and choice of law. That’s obviously important if you have employees spread across the USA. Even if you don’t, an employee can leave you and go work for a direct competitor across state lines.
You’ve got a couple options. Let’s say your company is headquartered in Texas. You might pick Texas law and a judge in your headquarters’ backyard. If you can make Texas venue and law stick, you’ve got an edge. Your ex-employee and his new employer must travel to defend themselves. Shoot, you might even use that leverage to broker a settlement deal.
In The Art of War, Sun Tzu put it this way:
Those skilled in war bring the enemy to the field of battle and are not brought there by him….
He who occupies the field of battle first and awaits his enemy is at ease; he who comes later to the scene and rushes to the fight is weary.
Another option is to pick the courts and laws where your employees work. The judge doesn’t have to think twice about law or venue, so your enforcement action may move faster.
Just don’t pick a state that’s not connected to the deal. A Dallas-based energy company picked New York law for its non-compete signed by a Houston VP. New York law made the non-compete enforceable; Texas law killed it. Nothing else connected New York to the VP’s employment. No good, said the Houston appellate court and applied Texas law. On Valentine’s day, the court ruled against the company. Talk about a shot through the heart…
Arbitration Class Waivers: Another Victim of the NLRB
Remember those pesky overtime claims where one bad policy can trigger a class action-like lawsuit? We’ve suggested heading off the class warfare with mandatory arbitration policies that prohibit class-wide arbitration. Well, the NLRB just stuck its nose into that too. And you can imagine how that one went…
Class waivers, says the NLRB in D.R. Horton, violate employees’ NLRA-guaranteed right to engage in “concerted activity.” Not that long ago, the NLRB used this same right to move aggressively into regulating social media. If you force employees to sign an arbitration policy that has a class waiver, the NLRB will haul you in for an unfair labor practice.
The NLRB’s ruling applies to you so long as you’re covered by the NLRA—even if you’re union free.
But there’s good news. Managers, supervisors and independent contractors have no right to engage in “concerted activity” under the NLRA. The NLRB’s ruling does not cover them. Satisfy the NLRB that your worker falls into one of those groups and you might require a class action waiver.
What about class waivers that are selectively imposed? Instead of including the waiver in a blanket arbitration policy for all employees, you might have all (or many of) your exempt employees sign an arbitration agreement with a class waiver. That might keep classes of your employees from ganging together to claim they were misclassified as salaried exempt. Better be sure, though, that the workers truly meet the NLRA’s definition of managers, supervisors or independent contractors. Or you the NLRB could put you in a world of hurt.
I doubt we’ve heard the last of D.R. Horton. The NLRB’s ruling will probably be appealed to the courts. Stay tuned.
Upcoming Seminar for General Counsel, Litigation Counsel and Judges
Alan Bush often speaks at seminars for business leaders—such as line executives, finance executives, human resource professionals, CPA’s and lawyers. You can hear Alan at:
Montgomery County Bar Association | General Meeting
Marsh v. Cook: Non-Competes Get Even More Teeth
March 28, 2012
Last summer, the Texas Supreme Court endorsed a new type of enforceable non-compete—one based solely on goodwill. But what does that mean? How do we know if a goodwill non-compete is reasonable? Are trade secrets still alive? We’ll talk it out.
Where: Conroe Tower
When: 12p
NLRB Approves Union Sneak-Attack Election Rule
Over the past few weeks, most folks were eating holiday dinners and celebrating the new year. Not the NLRB. The Labor Board rolled up its sleeves and cranked out more pro-union measures. And President Obama appointed three new members to the five-member Board.
Just before Christmas, the NLRB revamped the union election process. The process is now geared to catch you sleeping.
Union elections have typically happened about 42 days after the union fires the first shot by filing a union election petition. But now, the NLRB’s new rules will likely slash that to a little over 20 days. Possibly even less. That’s your window of opportunity to educate your employees on how having the union would give them a raw deal. The shorter window gives unions an edge—a smart union secretly courts your employees for months before filing a petition. The rules become effective on April 30, 2012.
We’ve written before about how to deal with the new union sneak-attack election rules. It’s all about doing your legwork in advance.
Keep an eye on legal challenges to block the NLRB’s new union election rules. One lawsuit has already been filed, and the House passed the Workforce Democracy and Fairness Act.
Like the new union election procedures weren’t enough, President Obama appointed three new members to the NLRB. The appointments must normally pass the Senate, yet the President moved forward while the Senate was out of town. Here’s what The Washington Post had to say about it.
Expect big things from the Labor Board.
Union Poster Requirement Delayed Again
The NLRB once again delayed the effective date for its union poster rule. Now, employers covered by the NLRA must post a union rights notice by April 30, 2012. The NLRB’s press release says it agreed to the delay to help resolve a lawsuit over the poster rule.
Wall Street Journal Gives Us A Nod
Texas Lawyer invited us to start writing freelance. We’re honored. Well, our first article with those folks also got picked up by The Wall Street Journal. Never thought we’d live to see that day!
Here’s the link to the WSJ piece: Provisions That Turbocharge a Noncompete.
And here’s a link to the article’s full text: Non-Compete Article – Texas Lawyer.
Huge thanks to everyone.
Personal Liability for Hard-to-Spot Overtime Risks
What are the chances you have an overtime violation that’s under your radar? In 73% of its recent wage and hour investigations, the DOL found violations. That’s what the DOL’s new enforcement data website says.
And the federal overtime law, the FLSA, puts your personal skin in the game. Depending on the circumstances, an overtime claimant can impose individual liability on managers, officers and even directors.
In Goetz v. Synthesys Technologies, Inc., a federal court in Austin put a director on trial for the overtime pay sins of his company. The court refused to let the director skate on summary judgment. Pointing to the director’s heavy involvement in a round of layoffs and participation in an employee training seminar, the court tossed the director’s personal liability to an Austin jury.
Don’t count on your insurance company to pick up the tab. Many EPLI policies won’t cover overtime claims—they’re specifically excluded. Insurance companies know that overtime compliance is a risky business.
Protect yourself by spotting and resolving overtime risks before they become collective action lawsuits. Just a few common ground zero risks:
- Independent contractors who should really be employees receiving overtime pay
- Salaried exempt employees whose job duties do not match the overtime exemptions
- Salaried exempt employees whose pay is docked against overtime rules
- Automatic deductions from the time clock for lunch and other breaks
- Failing to pay non-exempt employees for their time:
- Working from home on a smart phone
- Booting up a computer before a shift
Quickie Union Elections: Back on the NLRB’s Agenda
Your workforce is union-free? Great, but watch your back. The NLRB has proposed rule changes that could saddle your company with a union in 10 days flat. Sounds like a union sneak-attack.
Unions thrive on the element of surprise. Many successful unionization drives start with the union secretly courting your employees for months. The union quietly hunts for unresolved employee concerns and exploits them. Union bosses promise to fix your employees’ concerns at the collective bargaining table, hoping to foster an “us vs. them” mentality against management. Riding that momentum, the union files a petition with the NLRB to hold a union election. That’s often the first time management gets wind of the union trouble.
Your window of opportunity is now short. Over the few weeks leading up to the union election, you must combat the groundwork that the union has been covertly laying for months. Every single day counts.
The NLRB’s rule changes would tighten several already-stringent deadlines. The net effect is that union elections likely would be held 10 to 21 days after the union files an election petition. That could cost you several weeks’ of time to educate your employees on how a union would hurt them.
The proposed changes also strip away critical pre-election appeal rights. One example tells the story. If a union gerrymanders the group of employees who will vote in the union election, you can currently challenge the gerrymandering before the election. But the rule changes would delay your challenge until after the election, so long as the gerrymandering impacted less than 20% of the employees eligible to vote. In close elections, just 10% of the vote is often plenty to swing the result.
The sole Republican member of the NLRB dissented from the proposed changes because they would “effectively eviscerate an employer’s legitimate opportunity to express its views about collective bargaining.” He even took a shot at the NLRB’s pro-union motives in proposing the changes:
In truth, the “problem” which my colleagues seek to address through these rule revisions is not that the representation election process generally takes too long. It is that unions are not winning more elections.
Facing the threat of a union sneak attack even under the current union election rules, companies can push back. Many companies take measures to stay union-free long before union organizers come knocking. For example, you can:
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Identify employees who qualify as “supervisors” in the NLRB’s eyes, so they can be trained how to spot and react to union activity.
- Personally communicate with your employees on their job satisfaction and address any concerns before a union does.
- Task a rapid deployment team who is armed with an action plan to execute if you detect union activity.
- Check your employee handbook for provisions that could trigger an unfair labor practice charge, such as overly broad social media policies.
Union avoidance is all about advance preparation. Without some basic fundamentals, it may be too late when the union election petition crosses your desk. And the NLRB’s proposed changes hope to seal the deal.
Upcoming Seminar with HR Houston
Alan Bush often speaks at seminars for business leaders—such as line executives, finance executives, human resource professionals, CPA’s and lawyers. You can hear Alan at:
HR Houston | General Meeting
Non-Compete Agreements: Your Competitive Edge is at Stake
November 3, 2011
Ex-employees may take your company’s business secrets to competitors, cutting into your competitive edge. Studies show that roughly 60% of departing employees take your data to use on their next job. Most of that data is probably proprietary. If it isn’t valuable, why take it? Lock own your secret playbook with non-compete agreements and solid HR countermeasures.
- Learn how the Texas Supreme Court, in Marsh v. Cook, just gave companies a new arsenal to enforce non-compete and non-solicit agreements.
- Consider what’s in your company’s secret playbook—like financials, product design, customer information, margins or upcoming product and market launches.
- See how non-compete, non-solicit and non-disclosure agreements keep your secret playbook out of your competitors’ hands.
- Even without an enforceable non-compete, enlist paperless claims to protect your secret playbook by implementing simple security measures.
When: 9:15a-10:15a
Where: JW Marriott
RSVP: https://m360.hrhouston.org/event.aspx?eventID=36886&instance=0
NLRB Retrenches on Union Rights Poster
The NLRB is hard at work on a union rights posting requirement, which may boost union organizing efforts. Previously, the NLRB announced that NLRA-covered employers must display the poster by November 14. But unions will have to wait longer
Amidst a flurry of legal challenges, the NLRB just delayed the effective date of its new poster rule until January 31, 2012. Of course, the NLRB denies any connection between the lawsuit and the delay. Instead, it says the delay is for “enhanced education and outreach to employers, particularly those who operate small and medium sized businesses.”
Despite the litigation, the NLRB is holding course. It cautions employers that: “No other changes in the rule, or in the form or content of the notice, will be made.”
Get ready—the fight is on. And this one’s hotly political. If the rule sails through, unions will have a slick new tool to agitate towards organizing your workforce. We’ll keep you posted.
Upcoming Seminar for Business Leaders
Alan Bush often speaks at seminars for business leaders—such as line executives, finance executives, human resource professionals, CPA’s and lawyers. You can hear Alan at:
The Woodlands Chamber | Annual Employment Law Update
HR Meets CSI: Nothing Up My Sleeve, But Hands Off My Thumb Drive
October 21, 2011
Ex-employees may take your company’s business secrets to competitors, cutting into your competitive edge. Studies show that roughly 60% of departing employees take your data to use on their next job. Most of that data is probably proprietary. If it isn’t valuable, why take it? Lock down your secret playbook with non-compete agreements and solid HR countermeasures.
- Learn how the Texas Supreme Court, in Marsh v. Cook, just gave companies a new arsenal to enforce non-compete and non-solicit agreements.
- Consider what’s in your company’s secret playbook—like financials, product design, customer information, margins or upcoming product and market launches.
- See how non-compete, non-solicit and non-disclosure agreements keep your secret playbook out of your competitors’ hands.
- Even without an enforceable non-compete, enlist paperless claims to protect your secret playbook by implementing simple security measures.
When: 9a – 4p (full conference)
Where: Marriott—The Woodlands Waterway
RSVP: ELU Information (page 3)
The IRS has announced a voluntary self-reporting program for eligible employers who are concerned that their independent contractors should actually be classified as employees. If you cop to misclassifying independent contractors, you get IRS amnesty on a bunch of back taxes and penalties. In exchange, you must promise to start treating the workers as employees going forward. That means you pay state and federal payroll withholding taxes.
Doesn’t sound half bad. Any hidden risks to copping out?
Absolutely. The IRS may forgive your past sins, but not the DOL. Don’t forget that misclassifying workers as independent contractors triggers liability for overtime pay. Nothing in the IRS’s amnesty plan keeps the DOL from prosecuting you separately for unpaid overtime and penalties.
In fact, the IRS and DOL recently renewed their vows to share information on workers misclassified as independent contractors. So, if you self-report, it sure looks like the IRS will rat you out to the DOL.
Nice job. Think twice before jumping into this one.
Union Rights Posters: A Union’s Newest Tool to Organize
Well, it happened. We predicted the NLRB would approve the proposed rule that requires all employers covered by the NLRA to post a union rights notice. The rule became law yesterday. It impacts basically all private employers—unionized or not.
Here’s the NLRB’s Q&A sheet on the final rule. The poster will be “similar” to the one already required of federal contractors. You can find that poster here. You must comply by November 14.
You now have the privilege of telling your employees about their rights to unionize and engage in concerted activity. The rule requires you to post the notice in “conspicuous places where they are readily seen by employees.” That’s your bulletin board. You may also have to distribute the poster on via e-mail or on your intranet if you customarily use those channels to push out information to your employees.
The poster also tells employees how to complain to the NLRB if they feel their NLRA rights have been violated. Get ready for a new type of complainers. But remember that they are also protected from retaliation for filing an unfair labor practice charge.
Union avoidance measures now take on a higher priority. Expect unions to leverage greater employee awareness into pro-union agitating and organizing drives. After all, the NLRB is also considering a proposed rule to shorten union election timelines—giving unions a greater element of surprise.
Immunize against a union’s biggest advantage with advance preparedness.
Upcoming Seminar for HR on Employee Manuals
Alan Bush often speaks at seminars for business leaders—such as line executives, finance executives, human resource professionals, CPA’s and lawyers. You can hear Alan at:
MC-SHRM | General Meeting
Employee Handbooks: Get an Edge
August 9, 2011
New hires get a copy of your employee handbook on day one. So what’s the big deal?
Go beyond off-the-shelf policies. Look at the big picture. Appreciate the risks that your policies are meant to insulate you against, then tweak them to take advantage of legal developments.
For example, Alan will show you how turbo-charged policies can help:
- Reduce your damages exposure in overtime lawsuits
- Give an extra layer of protection from harassment and hostile work environment claims—protection that form policies don’t have
- Push employee disputes out of class actions and instead into faster arbitration proceedings
- Protect your business secrets from your competitors’ attempts to steal your best and brightest employees
- Discourage employees from secretly tape recording conversations
- Keep union organizers off your premises without drawing an unfair labor practice charge
Alan will also talk about how solid HR practices press your advantage. After all, many policies are only as effective as your actions behind them.
When: 11:30a-1p
Where: Lone Star College
RSVP: http://www.mc-shrm.org/
New ADA, Old Fundamentals
Hands down, the recent amendments to the Americans with Disabilities Act (ADA) are game changing. Many more folks now meet the ADA’s broadly expanded definition of having a “disability.” But what should we do about it?
There’s clearly a threat. In Norton v. Assisted Living Concepts, a federal court in Texas just ruled that renal cancer qualified as an actual disability, even though the cancer was in remission. New EEOC regulations say that other medical conditions ”should easily” qualify as disabilities. For example, the EEOC’s hit list includes fairly common medical conditions like diabetes, multiple sclerosis, major depressive disorder, bipolar disorder and post-traumatic stress disorder.
Before the ADA amendments, these medical conditions may not have qualified as a “disability.” Now they probably do.
The kicker is reasonable accommodation. According to the ADA, you must discuss how to reasonably accommodate an employee’s actual disability if she asks for an accommodation. And you may have to talk reasonable accommodations if the disability is obvious and will presumably affect job performance.
Time to go back to school on an old fundamental—dealing with reasonable accommodation requests. You’ll see more of them.
Here’s your worst case scenario. An employee with diabetes asks her supervisor for extra breaks to regulate her blood sugar. Thinking the request is bogus or exaggerated, the supervisor completely ignores the request. Maybe he even snaps off an immediate “no.” HR never hears a word about it. Not long after that, the supervisor fires the employee. Congratulations, you probably just bought an ADA lawsuit.
This is an awareness issue. Make sure your supervisors and managers know that many medical conditions could qualify as disabilities. Train them to take any request dealing with a medical condition immediately to HR. Confirm that your reasonable accommodation policy makes HR the lead point of contact. Educate your employees about your policy. Bring HR up to speed on cutting edge techniques to discuss and document dialogue about a reasonable accommodation.
Written performance documentation is also key. An employee who knows he’s been performing poorly may ask for a reasonable accommodation to buy some protection. I hope you’d been documenting his performance problems. If not, it can get risky to terminate or start disciplining him right then.
Thanks to the Texas Supreme Court, non-compete agreements just got easier to enforce. Texas companies have steadily enforced non-competes when the employee got trade secrets or confidential information as consideration for the non-compete. In Marsh v. Cook, the Court opened up a whole new ball game. Other kinds of consideration—stock options in this case—can rope an employee into a non-compete.
But let’s go light on the law and heavy on business points.
Marsh radically shifted Texas courts’ take on non-competes. Under their old take, a non-compete was enforceable only when the consideration given along with the non-compete agreement “gives rise” to the company’s need for the non-compete. Confidential information and trade secrets used to be about the only consideration that courts thought justified a non-compete. Other consideration wasn’t enough.
Now, consideration that is “reasonably related to an interest worthy of protection” will satisfy Texas courts. The Supreme Court said that the stock options linked the employee to the company’s “long-term business interests” in developing goodwill with clients. That deserved protection with a non-compete.
What consideration might work? Several possibilities could be tied closely enough to goodwill, depending upon how they’re structured:
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Stock option plan
- Incentive bonus plan
- Specialized technical training
- Education tuition reimbursement
- Introductions to key client relationships
Any time you give employees one of these, it could be a choke point to require them to sign a non-compete. The pitch is simple: “No non-compete, no participation in the incentive bonus plan.”
You’ve got good reason to roll out non-competes for key employees. Non-competes make it easier for you to protect your business secrets.
Once again in Marsh, the Supreme Court reassured Texas companies that their non-competes deserve respect. The Court warned, however, that non-competes must impose only reasonable restrictions on the employee:
The hallmark of enforcement is whether or not the [non-compete] is reasonable. The enforceability of the [non-compete] should not be decided on “overly technical disputes” of defining whether the covenant is ancillary to an agreement.
Reasonableness will be the new battleground on non-competes. And there are consequences for trying to hold your employees to a non-compete that is too broad.
Home Field Advantage to Protect Your Business Secrets
No matter what the game, you want the home field advantage. That’s true even when you’re prosecuting a lawsuit against an ex-employee who took your business secrets. You’d often rather be in federal court. And your employee manual may let you clinch that advantage.
The federal Computer Fraud and Abuse Act (“CFAA”) could be your ticket to federal court. The CFAA imposes civil and criminal liability on folks who exceed “authorized access” to protected computers. Several federal courts, including the Fifth Circuit that covers Texas, say the CFAA comes into play when your employees violate your written computer use policies to steal or misuse your business secrets. That federal claim can land you in federal court.
The Ninth Circuit in California just jumped on the band wagon. In Nosal, the court upheld the CFAA indictment of an ex-employee who had allegedly broken his company’s computer use policy. According to the federal indictment, he hired three current employees to download the company’s business secrets from its server and start a competing business. The company’s computer use policy restricted the use or disclosure of business secrets to legitimate company business.
Your employee manual should cast a wide net on prohibited computer use. That way, you have several hooks into CFAA liability. Many companies get mileage out of prohibiting employees from:
- Using or disclosing business secrets for anything other than legitimate company business;
- Transferring business secrets to any storage device other than the company’s server; and
- E-mailing business secrets to an employee’s non-work e-mail accounts.
Dust Off Your Non-Compete Agreement
Texas courts now lean toward enforcing non-compete and non-solicit agreements. But they may push back on how far your agreement can go.
Your restrictions must be reasonable. If you’ve demanded too much of your ex-employees, a court will ding you. The court will shave down or “reform” your restrictions to make them reasonable. You’ll get only an injunction to stop the ex-employee from breaking the rewritten agreement.
Even worse, the court won’t show you the money. No money damages can be awarded on an unreasonable non-compete or non-solicit until after the court has “reformed” your restrictions. And that won’t happen until sometime after you’ve filed a lawsuit. You would walk away empty-handed on lost profits for your customers the ex-employee stole before you could launch your lawsuit and the court rewrites your restrictions.
Your only option for money damages would be to prove the ex-employee has used your business secrets against you. Otherwise, your already stolen customers would be water under the bridge.
That’s exactly what happened to one Houston company in a recent case. The court ruled the non-compete was valid, but unreasonably broad. No money damages awarded there. On top of that, the court tossed the company’s business secrets claims. No money there too.
Keep your non-compete and non-solicit agreements deadly by making sure they’re reasonable. Over the past few years, Texas courts have refined how they decide if a restriction is reasonable. Are your agreements in step? Have you looked at them to know?
Upcoming Seminar for Finance Execs and CPA’s
Alan Bush often speaks at seminars for business leaders—such as line executives, finance executives, human resource professionals, CPA’s and lawyers. You can hear Alan at:
Texas Society of CPA’s | CPE by the Sea
Employment Law for Business Leaders
June 15, 2011
Non-Compete Agreements: Protect your competitive edge
- Identify your company’s secret playbook information—like financials, customer information, margins or upcoming product and market launches.
- Learn how non-compete, non-solicit and non-disclosure agreements keep your secret playbook out of your competitors’ hands.
- Sketch over the legal protections against employees taking your trade secrets—enforceable obligations without any paper agreements.
Overtime Claims: Preserve your working capital
- Expose how a plaintiff’s lawyer sizes up an overtime claim.
- Make your company an unattractive target by learning which employment policies are ground zero for the most expensive overtime lawsuits, as well as how to get those policies right.
- Job descriptions might lead to misclassification as salaried exempt.
- Independent contractor agreements might make you miss paying overtime to a real employee.
- Cover any gaps with best practices to reduce your damages exposure.
When: 9:40a
Where: Galveston Island Convention Center
Arbitration Can Deter Plaintiff’s Overtime Lawyers
Plaintiff’s overtime lawyers love class warfare. A well-written overtime lawsuit always asks the court to create a class of your current and ex-employees to sue you as a group. Lawyers call that an overtime collective action. It’s deadly—plaintiff’s lawyers leverage the high potential liability to broker class-wide settlements with eye-popping dollars.
One way to curb the problem is to break up these classes before they form. A plaintiff’s lawyer is less likely to aggressively pursue a single employee’s overtime claim against you because the lawyer’s up-side is much smaller. Employee arbitration programs may let you duke out an overtime dispute mano y mano.
Arbitration agreements and policies may prohibit your employees from ganging up on you in a class. You can insist that all employment disputes go to arbitration, but strip away the arbitrator’s power to lump individual claims into a class. But can you get away with that? Probably so.
In AT&T Mobility v. Concepcion, the US Supreme Court looked at a consumer contract with an arbitration provision that forced consumers to litigate their claims individually. No class actions allowed. Despite the plaintiff lawyer’s sleek argument for class warfare, the Court sent him to arbitration with one client. This ruling bodes well for employers too.
Think about starting an arbitration program for your employee disputes. If you go arbitration, look carefully at your policy or agreement. Does it specifically prohibit class arbitration? Does it limit pre-arbitration discovery to capture the speed and cost efficiencies of arbitration? What about limiting how long the claim can linger before the final arbitration hearing?
But arbitration programs aren’t for everybody. Jury trial waivers are another realistic option to get a handle on runaway jury awards. Either way, put some thought into how you’ll resolve employee disputes. You always want the home field advantage.
One of your key employees left a few months ago. He’s now working for your hottest competitor and soliciting all of his old accounts. And he knows your profit margins. Your first impulse is to fire up his old laptop and go digging for proof that he stole your customer list. Good instincts—the contents of that laptop will probably be “Exhibit A” in your lawsuit nailing the defector to the wall.
Don’t touch that computer. Stop, breathe and hire an IT forensic professional. If not, you’ll regret it.
Chances are, you’ll need a forensic analysis done on the laptop because most folks are careful to double delete the proof of their data theft. IT forensics can often show what your ex-employee took and how far he went to cover it up.
Courts can be nit-picky when it comes to IT forensic evidence. The starting point for any forensic analysis is a clean forensic image of the drive. The more you use a drive, the more you dirty the forensic trail needed to get your analysis into court. A forensic image usually costs about $400.
One company learned that lesson the hard way. In Koo, the president took his ex-employee’s laptop home for two days. He admitted that he made some screen shots and “could have” moved some files. An Oregon federal court kicked out some of the forensic analysis that was later done on the computer. The court couldn’t get past the fact that the computer had been used extensively before forensic IT got involved.
In fact, many companies make a forensic image of key employees’ computers when they leave. These companies know that IT forensic evidence can break a case wide open. It keeps your ex-employees honest.
Upcoming Seminar for Business Leaders
Alan Bush often speaks at seminars for business leaders—such as line executives, finance executives, human resource professionsals, CPA’s and lawyers. You can hear Alan at:
Texas Workforce Commission | Seminar Series
Strategic Policies to Shield Your Company from Overtime Claims
June 14, 2011
Employment law matters to a company’s strategic operations. Alan will talk about how solid HR practices protect your working capital from costly overtime claims. From a business perspective, he’ll answer:
- Who files lawsuits for unpaid overtime?
- What makes overtime lawsuits so costly?
- Which policies, if done wrong, are most often ground zero for an expensive overtime collective action and how do you get those policies right?
- What steps can you take to limit your company’s exposure to damages?
When: 10:00 am
Where: TWC Workforce Solutions—Hobby
RSVP: WFS_HRClaims_eFlyer
