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Monday, February 9, 2015

Can My Employer Enforce a Covenant Not to Compete?

Many employers require their employees to sign agreements which contain covenants not to compete with the company.  The enforceability of these restrictive provisions varies from state-to-state and depends on a variety of factors. A former employee who violates an enforceable non-compete agreement may be ordered to cease competitive activity and pay damages to the former employer.  In other covenants, the restrictions may be deemed too restrictive and an undue restraint of trade.

A covenant not to compete is a promise by an employee that he or she will not compete with his or her employer for a specified period of time and/or within a particular geographic location. It may be contained within an employment agreement, or may be a separate contract. Agreements which prevent employees from competing with the employer while employed are enforceable in every jurisdiction. However, agreements which affect an employee’s conduct after employment termination are subject to stricter requirements regarding “reasonableness,” and are generally disallowed in some states, such as California which has enacted statutes against such agreements except in very narrow circumstances.

Even in states where such covenants are enforceable, courts generally disfavor them because they are anti-competitive. Nevertheless, such agreements will be enforced if the former employer can demonstrate the following:
 

  • The employee received consideration at the time the agreement was signed;
  • The agreement protects the employers legitimate business interest; and
  • The agreement is reasonable to protect the employer, but not unduly burdensome to the employee who has a right to make a living.

Consideration

Under the principles of contract law, all agreements must be supported by consideration in order to be enforceable. The employee signing the covenant not to compete must receive something of value in exchange for making the promise. If the agreement is signed prior to employment, the employment itself constitutes consideration. If, however, the agreement is signed after employment commences, the employee must receive something else of value in exchange for the agreement to be enforceable.

Legitimate Business Interest

Legitimate business interests can include protecting and preserving confidential information (trade secrets) and customer relationships. Most states recognize an employer’s right to prevent an employee from taking advantage of information acquired or relationships developed as a result of the employment arrangement, in order to later compete against the employer.

Reasonableness

Based on the circumstances, a covenant must be reasonably necessary. If the covenant is overly broad, or unduly burdensome on the employee, the court may refuse to enforce the agreement. Therefore, the covenant must be reasonable in both duration and scope. If a covenant is overly broad, the court may narrow its scope or duration and enforce it accordingly. But if a covenant is so broad that is clearly was designed to prevent lawful competition, as opposed to protecting legitimate business interests, the court may strike down the agreement in its entirety.

To enforce a covenant not to compete, the employer can file a court action seeking an injunction against the employee’s continued violations of the agreement. The company can also seek monetary damages to cover losses resulting from the employee’s breach.


Monday, June 16, 2014

Questions You Shouldn't Ask or Answer During an Interview

Job-seekers have to be ready to respond to any interview question asked of them, but not every question has to be answered. 

To ensure that employers do not discriminate against candidates based on age, gender, race, health and family arrangements, there are certain regulations which restrict the type of questions which are permissible during an interview. Below, we explore several topics that may be problematic and should not be asked of potential employees: 

Questionable Questions

Let’s take a look at a few topics that may be problematic. 

  • Age: Does anyone like to be asked their age unless just turning 21? Probably not. While an interviewer may ask whether a candidate is over the age of 18 or 21, he or she may not ask for a specific age.  
  • Nationality: An interviewer can ask whether a candidate is legally allowed to work in the U.S., but he or she can’t ask about the applicant’s nationality or status as a citizen. 
  • Religious beliefs: Same goes for questions that ask about religious beliefs. The interviewer may be in the right if he or she needs to know if the interviewee can work on certain holidays, but otherwise, this topic should be off limits.
  • Health: While in many states an interviewer cannot ask if a candidate smokes, he or she may inquire as to whether the applicant has ever violated any corporate policies on alcohol or tobacco. Furthermore, an employer may ask whether the person being interviewed uses illegal drugs, is able to lift a given weight, or can reach items at a specific height. They also can ask if the individual is capable of completing certain tasks associated with the job and if any reasonable accommodations might be needed.
  • Family status: Employers want to know about an applicant’s availability which may sound like a legitimate concern.   They cross the red line, however, when they try to determine if a candidate has children or plans to have children in the future. An interviewer also cannot ask about an applicant’s maiden name or marital status.
  • Criminal record: A prospective employer is allowed to ask the applicant whether or not he or she has ever been convicted of a crime that relates to the job, but may be restricted from asking whether the candidate has ever been arrested.
  • Military service: An interviewer cannot discriminate against a member of the National Guard or Reserves. He or she can, however, ask if a candidate will anticipate any extended time away from work. 

Acing the Interview Process

The interview process can be a stressful time for employers and employees alike, but it will be a smoother process if you have a basic understanding of what can and can’t be asked during these initial meetings. 

As a candidate being interviewed, remember that if you’re asked a question which you’re not comfortable answering, or you think may be illegal, be sure to keep a positive attitude and try not to focus on the negative and instead deliver an answer which showcases your ability to fulfill the requirements of the job. For example, you may be asked if you can have a babysitter in a moment’s notice if an unexpected work emergency pops up. In answering this question, you may be concerned that you will be divulging too much information about your family life and, like many mothers, you may fear that they may not hire you because of the responsibilities that come along with motherhood. Rather than answering the specific question about a babysitter, you may instead wish to say “I am very flexible and am able to travel or work late when the need arises.” This answer addresses the interviewer’s question while preserving your privacy and also keeps the conversation going in a positive direction-one which showcases why you are the best candidate for the job. 

As an employer looking to hire a new employee, it’s important that everyone in your organization from the receptionist to the hiring manager who might come in contact with the candidates have a basic understanding of what topics and questions are off limits. You might even consider having a list of approved questions and a list of questions which are prohibited, regardless of the position being filled. These procedures should be a matter of strict company policy and should be reviewed each year to ensure compliance with all discrimination laws. 


Sunday, January 6, 2013

Are Criminal Background Checks Legal?

Why hire a person with a criminal record when, surely, there are applicants out there with unblemished records? In reality, however, the issue of job applicant criminal background checks is a complicated one.


Read more . . .


Monday, August 13, 2012

Employers and Immigration Compliance: What You Need to Know

The Immigration and Nationality Act (INA) makes it illegal for employers to knowingly hire undocumented workers and requires employers to verify each worker’s identity and eligibility by completing the I-9 Form. An employer’s failure to complete the I-9 Form can result in criminal and civil penalties.

The INA also protects individuals from employment discrimination based upon national origin, citizenship or immigration status. The Office of Special Counsel for Immigration Related Unfair Employment Practices (OSC) enforces the INA’s anti-discrimination provisions.  Victims of discrimination may file a complaint with the OSC to seek back pay, reinstatement and other remedies.

With so much at stake and so many potential pitfalls, it is important for all employers to familiarize themselves with the requirements and implement policies and procedures to ensure compliance.

Employers are prohibited from:

  • Discriminating on the basis of citizenship or immigration status, with respect to hiring, firing, recruitment or referral. This rule applies to employers of four or more employees.
  • Discriminating on the basis of national origin, with respect to hiring, firing, recruitment or referral. This rule applies to employers of between three and 15 employees. Employers may not extend different treatment to different individuals based on their birth place, country of origin, native language, ancestry or because they may look or sound “foreign.”
  • Requesting more or different documents to verify a worker’s employment eligibility. An employer may not request different or additional documents for determination of citizenship or national origin than those documents specified on the I-9 Form.  Furthermore, an employer is not permitted to reject genuine-looking documents.
  • Retaliating against an individual who files charges with the OSC, cooperates with an investigation or contests an action that may be considered discriminatory or in violation of the INA.

To improve compliance in your employment procedures, consider implementing the following practices:

  • Refrain from using discriminatory language in job postings, such as “green card only” or “U.S. citizen only,” unless it is required by law or by a government contract.
  • In completing the I-9 Form, do not request specific documents over other permitted documents. Each employee is permitted to present any document from the list of acceptable documents stated on the form.
  • Refrain from selectively verifying work eligibility for only certain employees based on their citizenship status or national origin; whatever your policy, make sure it is applied consistently to all employees.
  • Avoid the appearance of discriminatory practices by verifying employment eligibility only after you have made a hiring decision, and give the employee three days to provide the required documentation.
  • Do not immediately terminate an employee if you receive a “no match” letter from the Social Security Administration. While such a letter may mean the individual is not authorized to work in the United States, it is also possible that there is a discrepancy in the record due to a clerical error or legal name change.
  • If you suspect that an employee is not legally eligible to work in this country, notify the employee and request valid employment eligibility documents before terminating or suspending employment.

 

 


Sunday, July 15, 2012

Can You Be Fired for Having Bad Credit?

If you are feeling the pinch, you are not alone. Many Americans have experienced a decline in income, while expenses have continued to increase. Many have taken a significant hit to their credit scores and are considering bankruptcy. Others who are on the eve of foreclosure may be considering a bankruptcy filing to stop an imminent foreclosure sale.

Whatever the reasons, a common concern of many consumers who face mounting debt, or are considering filing bankruptcy, is whether such credit issues can affect their ability to obtain or keep a job or get a promotion. In short, no. Bankruptcy is a protected, fundamental right granted by the U.S. Congress to all Americans. Under federal law, employers are prohibited from discriminating against a worker because of a bankruptcy filing. Bankruptcy courts across the country have weighed in on this issue and have consistently upheld the anti-discrimination protections contained in the U.S. Bankruptcy Code.

Employees who have filed bankruptcy and are subsequently fired must prove that bankruptcy was the primary factor in the termination. If the employer can prove there were other reasons for the termination, the employee’s wrongful termination claim will fail. Similarly, it is a violation of the law to refuse to hire or fail to promote an employee solely on the basis of a bankruptcy filing.
 

 

 


Thursday, February 18, 2010

Understanding Severance

Since the 1930s, employees have acquired more legal rights as federal and state governments enacted laws giving them the right to unionize and engage in collective bargaining, to receive a minimum wage and extra pay for overtime work, and to be protected from discrimination based on race, religion, gender, or disability. However, the employee protection laws have a serious gap; with the exception of the right to maintain health insurance coverage under the provisions of COBRA, employees do not have any rights to income after termination.

Labor laws in virtually all European countries - and many other countries around the world - specify that an employee is entitled to payment if he is involuntarily terminated. The few exceptions which exist concern termination for gross cause, usually defined as criminal acts or breaches of fiduciary duty.

In the U.S., however, legal protections covering severance are far more limited in scope. There are no provisions in the federal Fair Labor Standards Act that require compensation for severed workers.  As a general rule, employees who lose their jobs are not entitled to severance payments unless the terms of severance are spelled out in an employment contract. A limited exception exists in the Worker Adjustment and Retraining Notification Act (WARN), that provides for advanced notice or pay in lieu of notice under certain conditions. WARN does not cover all employers or most termination scenarios.

However, workers who have lost their jobs may be able to demand severance if the company has traditionally provided severance to terminated employees. While an employer is free to change policies (with certain limitations), if there has been a written policy or oral statement that terminated employees will receive severance, a strong case can be made that such a commitment constitutes a binding agreement.

For example, a client of mine was terminated due to a company restructuring. His employer had a history of providing two weeks of severance per year of service (a pattern of practice). However, my client was provided with only one week of severance per year of service, which the company justified as reasonable due to its financial condition. We challenged this on several grounds, including the fact that the company's President had stated six months earlier that company benefits would be continued despite the economic climate.  Ultimately, my client received the correct severance package.

Employers should review any statements regarding severance that can be found in employee handbooks.  Oral statements, written memos, and even casual emails should be analyzed to see if commitments have been made.

A written severance policy should be drafted. The policy should consider the following questions:

• Do we want to have any severance provisions? If so, how much severance should be offered? How should it be calculated (e.g.length of service? Rank in the company?)
• If severance is granted, which workers are eligible?  Only those working full time?  What about long-term part-time workers?
• How long does an employee have to be on the job to be eligible for severance?
• Is there a cap on the duration of severance?  For example, six months regardless of length of service?
• Will any severance compensation be paid out as a lump sum or over time?
• How do severance payments affect eligibility for unemployment insurance claims?

Terms of severance involve more than payment of wages or salaries for a specified time after termination. Severance policies should also cover payment for unused sick leave as well as other benefits. In some cases, the company may decide to offer outplacement services to a severed employee, including career counseling and assistance with resume preparation. Workers are often asked to sign an agreement not to sue for wrongful termination in return for receiving severance benefits.  Non-compete clauses may also be part of a severance agreement.

It is important for employers to retain experienced employment counsel when drafting severance provisions for employee handbooks or in crafting severance agreement language.


Monday, August 17, 2009

Welcome

As an attorney, I am always asked by my clients: "what is the law?" I am expected to know the answer, and most of the time I do (or can research it).  But every once in a while, answering the question "what is the law" requires more than an explanation of statutes, administrative codes, or an analysis of case law.  The answer goes deeper, to the fundamental reason why we have laws in the first place.
  
A very wise and thoughtful person once told me that we have laws to tell the other guy what to do (or not to do, as the case may be). No one ever believes that a law is needed for me; only someone else. Yet, society is made up of me and thee and your “me” is my “thee”. Consequently, my response to the question sometimes is no more than the law is whatever is needed to make sure you and I can get along together. The rest is commentary.

Which brings me to the point of this blog. An attorney is – or should be – more than an expert in the written or decided law. He or she should also be a counselor, advisor, confidant, and guide to others. The attorney should provide information as a matter of course. However, she or he should also be willing to share opinions based on knowledge, experiences, and (hopefully) wisdom. This is the commentary.
 
This blog – also known as a “blawg” for its legal focus – will present my opinions and comments on issues, cases, and events in the law that affect all of us. I invite you to respond and contribute to it. Comment on what I have written, even if (and especially if) you disagree. Offer your own comments and wisdom, as well as ideas for topics to be discussed. I look forward to communicating with you through this media and in the near future, in person.


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