Timing Isn’t Everything in a Pregnancy Discrimination Claim

pregnant-worker-375x250The Fifth Circuit Court of Appeals recently joined the Second, Sixth, and Tenth Circuits in holding that where an employer shows that it had legitimate non-discriminatory reasons for firing a pregnant employee (e.g., non-performance), a mere fact that the employee was fired shortly after telling her employer that she was pregnant, doesn’t defeat employer’s stated reasons for termination.

In this case, the employee had a documented history of poor work performance and multiple write ups. Two months after she told her supervisor  she was pregnant, she was terminated for poor performance.  The employee argued that poor performance was just a pretext, but that she was really fired for being pregnant. The employer argued that pregnancy had nothing to do with it and that it had legitimate non-discriminatory for firing the employee.  The employee claimed that another management-employee told her during a social lunch that she was fired for being pregnant, but the court excluded this evidence as hearsay.  So, the only evidence of pregnancy discrimination that the employee could point to was the timing of her termination, which happened shortly after she told the employer she was pregnant.  The Fifth Circuit found that this fact alone was not enough to establish that the employer’s stated reasons for termination were just a pretext. Thus, theemployee must have other additional evidence to support its pregnancy discrimination claim.

TAKEAWAY: Where an employer shows it had legitimate non-discriminatory reasons for firing a pregnant employee, the fact that the employee was fired shortly after telling her employer she was pregnant, without more, won’t be sufficient to establish that employer’s stated reasons for termination were a pretext.

Leiza Dolghih represents both COMPANIES and EMPLOYEES in employment litigation and arbitration proceedings.  If you are facing an actual or a potential employment dispute, contact Ms. Dolghih for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

 

Fair v. Unfair Competition, or the Real Life Case of Globo Gym v. Average Joes

DodgeballWhile we patiently wait for a sequel to Dodgeball: A True Underdog Story to come out, a similar saga involving competing gym/spa establishments has been unfolding in Houston, Texas (minus the dodge ball tournament and shiny singlets) recently culminating in a lawsuit in the federal district court for the Southern District of Texas. 

In this lawsuit, Life Time Fitness sued its former regional vice president, his wife, who also worked for Life Time Fitness at various times, and their newly formed company – ReNew You LLC – alleging that the VP “pilfered” proprietary business information, duplicated Life Time’s business model, and used company personnel to open a competing business.  Life Time filed the complaint on January 16th and four days later obtained a temporary injunction order against the defendants ordering ReNew You to cease and desist all operations and barring it from offering or providing services provided by Life Time.  In sum, Life Time has succeeded in shutting down ReNew You for now. 

The complaint alleges that while working for Life Time, the VP used Life Time’s technology system, email and his personal assistant to:

(1) draft and revise detailed business plans, agendas and checklists for his new company;

(2) build proformas, budgets, forecast and financial models for his new company based on Life Time’s proformas, etc.;

(3) obtain quotes for or leasing equipment for ReNew You;

(4) develop logos for ReNew You;

(5) develop a website for ReNew You;

(6) negotiate a partnership agreement with his partner in ReNew You.

Life Time also alleged that the VP “egregiously and surreptitiously” breached the non-compete agreement by using Life Time’s time, resources, computers, proprietary information and employees to build the medi-spa and weight-loss business less than four miles away from one of Life Time’s facilities.

While the complaint doesn’t specify how Life Time eventually found out about the VP’s activities, it is clear that the VP was using Life Time’s email address to send much of communications related to establishing ReNew You.  Apparently, the VP was also using his Life Time computer to create and edit many of the ReNew You documents.  It is alleged that he also used his Life Time email address to email himself Life Time’s confidential information. 

The complaint contains nine (typical) counts: violation of the Computer Fraud and Abuse Act (CFAA), breach of contract, breach of fiduciary duties, misappropriation of trade secrets, violation of the Texas Uniform Trade Secrets Act (TUTSA), tortious interference with prospective contracts, tortious interference with existing contracts, conspiracy, and aiding and abetting breach of fiduciary duties.

The VP’s attorneys and the VP himself have denied any improper actions.  As usual, the allegations made by Life Time in its complaint remain to be proven.

TAKEAWAYS:  The allegations in this case (which remain to be proven) illustrate a typical former employee/employer dispute, which often arises when an employee decides to open a business that competes with his or her former employer.

The allegations raise an issue of when is the line between preparation to compete (generally allowed under Texas law) is crossed into competition with the employer while on employer’s payroll (not permitted).  In some situations, the answer to that question is clear, while in others, it requires a rigorous legal and factual analysis.

The line between fair competition and unfair competition is often in the eye of the beholder, frequently pushing the parties towards litigation as a forum for resolving what is fair.  While some disputes may not be resolved outside the courtroom, many may be avoided if employees planning to compete with their former employer follow two simple steps: (1) review their employment agreements to determine what obstacles, if any, they present to opening a competing business; and (2) avoid actually competing with the employer or using employer’s resources to plan the new business while on employer’s payroll. 

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and knows how such disputes typically play out for both parties. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

9 Basic Steps For Minizing Trade Secrets Theft From Your Company

ArtCaption_DataExplosionLawsuits involving trade secrets theft have become an almost weekly occurrence. In 2015, Fitbit, Nike, Angie’s List, and Oculus Rift became entangled in high-profile legal battles arising out of former employees and competitors allegedly stealing the companies’ trade secrets such as customer lists, software codes, and design patterns. 

Considering the technological progress, with each passing year, more confidential information is stored, shared, and transmitted electronically.  At the same time, the number of devices that employees can use to easily and quickly copy and transmit such information is also increasing every year.  Given these parallel trends, those companies who have not taken stock of their trade secrets and implemented measures to protect them, are extremely vulnerable to having such secrets stolen by disgruntled employees or aggressive competitors, resulting in an irreversible loss of competitive advantage. 

There are simple steps that any business – small or large – can take to minimize the risk of trade secret theft. Here is short list of basic precautions that any company should be undertaking. 

  1. Figure out what trade secrets your business has. What gives you a competitive advantage? Is it a list of repeat customers? Pricing formula? Design patterns? Procedures that your company follows? Business plans? Product development plans? If this information is not publicly available, it most likely qualifies as a trade secret. 
  2. Who has access to your trade secrets? Can all of your employees access the information or is access limited only to key employees or on a “need to know” basis? The less people have access to your trade secrets, the better. 
  3. What systems do you have in place to limit access to trade secrets? Is the information password-protected? Do you have a way of keeping track of who accessed it, when, and for what purpose? Can you lock people out if you discover a security breach? Do you have alarms set for when somebody downloads a large amount of information or uses a personal device to access it?  Do you limit physical access via locked doors, thumb-print access or other security measures? 
  4. Do you have a confidentiality policy? Does your employment handbook include a confidentiality policy? Do all of your employees sign the policy? 
  5. Do you provide confidentiality training? If you have a large company, make confidentiality training part of your on-boarding process. If you run a smaller business, explain to employees what you consider confidential business information and how your expect them to treat it. 
  6. Do your employees sign non-disclosure agreements? If not, 2016 should be the year when all of your employees who work with confidential information sign enforceable Non-Disclosure Agreements (NDA).
  7. Do your vendors, suppliers, joint venture partners, etc., sign non-disclosure agreements?  Anybody – and I mean anybody – with whom your company either does business or plans on doing business – who gets access to your company’s confidential information, should  be signing a NDA before such information is shared with them. 
  8. When employees leave, do they sign a document stating they’ve complied with the NDA? All key employees should have an exit interview, during which they should reaffirm that they are aware of the NDA obligations and they have complied and intend to comply with them.  If an employee refuses to sign such a document, a forensic analysis of his or her devices might be necessary. 
  9. Do you back up devices of the key employees after they leave?  For key employees, before recycling their laptops, blackberries, etc. to be used by others, image those devices so that any evidence of confidential information being copied, transmitted or emailed outside the company is preserved for future investigation and, if necessary, litigation. 

Make 2016 the year that you proof your business against trade secret theft and ensure that it doesn’t fall victim to unscrupulous employees or unfair competition practices from business rivals.

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and knows how such disputes typically play out for both parties. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458. 

 

Business Owners Alert: State Minimum Wage Increases in 2016

kkWhile the minimum wage in Texas will remain the same in 2016, those Texas companies that have employees in other states, need to be aware of the following minimum wage (and overtime) increases.* Given the recent increase in unpaid overtime lawsuits around the country, companies should be extremely vigilant in ensuring that their employees get paid a proper minimum wage and overtime.

Alaska – Minimum wage increases from $8.75 to $9.75 an hour. Minimum weekly salary for bona fide executive, professional, and administrative employees will increase from $700 to $780 per week (i.e., two times state minimum wage for the first 40 hours of employment).

Arkansas – Minimum wage increases from $7.50 to $8.00 an hour. Minimum wage for tipped employees remains $2.63.

California – Minimum wage increases from $9.00 to $10.00 an hour.  Minimum annual salary for bona fide executive, professional, and administrative employees will increase from $37,440 to $41,600 (i.e., two times state minimum wage for the first 40 hours of employment each week).

Colorado – Minimum wage increases from $8.23 to $8.31 an hour. Minimum wage for tipped employees increases from $5.21 to $5.29 an hour.

Connecticut – Minimum wage increases from $9.15 to $9.60 an hour. Minimum wage for tipped bartenders increases from $7.46 to $7.82 an hour and minimum wage for hotel and restaurant tipped employees other than bartenders increases from $5.78 to $6.07 an hour.

Hawaii – Minimum wage increases from $7.75 to $8.50 an hour. Adjusted minimum wage for tipped employees increases from $7.25 to $7.75 an hour, provided that when tips are added to the wages paid by the employer, the total amount is no less than $15.50 per hour.

Massachusetts – Minimum wage increases from $9.00 to $10.00 an hour. Minimum wage for tipped employees increases from $3.00 to $3.35 an hour.

Michigan – Minimum wage increases from $8.15 to $8.50 an hour. Minimum wage for tipped employees increases from $3.10 to $3.23 an hour.

Nebraska – Minimum wage increases from $8.00 to $9.00 an hour.

New York – Minimum wage increases from $8.75 to $9.00 an hourSubject to caveats outside the hospitality industry, the minimum wage for all tipped employees will increase to $7.50 an hour. The minimum weekly salary for bona fide executive and administrative employees will increase from $656.25 to $675 per week.

Rhode Island – Minimum wage increases from $9.00 to $9.60 an hour. Minimum wage for tipped employees increases from $2.89 to $3.39 an hour.

South Dakota – Minimum wage increases from $8.50 to $8.55 an hour. Minimum wage for tipped employees increases from $4.25 to $4.28 an hour.

Vermont – Minimum wage increases from $9.15 to $9.60 an hour. Minimum wage for tipped employees increases from $4.58 to $4.80 an hour.

West Virginia – Minimum wage increases from $8.00 to $8.75 an hour. Minimum wage for tipped employees increases from $2.40 to $2.62 an hour.

* This is not a complete list of all geographic areas around the country that increased the minimum wage floor in 2016. Please consult with an attorney regarding specific locations outside of Texas where your company has employees to determine whether their compensation complies with all the applicable state and local laws.

Leiza Dolghih represents both COMPANIES and EMPLOYEES in employment litigation and arbitration proceedings.  If you are facing an actual or a potential employment dispute, contact Ms. Dolghih for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

 

Steve Sarkisian Files Wrongful Termination Lawsuit Against USC Trojans; Claims Discrimination Based on Alcoholism

downloadIn early October, the University of Southern California fired Steve Sarkisian, its head football coach after an incident where he appeared drunk during a speech at a USC event. Copies of hotel and bar receipts allegedly showing Sarkisian’s alcohol consumption far exceeding the norm spread like a wildfire on the internet

Yesterday, Sarkisian admitted that he is an alcoholic in a lawsuit that he filed in California Superior Court.  He alleged that the university discriminated against him based on his disability (alcoholism), failed to engage with him in an interactive process to accommodate such disability, and retaliated against him for his request to accommodate his alcoholism. While Sarkisian’s claims are based on violations of California state law, the Americans with Disabilities Act (ADA) covers alcoholism as disability as well, so whether you are in California or any other state, here are the basics that you need to know about providing accommodations under the ADA to employees who are alcoholics:

  • Alcoholism is considered a disability under the Americans with Disabilities Act
  • Thus, just as with any other disabled employee, employers are required to provide accommodation to alcoholics who can perform the essential functions of the job with or without a reasonable accommodation, unless doing so would create undue hardship for the employer (e.g., allowing an employee flexible work schedule to attend AA meetings or attend a rehab facility);
  • According to the EEOC, “regardless of coverage under the ADA, an individual’s alcoholism or drug addiction cannot be used to shield the employee from the consequences of poor performance or conduct that result from these conditions”; 
  • Furthermore, “an employer will always be entitled to discipline an employee for poor performance or misconduct that result from alcoholism or drug addiction”;
  • Employers can prohibit the use of alcohol and drugs at work, but must apply that rule to all employees and not just alcoholics; 
  • Employers are no permitted to tell coworkers that an employee with a disability is receiving a reasonable accommodation.

Conclusion: While an employer may strictly (and uniformly) enforce a no-drug/no-alcohol policy in the workplace, when it comes to handling employees who are recovering or recovered alcoholics or drug addicts, employers may be required to allow them certain accommodations as prescribed in the Americans with Disabilities Act.

Leiza Dolghih represents both COMPANIES and EMPLOYEES in employment litigation and arbitration proceedings.  If you are facing an actual or a potential employment dispute, contact Ms. Dolghih for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

Enforcing Texas Non-Compete Agreements Against Employees in Other States

noncompeteFor Texas companies, enforcing non-compete agreements in other states can be tricky since each state has its own rules about what makes a non-compete enforceable, and some states do not allow them at all. Therefore, any Texas company with out-of-state employees should ask two questions about its employees’ non-compete obligations: (1) are my remote employees’ non-compete agreements enforceable? and (2) will I be able to enforce them in a Texas court if necessary?  I have previously written regarding Question 1 here and here, and recently a Texas Court of Appeals addressed Question 2.

In that case, a Texas company sued its Louisiana employee for breach of his non-compete and non-solicitation clauses, breach of fiduciary duty by using the company’s confidential information to compete with it, and tortious interference with the company’s existing business relationships. The company sued the employee in Texas, and he alleged that Texas courts had no jurisdiction (power) over him because he worked entirely from Louisiana, solicited business in Louisiana, and used the company’s confidential information in Louisiana.  In short, other than being employed by a company based in Texas, he did not have any contacts with that state so he could not be dragged into a lawsuit in Texas.

The Court of Appeals found that Texas courts had jurisdiction over the employee to decide the breach of contract/non-compete claim because he originally called the company’s president in Texas to solicit employment with the company, thus purposefully availing himself of the Texas forum. This contact was enough to subject him to the jurisdiction of Texas courts. However, Texas courts did not have the power to decide other claims brought by the employer because those claims arose out of the employee’s conduct that took place entirely in Louisiana.  

TAKEAWAY:  Texas companies that have employees in other states need to make sure both – that their non-compete agreements are enforceable in those states and that they can enforce those agreements in Texas courts.  Some of this can be achieved via contractual provisions in employment agreements, and some can be done via hiring, training, and other corporate policies that affect remote employees.  

Any Texas business that is planning on expanding outside of Texas in 2016, should conduct an audit of its non-compete agreements and employment practices to ensure that they are properly set up so that the company can enforce the agreements in Texas courts.

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and knows how such disputes typically play out for both parties. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

Non-Compete Agreements are Not OK in Oklahoma

leoTurns out Oklahoma and California have much more in common than one would imagine – they both prohibit non-compete agreements.  The Fifth Circuit Court of Appeals recently confirmed in Cardoni, et al. v. Prosperity Bank what many Oklahoma businesses already know – non-compete restraints in Oklahoma do not hold up in court.  What makes this case interesting is that the Fifth Circuit refused to apply Texas law to bankers’ non-compete agreements even though they agreed that their agreements should be governed by Texas law, because Texas law was contrary to Oklahoma’s public policy, which prohibits such agreements under any circumstances. As the result, the Oklahoma bankers were allowed to compete despite the non-compete clauses in their employment contracts with a Texas bank.

Prosperity Bank highlights a situation, which has become more common in recent years, where a court will not apply the parties’ selected law because it is either (a) contrary to the fundamental policy of the state where the employee works, or (b) has no substantial relationship to the employment relationship, the employer or the employee.  So, how can companies ensure that they are protected from competition from employees located in other states?  The following basic rules can help companies draft effective post-employment restraints:

  1. Non-compete agreements are governed by different laws in each state.
  2. While the courts usually will defer to the parties’ choice of law to govern their employment contracts, that is not always the case.
  3. Where the law specified in an employment agreement contradicts a “fundamental public policy” of the state where the employee works, courts may refuse to apply the chosen law.
  4. If possible, a company should make sure that its non-competes are enforceable in both – the state specified in the contract and the state where the employee works.
  5. If that is not possible or an employee works in a state that prohibits non-compete agreements, the employer should look to see whether confidentiality or non-solicitations clauses may be used to achieve the same or similar results.
  6. The bottom line is that figuring out which law applies to non-compete agreements in different states and whether they will be enforced in court down the road involves a factually intensive and complicated legal analysis.  For higher-level employees, it pays to have the analysis done before non-compete agreements are signed and not after such employees have already opened a competing business or joined a competitor.

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and knows how such disputes typically play out for both parties. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

Common Legal Mistakes When Hiring Seasonal Workers for the Holidays

overtimeThe holidays are around the corner, and employers who are considering hiring temporary workers for this holiday season should consider the following issues that often land companies in trouble when it comes to seasonal hiring:

  1. Employment Applications. Employers should remember that applicants for seasonal positions are subject to the same employment eligibility verification requirements and anti-discrimination rules as non-seasonal workers.  Therefore, employers should follow the same application process with the seasonal workers as with the permanent ones.
  2. Employment Offers. Businesses should clearly inform all seasonal employees in writing that their employment is temporary. Creating an impression that temporary employees are hired for a definite term may lead to problems at termination.
  3. Training. Seasonal workers can create the same potential liabilities for their employers as their non-seasonal peers if they engage in discrimination, harassment, or other inappropriate conduct. Therefore, skimping on training for seasonal employees is not a good idea.  While it may save some money in the short term, it can end up costing a lot more in legal fees down the road.
  4. Eligibility Verification. Employers should verify that employees are legally permitted to work in the U.S. just as they do with the permanent employees by obtaining proper Form I-9 records.
  5. Minor Employees. Employers should verify and comply with the limitations on employment of minors, such as work permits for students, limits on the number of hours or how late they can work, and break requirements for minor workers.
  6. Minimum Wage/Overtime Issues. Most seasonal jobs are not exempt from overtime under the federal Fair Labor Standards Act (FLSA) or state wage and hour laws. Employers should take care to pay minimum wage and overtime to seasonal employees. Overtime lawsuits are extremely popular right now among plaintiffs’ lawyers, particularly those alleging that employees were pressured to work through lunch breaks or before or after their shifts without being paid for that time.
  7. Employee /Independent Contractor Classification. A lot of companies wrongly assume that because an assignment is temporary, they can treat a worker as an independent contractor. That assumption is often wrong. When in doubt on how to classify seasonal workers, employers should consult with an attorney, as this is a complicated area of the law.
  8. Criminal Background Checks. Employers should conduct those checks, follow the proper procedures under the Federal Credit Reporting Act (FCRA), and use forms that contain proper authorization language from the potential hires.
  9. Unpaid Interns. In most circumstances, interns must be paid at least minimum wage. When in doubt, employers should consult with an attorney, as the test for determining whether a certain position can qualify for unpaid internship is complicated.
  10. Health Benefits. Employers should determine in advance of hiring, whether hiring seasonal workers will convert a company into a large employer under the Affordable Care Act (ACA) or, if a company is already a large employer, whether it will be required to cover the seasonal employees’ health benefits.
  11. Record-Keeping. Too often companies who keep thorough records for permanent employees, fail to do so for the seasonal hires. Those records, however, may play an important role if a litigation arises out of seasonal employment or if a seasonal employee later becomes a permanent one and claims Family & Medical Leave Act (FMLA) benefits. Thus, keeping good records for seasonal employees is as important as for permanent ones.

Leiza Dolghih represents both COMPANIES and EMPLOYEES in employment litigation and arbitration proceedings.  If you are facing an actual or a potential employment dispute, contact Ms. Dolghih for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

Negotiating Employment Agreements or the Real Reason Jennifer Lawrence Got Paid Less Than Bradley Cooper

jennifer lawrenceSomebody recently went through Sony’s hacked e-mails and found some that show Jennifer Lawrence and Amy Adams were paid less than the male leads in American Hustle. This prompted Jennifer Lawrence to write an essay titled “Why Do I make Less Than My Male Co-Starts?”

She blamed her lower pay partially on Hollywood being sexist and partially on her not wanting to appear “difficult” and feeling silly about negotiating regarding millions she didn’t really need.  As you can imagine, the essay sparked a whole lot of indignation about the “wage gap” and the sexism in the workplace when it comes to salaries, not just in Hollywood, but everywhere.

However, many of these responses focused on gender issues and failed to address Jennifer’s glaring violation of the cardinal rule of employment negotiations – IF YOU DO NOT ASK FOR IT, YOU WILL NOT GET IT.  This is not a gender specific rule, by the way. Some believe that men are better at asking or demanding to be paid according to their worth than women, but I personally do not think that’s true. In my experience, it’s more of a personality or experience issue than a gender-related trait.  If your personality is like Jennifer Lawrence’s (by her own admission) and does not allow you to ask, find a person who will ask and negotiate for you, i.e. a lawyer or an agent.

I see too often executives (men and women) not asking for what they want in an employment agreement, not asking about what the terms in their employment agreements mean, assuming that their employment terms are not negotiable, or giving up on negotiations too early in the process.  As in any negotiation process, knowledge is power.  So, here is a list of terms that are often negotiable in the executive employment agreements and that you should at least discuss with your employer and your attorney before signing an employment agreement:

1. Severanceis the employer going to provide severance and, if so, how much? Is death or disability a severance trigger? What will happen to medical benefit continuation, prorated bonus, equity vesting acceleration, extension of the option exercise period, or other benefits if the employment is terminated?

2. Term of employment – most executive employment agreements will specify a term of employment, which is, of course, an exception to the at-will approach taken with respect to non-executive employees.  If it is an at-will contract, ask for a specific term. Often, an employer will specify that the company may terminate the executive “for cause.”  What constitutes “cause” is purely up to the parties.

3. Restrictive Covenants – what restrictions will be imposed on the executive after he leaves the company? For how long? The length, geographic scope, term of restrictions and other parameters can be negotiated to strike a balance between protecting the company and allowing the executive to earn a living after he moves on.

4. Cause does the “termination for cause” clause define what the “cause” is? Does it allow for a cure period, i.e. a period during which the executive can address the company’s concerns before being terminated “for cause”? Is the company’s board involved in the termination process and what are the steps in that process that the company and the employee will have to follow?

5. Good Reason – a “good reason” separation provision allows an executive to resign for certain pre-approved reasons, such as demotion, relocation and other events that would materially change the terms of employment.  What constitutes a “good reason” is negotiable.

6. Equity will the executive receive equity in the company as part of the compensation? How much? When does it vest? What happens with it if the employee is terminated for cause v. employee leaves for a “good reason.”  Are there additional restrictive covenants tied to the equity award?

7. Arbitration – if a dispute about the employment agreement arises, where will it be brought?  If in court, will an executive want to give up his/her rights to a jury trial? If in arbitration, what arbitration body will decide the dispute and what rules will govern it? Who will pay for costs?

8. Assignment – what happens to the executive’s rights and obligations under the employment agreement if the company is sold or bought? Can the company assign the employment agreement to the new entity? Will it need the executive’s permission to do so?

9. 409A When possible, severance, other payments and the employment agreement generally should be structured so as not to trigger coverage under Section 409A of the Internal Revenue Code. If the agreement is subject to Section 409A, it should be written to comply with.  Failure to do so can expose the executive, among other things, to a 20 percent additional tax.

10. Other Provisions  –  there are many other employment provisions that an executive can negotiate.  A little bit of planning and persistence in the negotiations at the front end of employment will pay ten-fold at the end of that relationship.

Leiza Dolghih represents both companies and employees in litigation and arbitration proceedings in state and federal courts.  If you are facing an actual or a potential employment dispute, contact Ms. Dolghih for a confidential consultation at Leiza.Dolghih@GodwinLewis.com or (214) 939-4458.

Small Business Corner: Limiting Competition Through Contract Provisions

download (1)Whether you are hiring a new employee or entering in a contract with your vendor or supplier, if you are planning on giving these persons access to your business’ confidential information, such as customer lists, financial information, proprietary training materials, etc., you should make sure that the person you are sharing it with is not going to take that information and use it to compete against your business. There are several tools available to business owners to make sure that this does not happen.

When properly drafted, the following contractual provisions will serve to protect a business owner from unfair competition by a former employee or business partner:

  • Non-compete clause.  This clause prevents current employees or business partners from joining or forming a competing business after the end of their employment or business relationship with your company.  It is enforceable in Texas when certain conditions are met.
  • Non-solicitation of clients clause.  This clause prevents current employees or business partners from taking the company’s clients with them after their employment or business relationship with that company ends.
  • Non-solicitation of employees a.k.a anti-raiding clause.  This clause prevents current employees or business partners from poaching their former employer’s or business partner’s employees after the end of their employment or business relationship.
  • Non-disclosure clause.  This clause prohibits employees or business partners from using or disclosing confidential information that a company shared with them during their employment or business relationship.

To be enforceable, each clause has to be drafted specifically for your business.  There are some contract clauses that stay the same no matter what the substance of the contract or the business is – these are not those clauses.

A lot of business owners will adopt a friend’s or a former employer’s non-compete and non-solicitation agreements for their own use, or copy an agreement they found online.  However, those agreements usually work only until a company attempts to enforce them, leaving a business owner exposed to unfair competition at the precise moment when it needs the protection the most.

These copycat restrictive covenants often fail because a company that attempts to enforce them in court must show why a particular geographic area or a specified time period is reasonable for a particular employee, and explain exactly what is included in the definition of “confidential information” included in the non-disclosure clause.  This is virtually impossible to do if the agreement that the company is seeking to enforce was catered to a different company’s business, with different types of confidential information, and different employee structure.

Leiza litigates non-compete and trade secrets lawsuits on behalf of COMPANIES and EMPLOYEES in a variety of industries, and knows how such disputes typically play out for both parties. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at Leiza.Dolghih@GodwinLewis.com or (214) 939-4458.

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