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Practical Counsel – Enforceability of Non-Compete Agreements

On a weekly basis, we receive calls from employees and employers inquiring about the enforceability of non-competition agreements.  Non-competition agreements can be enforceable, but only if narrowly tailored to protect the legitimate business interests of the employer, not unreasonably restrict the employee from earning a livelihood, and are reasonable from public policy standpoint.

Non-Competition Restrictions:  For example, sometimes employers want to draft an agreement that prohibits their former employees from working for any competitor.  That would be unenforceable because it prohibits the former employee from doing ANY work for such competitor, even something completely unrelated to what the employee did for employer and/or unrelated to core business of employer.  It is broader than necessary to protect employer’s business and unfairly restricts employee’s ability to find job.

A valid non-competition provision should specifically (and narrowly) identify and define Competitor and the Scope of Work of the employee.  

Non-Solicitation Restrictions:  For some businesses, a non-compete agreement is not necessary or appropriate.  However, they still have valid interests to protect and should have employees sign a Non-Solicitation restriction.  A valid non-solicitation provision restricts the Scope of Work an employee can provide for current or prospective clients of employer.  It makes sense that employers do not want former employees starting their own business, going to work for a competitor, or working directly for a client and, as such, taking business from employer.  Protecting client relationships is a legitimate interest of employer.  A strong non-solicitation provision is more likely to be enforced than a non-compete provision.

A few other points to remember.  First, a non-compete agreement must be a legal binding agreement (it should not be in an employee handbook and needs to be supported by consideration).  Second, a good agreement should also include other provisions such as:  Non-Solicitation of Employees; Confidentiality; Intellectual Property Protection; Remedies/Injunctive Relief; and Non-Disparagement.

For more information and in-depth analysis, please review information on our website:  https://www.generalcounsellaw.com/practice-areas/labor-and-employment-law/non-competition/

If you are an employer or an employee with a Non-Compete Agreement that you are not sure is enforceable, contact Merritt Green at mgreen@gcpc.com or 703-556-0411 for free initial consultation.

Merritt Green leads the employment practice at General Counsel, P.C., a law firm located in McLean, VA representing businesses, non-profit organizations, and individuals throughout the DC Metro area.

May 22, 2017 0

Intern or Employee? Should Your Organization be Paying Your Interns?

Case: Mark v. Gawker Media, LLC, No. 13-cv-4347 (S.D.N.Y. Mar. 29, 2016)

Court Holding: The court granted summary judgment to the employer-defendant concluding that under the eight-factor primary beneficiary test, the plaintiff was an intern – not an employee and, as such, was not entitled to wages pursuant to Fair Labor Standards Act (“FLSA”).

Employment Counsel: An internship can be unpaid when the vocational and educational benefits received by the intern outweigh the benefits received by the employer for the intern’s work. Thus, if the intern spends most of his/her time performing professionally relevant work, even if the employer also benefits from such work, the intern does not need to be paid. However, if the intern is performing menial services that do not provide true vocational training (for example, getting coffee, running errands, photocopying, data entry), it is likely the intern needs to be paid wages to comply with FLSA.

Prior to commencing any internship, the organization and intern should define the relationship – both for the benefit of the intern and the organization. Further, during the internship, the organization must be diligent to ensure that the intern is actually performing professionally relevant work and receiving benefit from the internship (beyond resume building).

Case Summary: The defendant, Gawker, was a media company that employed unpaid interns. Plaintiff, Aulistar Mark, was one of Gawker’s unpaid interns who argued that he was a Gawker employee under the Fair Labor Standards Act (“FLSA”) and entitled to minimum wage for his work.

In determining that Mark was properly classified as an intern instead of an employee, the court employed an eight factor “primary beneficiary” test under which an unpaid internship is considered legitimate if the educational benefits the intern receives from the internship outweigh his contribution to the employer.

Eight factors to help a court determine who is the primary beneficiary of the internship, with their application to this case, are as follows:

The understanding between employer and intern that there is no expectation of compensation: Mark had no expectation of compensation for the internship.

Does the internship provide training that is similar to the clinical and other hands-on training that would be provided in an educational environment? Mark received educational benefits in the form of opportunities to learn journalism skills that Gawker employees were expected to already know.

Does the internship count for academic credit? Yes, Mark earned academic credit.

Does the internship accommodate the intern’s academic commitments by corresponding to the academic calendar? Gawker accommodated Mark’s academic commitments.

Was the length of the internship sufficiently limited to the time it took to learn new skills? Mark’s internship only lasted 3 months and he was provided with beneficial learning experiences for the entire duration of his internship.

Does the intern’s work complement, rather than displace, the work of paid employees? The majority of Mark’s work was complementary.

Is there an understanding that there will be a paid position for the intern at the conclusion of the internship? There was no expectation of a paid position following Mark’s internship.

Was the intern the primary beneficiary under the totality of the circumstances? Under a totality of circumstances, Mark was properly classified as an unpaid intern because he received significant vocational benefits. Mentors edited his work, helped him publish a piece for his portfolio, and he received academic credit for his internship.

For additional information about this case or other employment law matters, please contact Merritt Green at mgreen@gcpc.com or (703)556-6505. Mr. Green leads General Counsel, P.C.’s Employment Law Practice and has been representing employers (and occasionally employees) for 20 years.

May 11, 2017 0

Unauthorized Computer Access by Former Employee – Protection of Trade Secrets

Case: Estes Forwarding Worldwide LLC v. Cuellar, (E.D. Va. Mar. 09, 2017)

Holding: The U.S. District Court for the Eastern District of Virginia denied former employee’s motion to dismiss finding that employer sufficiently plead facts to assert violations of Computer Fraud and Abuse Act and the Stored Communications Act.

Employment Counsel: State and Federal laws protect computer and other electronically stored information from unauthorized computer access.  Employers must establish, maintain, and monitor employee access to such electronic databases and ensure that at termination of employment, access is terminated.  Further, employment agreements should specifically identify post-employment restrictions to any employment related electronically stored information. Finally, there are numerous state and federal laws protecting trade secrets and electronically stored information.  Employers should be aware of such laws and utilize them to protect their confidential information.

Case Summary:  In 2010, Marcelo Cuellar, the defendant, began working for the plaintiff, Estes Forwarding Worldwide LLC (“EFW”) in its San Francisco operations unit.  As part of his employment, Cuellar created a Google Drive account (“the account”) that he and other EFW employees used to record daily company transactions.  EFW considered these recordings to be trade secrets. In February 2015, EFW fired Cuellar. He subsequently went to work for a competitor. However, a year after his termination, Cuellar accessed the EFW account, downloaded information from it, and changed its password. Google notified EFW about the unauthorized access, which then prompted EFW to pursue a costly investigation to discover the identity of the unauthorized user.

Upon discovering that the user was Cuellar, EFW filed a complaint against him alleging eight (8) causes of action, including: (1) breach of contract (confidentiality agreement); (2) violations of the Computer Fraud and Abuse Act (“CFAA”); (3) violation of the Defend Trade Secrets Act of 2016; (4) violation of the Stored Communications Act; (5) misappropriation of trade secrets pursuant to VA Code Ann. §§59.1-336; (6) violation of Virginia Computer Crimes Act; and (7) seeking preliminary and permanent injunction.

Cueller filed a motion to dismiss challenging the CFAA and SCA causes of action.  

The court held that in order to establish that Cuellar violated the CFAA and the SCA, EFW had to show that Cuellar’s use of the Google account that he helped create was unauthorized or exceeded his authorization. Cuellar argued that his access to the account was authorized because when a person provides personal information to create an account with Google, it is the service provider, not the employer, who grants authorization for account access. The court, however, pointed out that Cuellar created the account while “acting in the course and scope of his employment and for the benefit of EFW, not for personal use.”  It then pointed to the Fourth Circuit’s reasoning that a person “exceeds authorized access” when “he has approval to access a computer, but uses his access to obtain or alter information that falls outside the bounds of his approved access.” Since the account was not Cuellar’s personal account, but rather created in the scope of his employment and used for EFW’s benefit, the court reasoned that Cuellar’s access to it post-employment was unauthorized.

For additional information about unauthorized computer access, and about this case or other employment law matters, please contact Merritt Green at mgreen@gcpc.com or (703)556-6505.  Mr. Green leads General Counsel, P.C.’s Employment Law Practice and has been representing employers (and occasionally employees) for over 19 years.

April 27, 2017 0

Employers Beware of Retaliation Claims

Case: Egei v. Johnson, 192 F Supp. 3d 81 (D.D.C. 2016)

Issues: Title VII Retaliation

Holding:  The United States District Court for the District of Columbia held that employer retaliated against employee for terminating employee where employer believed that employee had made false sexual harassment claim.  The court held that Title VII’s participation clause safeguards an employee from “adverse employment action taken on the basis of the substance of a charge or testimony” given during EEO proceedings.

Employment Counsel: More employers violate Title VII (and other anti-discrimination laws), through retaliation than outright discrimination.  In August 2016, the EEOC issued Enforcement Guidance on Retaliation and Related Issues providing valuable insight and guidance for employers.  When an employee makes an allegation of discrimination or harassment, the employer must not take any negative actions towards that employee based upon such allegations – even if the employer reasonably believes such allegations to be false.

Case Summary:  In this case the court considered whether an employer could lawfully terminate an employee for making false or malicious charges or statements in the course of an Equal Employment Opportunity (“EEO”) proceeding.  The plaintiff, Ominoba Egei, worked as a disaster assistance employee for the Federal Emergency Management Agency (“FEMA”).  FEMA sent Egei to Texas after Hurricane Ike.  Egei alleged that while there, her supervisor, Jean Jacques Fequiere, sexually harassed her.  According to her complaint, Fequiere requested that Egei massage him, asked her to his hotel room where he appeared from the bathroom half naked, requested that she shower with him, and threatened to send her home after she refused his advances.  

Shortly after these incidents, Egei was “right-sized” or sent home to be reassigned.  Egei filed an EEO administrative complaint under Title VII, but during the proceedings, she was impeached because FEMA showed that Egei had picked up a rental car during the timeframe that she claimed the sexual harassment had occurred. The ALJ judge rejected Egei’s claim on the basis that she did not prove her claim and that FEMA had shown the events did not occur.

A year and a half later, FEMA informed Egei that she was terminated for the false charges she had brought. Egei again filed suit, this time alleging that FEMA unlawfully retaliated against her for making an EEO claim. In response, FEMA argued that although an employer cannot terminate an employee for making an EEO claim, it can terminate her for making false or malicious statements.   

Circuit Split: Absolute vs. Qualified Protection: The participation clause of Title VII’s retaliation provision states that an employer cannot retaliate against an employee because she has “’made a charge, testified, assisted or participated in any manner in an investigation, proceeding or hearing’ governed by Title VII.”  The court acknowledged a circuit court split as to the question of whether this clause provides the employee an absolute privilege from the substance of her testimony –even if that testimony is later deemed to be false or malicious by an ALJ judge- or whether the protection is qualified and an employee’s claim must be made in good faith.

In siding with the interpretation that an employee is fully shielded from adverse action on the basis of testimony given during an EEO proceeding, the court reasoned that (1) case precedent favors an unqualified protection, (2) a straightforward reading of the statute’s unrestrictive language suggests that the substance of all claims and testimony provided during an EEO proceeding is protected, (3) the remedial purpose of Title VII would be chilled with a narrower interpretation since if the outcome of an EEO claim can later justify an employee’s termination, then others could be discouraged from filling legitimate claims against their employers.

Despite ruling in favor of broad protection, the court emphasized that this protection does not apply to those cases where an employee admits to lying or for example, “an employee maliciously divulges secrets on the public record in a Title VII action.”

The court granted partial summary judgment to Egei. Since the “fundamental premise of FEMA’s argument is that it fired Egei because of her statements, not because she chose to avail herself of the EEO process,” FEMA’s actions constituted a violation of Title VII’s retaliation clause.

For additional information about this case or other employment law matters, please contact Merritt Green at mgreen@gcpc.com or (703)556-6505.  Mr. Green leads General Counsel, P.C.’s Employment Law Practice and has been representing employers (and occasionally employees) for over 18 years.

 

April 11, 2017 0

NVR Non-Compete Held Unenforceable

Case: NVR, Inc. v. Nelson, No. 1:16-cv-1328, (E.D. Va. Feb 14, 2017)

Issues: Non-Compete Agreements

Holding: The court found that NVR’s non-compete agreement was ambiguous and overbroad, and, as such, unenforceable.

Employment Counsel:  Non-compete/Non-solicitation agreements are important documents that all employers should consider for employees – especially key employees.  However, to be enforceable, the agreement needs to be narrow in scope and clear in application solely to protect the legitimate interests of the employer and not unduly restrict the employment rights of the employee.  

Case Summary:

In this case, the plaintiff, NVR, Inc. (“NVR”), sold and constructed homes in 14 states, including North Carolina. It sought to enjoin one of it’s former employees, David Nelson, from working for Simonini Homes, Inc., another home developer and construction company.  Before Nelson was terminated for underperformance in August 2016, he was a Division Manager in the Charlotte area who dealt with sales, profits and losses, home construction projects, and the company’s strategic decisions.  In October 2016, Nelson joined Simonini.

Nelson signed a non-compete agreement that specified that for a year following the termination of his employment with NVR, Nelson was prevented from working in the areas of “residential homebuilding, mortgage financing, or settlement services” for any NVR competitor in the “Restricted Area” which included “those counties…in which the Company engaged in…business activities… [and] over which you had any management responsibility at any time during the twenty-four months prior to termination of your Service.” NVR argued that by joining Simonini, Nelson violated his non-compete agreement.

The court determined that it only needed to give detailed analysis to the agreement’s restriction on employment functions and its geographic scope.

(1) Restricted Employment Functions: the court did not find the non-compete overly broad. Although the agreement detailed a wide range of employment activities, Virginia courts have found similar restrictions on employment functions to be valid.   

(2) Geographic Scope: The court’s finding that the non-compete agreement was invalid arose out of a provision that limited Nelson from working in regions “from which [he] received, as part of your work duties, Confidential Information regarding such business activity.”  The court pointed out that since NVR failed to narrowly define “Confidential Information” and “what it means for [that] information to come from an area” the provision was ambiguous and overbroad. For example, a Chicago NVR employee could send a package, or even an email, containing Confidential Information to Nelson, and Nelson could interpret his non-compete as enjoining him from working in similar employment in Chicago. Thus, Nelson’s non-compete placed an unreasonable burden on him to determine which geographic areas he was barred from working in. Accordingly, the court determined that the non-compete agreement was unenforceable.

For additional information about this case or other employment law matters, please contact Merritt Green at mgreen@gcpc.com or (703)556-6505.  Mr. Green leads General Counsel, P.C.’s Employment Law Practice and has been representing employers (and occasionally employees) for over 18 years.

April 5, 2017 0

Construction Contractors Determined to be Joint Employers for FLSA Liability

Case: Salinas v. Commercial Interiors, Inc., No. 15-1915, (4th Cir. Jan 25, 2017)

Issues: Fair Labor Standards Act (“FLSA”), Joint Employment

Court Holding: For the purposes of plaintiff’s FLSA claim, joint employment existed between the two defendants.

Employment Counsel: To avoid a joint employer determination, entities should be careful to avoid codetermining the key terms and conditions of workers’ employment.  In the context of a construction space, this means that a court might find such a joint employer relationship between a contractor and a subcontractor when the contractor extensively supervises the projects of a subcontractor’s employees, the contractor provides most of the materials needed for the work, or the workers are subject to the contractor’s daily workplace protocols (such as regular update meetings, sign-in and out procedures, etc.)

Case Summary:  Plaintiffs were direct employees of J.I. General Contractors, Inc. (“J.I.”) a framing and drywall subcontractor.  Commercial Interiors, Inc. (“Commercial”) provided J.I. most of its work. Plaintiffs argued that J.I. and Commercial were joint employers, and in violation of FLSA and the Maryland Wage and Hour Law, the defendants failed to pay regular and overtime wages.

The 4th Circuit’s test for determining that J.I. and Commercial were joint employers under the FLSA included two steps. Joint employment exists (1) when two or more entities codetermine, directly or indirectly, “the essential terms and conditions of a worker’s employment” and (2) “the two entities’ combined influence over the essential terms and conditions of the worker’s employment render the worker an employee as opposed to an independent contractor.”

The Circuit Court outlined six factors which, though not exhaustive, should help lower courts determine whether two entities codetermine the essential terms and conditions of a worker’s employment and are joint employers for FLSA purposes. Using these six factors, the Circuit court concluded that Commercial’s relationship with the plaintiffs constituted such an employer-employee relationship. The six factors, with their application to this case, are as follows:

(1) Whether putative joint employers share power to direct workers: Commercial and J.I. both supervised the plaintiffs through informal instruction and formal, mandatory meetings. Commercial also required plaintiffs to wear uniforms with the Commercial logo and so outwardly identify as Commercial employees.

(2) Whether putative joint employers share the power to hire and fire workers or modify the terms or conditions of their employment: Commercial dictated the plaintiffs’ work schedule and even required overtime work.

(3) The “degree of permanency and duration of the relationship” between the two employers.

(4) Whether one putative joint employer is controlled by another putative joint employer: the defendants had a long standing business relationship and J.I. contracted almost exclusively with Commercial.

(5) Ownership of the premises that work is performed on: Commercial was in control of the premises that plaintiffs worked on.

(6) Whether putative joint employers jointly determine “functions ordinarily carried out by an employer”: Commercial provided plaintiffs with all the necessary tools and equipment needed to compete their work, it maintained plaintiffs’ hours on timesheets, and it demanded that Plaintiffs sign in and out daily.   

After this analysis, the 4th Circuit reversed the district court’s decision, finding that J.I. and Commercial were joint-employers for the purposes of the FLSA claim.   

For additional information about this case or other employment law matters, please contact Merritt Green at mgreen@gcpc.com or (703)556-6505.  Mr. Green leads General Counsel, P.C.’s Employment Law Practice and has been representing employers (and occasionally employees) for over 18 years.

March 29, 2017 0

Contractors determined to be Joint Employers and Workers W-2 Employees, Not Independent Contractors

Case: Hall v. DIRECTV, LLC., No. 15-1857 (4th Cir. 2017)

Issues: Joint Employers, W-2 vs. 1099 Independent Contractor, FLSA Overtime

Court Holding: The 4th circuit court reversed the district court’s dismissal of Plaintiffs’ FLSA claim holding that, for the pleading stage, the plaintiffs adequately established that they were jointly employed by defendants. Moreover, the plaintiffs also provided sufficient evidence to establish uncompensated overtime work.

Employment Counsel: For FLSA purposes, two employers are joint employers if they codetermine the key terms and conditions of an employee’s job. Workers are properly classified as “employees” (instead of “independent contractors”) when they are economically dependent on their employer. To proceed with a claim for uncompensated overtime, a plaintiff must submit “sufficient factual allegations to support a reasonable inference” that she worked uncompensated overtime hours.

Case Summary:  DIRECTV hires several technicians through a pyramid structured network where it contracts with intermediary entities that then contract directly with individual technicians. Plaintiffs included intermediary providers, individual technicians or some combination of these. DIRECTV controlled nearly every aspect of Plaintiff’s work. It established hiring standards, required DIRECTV logos on technicians’ uniform and vehicles, assigned work to technicians through DIRECTV’s centralized system, and was the principal source of each provider’s income.

Plaintiffs alleged that they were regularly deprived of overtime pay while jointly employed by DIRECTV and DirectSat (collectively “Defendants”) in violation of the FLSA. The 4th circuit reversed the district court’s dismissal of plaintiffs’ complaint holding that the plaintiffs demonstrated that they were (1) jointly employed by defendants and (2) were employees, not independent contractors. Moreover, they provided sufficient evidence that they worked uncompensated overtime hours.

  1. Employment Relationship: The district court erroneously approached this case by first determining whether the plaintiffs were employees or independent contractors with respect to each defendant individually, and then analyzing whether the plaintiffs were jointly employed by the defendants. The circuit court rejected this approach and determined that the proper analysis was to first determine whether the plaintiffs were jointly employed by the defendants, and then to determine whether the plaintiffs were employees or independent contractors.

(1) Joint-Employment Determination: To determine whether a plaintiff is jointly employed by two or more defendant entities, a court must determine whether the entities in question “codetermined the key terms and conditions” of the plaintiff’s job. The circuit court identified six factors to help lower courts determine this question: (1) whether putative joint employers share ability to direct or control workers (2) whether putative joint employers jointly determine the hiring or firing of workers or modify the terms or conditions of their employment (3) the “degree of permanency and duration of the relationship” between the two employers (4) whether one putative joint employer is controlled by another putative joint employer (5) ownership of premises that work is performed on (6) whether putative joint employers jointly determine “functions ordinarily carried out by an employer,” i.e, paying payroll taxes, providing materials to complete work, offering worker’s compensation insurance.  

Since the defendants codetermined essential elements of the plaintiffs’ work (such as hiring and firing standards, compensation, uniform, and work assignment) the circuit court determined that the defendants were not “completely disassociated” from one another.

(2) Independent Contractor vs. Employee Determination: If two entities codetermined a plaintiff’s work, the next question to consider is whether “the two entities’ combined influence…render the worker an employee as opposed to an independent contractor.” If the two entities are not joint employers, then the employee vs. independent contractor relationship of the plaintiff to each defendant must be assessed separately. The circuit court concluded that the plaintiffs could be classified as employees because they were “economically dependent” on defendants as opposed to being “in business for themselves.”

  1. Overtime Pay: The defendants argued that the plaintiffs’ FLSA claims should be dismissed due to a failure to provide sufficiently detailed documentation of their uncompensated work hours. After reviewing different courts’ approach to this problem, the circuit court decided that in order to present a successful overtime claim, a plaintiff must do more than merely allege uncompensated overtime; they must also submit “sufficient factual allegations to support a reasonable inference” that she worked uncompensated overtime hours. However, the court emphasized that the plaintiff need not provide such detailed information that, for example, she would be able to identify the particular week in which she accrued the uncompensated overtime.

Applying this standard, the circuit court concluded that it would be inappropriate to grant a motion to dismiss in this case because the plaintiffs had offered a sufficient “level of granularity,” in describing their uncompensated overtime i.e., their regular work schedule, pay rate, and approximation of overtime hours regularly worked each week.

For additional information about this case or other employment law matters, please contact Merritt Green at mgreen@gcpc.com or (703)556-6505.  Mr. Green leads General Counsel, P.C.’s Employment Law Practice and has been representing employers (and occasionally employees) for over 18 years.

March 29, 2017 0

Rhodes v. Comcast

Case: Rhodes v. Comcast Cable Communications Management, LLC, No. GLR-14-1824 (District Court of Maryland, August 17, 2016)

Issues: Title VII, Hostile Work Environment, Retaliation

Court Holding: The Court denies defendant’s motion for summary judgment on plaintiff’s Title VII claims.

Employment Counsel: A motion for summary judgment on Title VII hostile work environment claim will be denied if a plaintiff can provide evidence of discriminatory conduct that is sufficiently severe, pervasive or of such a humiliating nature as to interfere with an employee’s work performance. In regards to a retaliation claim, temporal proximity between employee’s protected activity and employer’s negative action gives rise to inference of prima facie case of discrimination.

Case Summary:

This summary focuses on the Title VII claims discussed in this case. From May 2007 through August 2012, plaintiff, Rylinda Rhodes worked as a dispatch representative for Comcast. Throughout her employment at Comcast, Rhodes described experiencing extreme sexualization in her work environment and specific sexually hostile actions directed at her.  Rhodes’ male coworkers used profane and vulgar language, described sexual acts and body parts, and took pictures and manipulated images of female breasts.  Despite Rhodes’ repeated complaints to her supervisor, her coworkers’ behavior persisted. Around August 2011, one of her coworkers grabbed her breasts and later, the same coworker lewdly referenced “missing” them. In May 2012, Rhodes informed a Comcast supervisor she could not return to work due to her coworkers’ vulgarity. Although Comcast said it would investigate her complaints and offered her a position at a different location, it did not offer to reimburse relocation expenses and Rhodes declined the offer. She refused to return to her original employment location and was eventually terminated. She subsequently filed Title VII discrimination claims against the company and Comcast moved for summary judgment.

Title VII prohibits discrimination based on sex and in retaliation for opposing such discriminatory practices. In order to substantiate a hostile work environment claim, Rhodes must show that “the offending conduct (1) was unwelcome, (2) based on her sex, (3) was sufficiently severe or pervasive to alter the conditions of her employment and create an abusive work environment, and (4) was imputable to her employer.”  A workplace is judged as objectively hostile “from the perspective of a reasonable person in the plaintiff’s position” who assesses the circumstances by considering the following factors: the frequency and severity of the conduct, the extent to which it reasonably interferes with the employee’s work, and whether the conduct goes beyond a “mere offensive utterance” and is physically threatening or humiliating.  Conduct can include coworker’s discussions about sexual practices even if such discussions are not directed at the plaintiff.  

In this matter, Comcast argued and presented evidence that it was unaware of the harassment but, the Court pointed out that the evidence presented by Rhodes could establish a hostile work environment. Due to the contradictory evidence presented by both parties, the Court denies Comcast’s motion for summary judgment on this matter.

To establish a Title VII retaliation claim, a plaintiff must demonstrate “(1) that she engaged in a protected activity, (2) that the employer took an adverse action against her, and (3) that a causal relationship existed between her protected activity and the employer’s adverse action.”  The plaintiff must present a prima facie case of discrimination by a preponderance of the evidence.”

In this case, since “temporal proximity between the adverse employment action and the employer’s knowledge of the protected activity ‘gives rise to a sufficient inference of causation to satisfy the prima facie requirement,’” the Court concluded that there was temporal proximity between the time of Rhodes’ complaints and Comcast’s failure to relocate her into a different position. The court held that this court create an inference of causation.  Since Rhodes satisfied the prima facie requirement, the burden shifted to Comcast to provide a “legitimate, nondiscriminatory justification” for its decision to terminate Rhodes. The Court held that based on the evidence presented, Comcast had not yet overcome this burden and denied it’s motion to dismiss the Title VII retaliation claim.

For additional information about this case or other employment law matters, please contact Merritt Green at mgreen@gcpc.com or (703)556-6505.  Mr. Green leads General Counsel, P.C.’s Employment Law Practice and has been representing employers (and occasionally employees) for over 18 years.

 

March 2, 2017 0

Hair Club for Men v. Ehson

Case: Hair Club for Men, LLC v. Ehson, No. 1:16-cv-236 (E.D. Va, District Court for Eastern VA, May 6, 2016)

Issues: Preliminary Injunction for Breach of Contract, Violation of Non-Compete & Non-Solicitation Clauses, Misappropriation of Trade Secrets and Confidential Information, Wrongful Interference with Contract, Tortious Interference with Contractual Relations, and Unjust Enrichment.  

Court Holding: The Court denied plaintiff’s request for an injunction to prevent defendants’ from engaging in hair replacement services because it found that the plaintiff is unlikely to succeed on the merits of its claims against the defendant.  

Case Summary: From 2011 to 2014, Ehson (defendant) was employed by Hair Club for Men (plaintiff). At the outset of her employment, she signed a non-compete and confidentiality agreement. In 2014, Ehson opened her own spa that treated individuals for hair loss. Plaintiff claimed breach of contract and sought injunctive relief.

Legal Standard: In order to obtain an injunction, a plaintiff must establish that “[1] he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.” Since the Court denied the injunction on the grounds that Plaintiff would unlikely prevail on the merits of its claim and is unlikely to demonstrate irreparable harm. The court declined to address the third and fourth factors.   

  1. Likelihood of Success of Claim: The Plaintiffs presented the following five claims against Ehson:

(1) Breach of Contract:

(a) Non-compete: Defendant claimed that the non-compete was overly restrictive.  In order for a non-compete to be enforceable, the “employer must show that the “restraint [1] is no greater than necessary to protect a legitimate business interest, [2] is not unduly harsh or oppressive in curtailing an employee’s ability to earn a livelihood, and [3] is reasonable in light of sound public policy.”  Since the disputed contract prevented Ehson from “engag[ing] in the business of hair replacement, on [her] own account or becom[ing] interest[ed] in such business…in any relation or capacity whatsoever,” the Court refrained from enforcing the non-compete because several aspects of the clause, including the definition of “business” and types of future positions Ehson was allowed to hold, were overly broad and vague.

(b) Non-solicitation clause: The court held that Plaintiff’s non-solicitation clause was also overbroad. Some Virginia courts have upheld non-solicitation contracts that limit the restriction to those “clients who were contacted, solicited, or served by [the employee] while he was employed by [the employer],” but this Court held that the provision was overly broad because it required Ehson to “know all of the customers that have been invoiced by Hair Club, at any Hair Club location, in the two years prior to her departure.”

(2) Misappropriation of Trade Secrets & Confidential Information: To establish trade secret misappropriation, a plaintiff must prove both that a trade secret (1) exists and (2) that the defendant misappropriated it. To constitute a trade secret, the following factors must be met: “(1) independent economic value; (2) not known or readily ascertainable by proper means; and (3) subject to reasonable efforts to maintain secrecy.”  Plaintiff’s allege that the following were protected trade secrets:

(a) Pricing Information: A price list can be a trade secret when it is “qualitatively different from a standard price list” and is “not even made available to customers,” but Plaintiff’s did not make the argument that its price list fell under this description.

(b) Marketing Information: The claim was deemed unlikely to succeed because Plaintiff’s did not provide information on how it endeavored to keep its marketing strategies secret or how it believed Ehson misappropriated its marketing strategies.

(c) Client Information:  Ehson claimed that since she obtained the client’s contact information “directly from the clients themselves,” she did not misappropriate the client list.  The Court found Ehson’s claim persuasive and held that this constituted an “independent development of a contact list.”   

(d) Technique: Plaintiff argued that its hair replacement techniques were unique. In response, Ehson argued that Plaintiff’s techniques were found on outlets like YouTube. The Court did not accept the Plaintiff’s argument.  

(3) Wrongful Interference with Contract & Prospective Business Advantage: In order to prevail,  the plaintiff most demonstrate: “(1) the existence of a business relationship or expectancy, with a probability of future economic benefit to plaintiff (2) defendant’s knowledge of the relationship… (3) a reasonable certainty that absent defendant’s intentional misconduct, plaintiff would have continued in the relationship… and (4) damage[s].”  The Court held that the Plaintiff had may be able to prevail on this claim. The Court reasoned that a central aspect to Plaintiff’s business is building and maintaining its client base. The Court further reasoned that it is “probable that Hair Club’s clients would have continued to patronize Hair Club for maintenance services and thus continued to provide economic benefit.”

(4) Tortious Interference with Contractual Relations:  In order to esblish that there was interference with a contractual relationship, there must be “existence of a valid contractual relationship or business expectancy.” Since the Court doubted whether Ehson’s and Plaintiff’s non-compete and non-solicitation contract was enforceable, it held that it was unlikely that Plaintiff prevail on this claim.

(5) Unjust Enrichment: The Court was unpersuaded that Ehson was unjustly enriched by Plaintiff’s for two reasons: (1) Plaintiff did not argue that it conferred a benefit on the defendant and (2) under Virginia law there shall be no contractual relationship for an unjust enrichment claim to succeed. In this case., the parties had a contractual relationship.

  1. Likelihood Plaintiffs Will Suffer Irreparable Harm: The Court held that the injuries were not irreparable because monetary damages would adequately compensate the Plaintiff for the type of harm alleged.

For additional information about this case or other employment law matters, please contact Merritt Green at mgreen@gcpc.com or (703)556-6505.  Mr. Green leads General Counsel, P.C.’s Employment Law Practice and has been representing employers (and occasionally employees) for over 18 years.

February 27, 2017 0

12th Anniversary Message to Clients

Dear Clients and Friends,

This week, on December 13th, General Counsel, P.C. celebrated our 12th Anniversary.  This would not be possible without the trust, support and loyalty of our clients and friends.  Thank you.

Personally, as I trust most of you have also experienced over the past 12 years, there have been countless challenges, many victories, and occasional losses.  I hope that these experiences have helped me grow as a business owner and legal advisor.

I often tell clients (and other GCPC attorneys) that as attorneys, our responsibility is to serve our clients.  We must understand and proactively protect our clients’ interests.  We must actively communicate.  We must consistently strive to do our best to serve and satisfy our clients to the best of our abilities.  I sincerely hope that we always accomplish this goal for our clients.

When I started General Counsel, P.C. 12 years ago, I was fortunate to have 5 clients leave my prior firm with me.  They were taking a chance since they were leaving a large national law firm to continue working with a start-up solo practitioner.  My gratitude to these 5 original GCPC clients cannot be understated.  They were the foundation of the firm.  And, I am proud to state that each of these 5 clients remain General Counsel, P.C. clients.

It is this long term client relationship built on trust, support and service that I hope we can build with all General Counsel, P.C. clients.  Yes, there are sometimes challenges, but I hope that our dedication to service and absolute client satisfaction will continue to build the foundation of client relationships.  If we ever do not satisfy such expectation, please never hesitate to contact me immediately.

Finally, if you have not had the opportunity to review our revamped website recently, here is a link:  www.gcpc.com.  We continue to serve our clients with 4 primary practice areas:  (1) employment; (2) corporate; (3) litigation; and (4) government contracts.

In closing, thank you again.  General Counsel, P.C. would not be able to celebrate 12 years without the support and loyalty of our clients and friends.  I wish each of your success in your business and personal pursuits.  And, if we can ever be of service, please contact us.

December 16, 2016 0

Employment Law: Changing Requirements for White Collar Overtime Exemption on Hold

Employment Law: Changing Requirements for White Collar Overtime Exemption on Hold

Introduction

As we told you earlier, the general rule for the white collar overtime exemption was subject to an overhaul this year, with the changes scheduled to go into effect December 1, 2016.  Specifically, the minimum salary level for exempt employees was scheduled to rise from $455 per week, or $23,660 annually, to $921 per week, or $47,892 annually.  The new rule also allowed for salary adjustments every three years.  

Legal Posture

On Tuesday, November 22, 2016, U. S. District Judge Amos Mazzant II issued a preliminary injunction in response to an Emergency Motion for same filed by the State of Nevada and 20 other states.  

In their Emergency Motion for a Preliminary Injunction, the states questioned the lawfulness of the Final Rule, whether the Department of Labor had the authority to promulgate the rule, and whether the automatic update provision complied with certain requirements.  

Preliminary injunctions are fairly rare.  In order to prevail on a motion for a preliminary injunction, the plaintiffs must establish four things, as follows:

  • There is a substantial likelihood of success on the merits;
  • There is a substantial threat to the plaintiffs that they will suffer irreparable harm without the injunction;
  • That the injury threatened outweighs the damage that might be caused by an injunction; and
  • That the injunction does not disserve the public interests.

Likelihood of Success on the Merits

After an analysis of the statutory language governing the white collar overtime exemption, the Court ruled that Congress, not the Department, has the authority to make determinations about raising the minimum salary level.  Consequently, the Court found the plaintiffs would likely be successful on the merits.

Substantial Threat of Irreparable Harm

The plaintiffs argued the implementation of the law would have irreparable harm on the states.  They offered, for example, the state of Kansas’ Department of Children and Families, and the Department of Corrections, both of which had over 50% of their employees affected by the rule.  Plaintiff argued, and the Court agreed, that the budget constraints of these departments were such that they would not be able to increase salaries per the law.  This could lead to lay-offs, which would impact public safety considerations.

Balancing the Injury Against Potential Damage Caused by the Injunction

Plaintiffs argue the substantial sums that would be spent under the rule would not be recoverable if the rule went into effect.  They also argue the rule could impact government services, would cause administrative disruptions, would result in employee reclassifications or terminations, and general harm to the public.  The Court notes that there is little to no harm to the defendant if the rule is delayed, and thus finds on balance, the plaintiffs’ potential injuries tip the scale in favor of the plaintiff.

The Public Interest

The Court noted that due to the rapidly approaching effective date, the Court did not have time to “render a meaningful decision on the merits.”  Because of this, a preliminary injunction would provide the Court the time to review the case more completely.

Conclusion

In light of the above, the Court has issued a nation-wide injunction, prohibiting the implementation and enforcement of the modifications to the white collar overtime exemptions.  

Of course, we at General Counsel, PC will keep you apprised of new developments as they occur.  

You can read the court’s decision in its entirety here.

November 28, 2016 0

Employment Law: Court Determines Gov’t Contractor’s Non-Compete Unenforceable

Case: RLM Commc’ns, Inc., v. Tuschen, No. 14-2351 BL 244020, 41 IER cases 971 (4th Cir. July 28, 2016)

Issue: Non-Compete Agreement Determined to be Unenforceable Because Overly Broad

Court Holding: In litigation between two competing government contractors, Fourth Circuit affirmed district court’s summary judgment against plaintiff.  Former Employee and her new employer did NOT violate non-compete agreement or other obligations because, in part, non-compete was overly-broad and, as such, unenforceable.

Employment Counsel: Employer’s MUST make sure that its non-compete / non-solicitation agreements are narrowly written to protect the legitimate interest of the business.  If not, they will not be enforceable.

Case Summary: The plaintiff, RLM Communications, Inc. (“RLM”) is a government contractor that specializes in cyber security, information technology, and information assurance.  The defendant, Amy Tuschen (“Tuschen”), worked for RLM for six years managing an information-assurance contract with the U.S. Government. She resigned about a year before this contract was due to expire and joined a competitor, eScience and Technology Solutions (“eScience”).  Prior to departing, Tuschen copied several files related to the contract that she managed onto a CD, which she allegedly provided to her successor at RLM.  Initially, RLM did not object to Tuschen’s resignation and new job.  However, when RLM learned that eScience planned to bid against RLM on a government contract similar to the one Tuschen had managed at RLM, RLM filed lawsuit against Tuschen and eScience.

 

RLM’s filed a suit in North Carolina that included multiple claims against Tuschen and eScience, including breach of Tuschen’s non-compete and confidentiality agreements, misappropriation of trade secrets, conversion, tortious interference with contractual relations and unfair and deceptive trade practices, and civil conspiracy.  The district court granted summary judgment on all claims to Tuschen and eScience.  RLM filed an appeal. The appeals court upheld the district court’s decision based on the following analysis:

  1. Non-compete. The court concluded that Tuschen did not violate her noncompete agreement. It found that the agreement itself was overly broad and therefore invalid because it prohibited direct and indirect participation in similar businesses. In relevant part, Tuschen’s noncompete prohibited her from “directly or indirectly” participating in a business similar to RLM and located in the same geographical area.  Specifically, the non-compete provided:

While I, the Employee, am employed by Employer, or for 1 years/months afterward, I will not directly or indirectly participate in a business that is similar to a business now or later operated by Employer in the same geographical area.  This includes participating in my own business or as a co-owner, director, officer, consultant, independent contractor, employee, or agent of another business.

The court concluded that this language created a “restriction on Tuschen’s future employment that is largely unmoored from RLM’s legitimate business interests,” and could be read as preventing Tuschen not only from working with a competitor in a similar position to the one she held at RLM, but also from doing any other job, such as mowing lawns, working as a realtor, etc., for any business that provided similar services.  As such, it was unenforceable.

  1. Confidentiality Agreement. RLM claimed that Tuschen breached her confidentiality agreement when she copied confidential files onto a CD without permission. The court, however, noted that this action would only constitute a breach if it was outside the scope of her professional duties. Tuschen testified that she only copied files in order to give them to her successor and so ease his transition into the job. RLM could offer no contradicting evidence to her testimony. Therefore, the court affirmed summary judgment as to this claim because RLM failed to provide sufficient evidence that Tuschen breached her confidentiality agreement by both copying information without permission and for reasons other than the furtherance of her professional duties to RLM.
  1. Misappropriation-of-trade-secrets. RLM claimed that Tuschen created a copy of the CD to share confidential information with eScience. The court reasoned that multiple interpretations of North Carolina’s misappropriation statute can “produce a rule sufficient to resolve the case: “When an employer brings a misappropriation claim against an employee, admitting that the employee had authorized access to its trade secrets at all relevant times, the employer must raise an inference of actual acquisition or use of trade secrets to survive summary judgment.” Applying this rule, the court rejected RLM’s misappropriation-of-trade-secrets claim because RLM authorized Tuschen to have access to its trade secrets, and it did not establish that she ever accessed them without proper authorization. Moreover, the court dismissed RLM’s claim that an “unexplained leap in technical capacity” permited an inference of misappropriation in this case because the only evidence of such a leap was eScience’s unsuccessful bid for the government contract.
  1. Tortious Interference with Contractual Relations: Citing Peoples Sec. Life Ins. Co. v. Hooks, the court concluded that summary judgment was appropriate on RLM’s tortious interference claim because “competition in business constitutes justifiable interference in another’s business relations” and in the present case, there was no evidence that eScience was motivated by malice or anything other than normal competition in its dealings with Tuschen. 322 N.C. 216 (N.C. 667).  
  1. Other Claims: The court affirmed summary judgment on RLM’s conversion claim using its misappropriation-of-trade secrets analysis. Similarly, it dismissed RLM’s remaining claims of unfair and deceptive trade practices and civil conspiracy, reasoning that those claims relied on analysis that the court had already found meritless.

For additional information about this case or other employment law matters, please contact Merritt Green at mgreen@gcpc.com or (703)556-6505.  Mr. Green leads General Counsel, P.C.’s Employment Law Practice and has been representing employers (and occasionally employees) for over 18 years.

 

October 5, 2016 0

Pregnancy Discrimination: EEOC vs. Dimensions Healthcare Sys., No. PX15-2342

Pregnancy Discrimination: EEOC vs. Dimensions Healthcare Sys., No. PX15-2342

Case:  EEOC vs. Dimensions Healthcare Sys., No. PX15-2342 (D. Md. Sept. 2, 2016).

Issue:  Pregnancy Discrimination

Court Holding:  Employee provided sufficient evidence to defeat employer motion for summary judgment.

Employment Counsel:  Telling employee that she did not get promotion because “you were on maternity leave for a while,” will likely expose employer to pregnancy discrimination liability.

Case Summary:  In a September 2, 2016 decision, the Maryland U.S. District Court denied summary judgment for Dimensions Healthcare System in a case brought by the EEOC.  When discussing why female employee did not receive promotion, manager allegedly stated: “Well, like I said, he had a management background.  Plus, you were on maternity leave for a while.”  When reading this statement, it is easy in hindsight to realize that if actually stated, saying that an employee did not receive a promotion because she was on “maternity leave for a while,” was incredibly foolish and likely will cost the employer (or its insurance company) significantly. 

A plaintiff may survive summary judgment by establishing her Title VII discrimination claim either through direct and indirect evidence of discriminatory animus, or through the burden-shifting framework of McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973).  Under the direct method of proof, “[t]o avoid summary judgment, the plaintiff must produce direct evidence of a stated purpose to discriminate and/or [indirect] evidence of sufficient probative force to reflect a genuine issue of material fact.” Rhoads v. FDIC, 257 F.3d 373 , 391 (4th Cir. 2001).  

Under the burden-shifting framework, the plaintiff must establish a prima facie case of discrimination by a preponderance of the evidence. Then, the burden shifts to the defendant who [*6] must articulate a legitimate, nondiscriminatory reason for the adverse employment action. If the defendant offers a legitimate reason, the burden shifts back to the plaintiff to demonstrate that the reason offered by the employer is false. See McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973).

To establish a prima facie case, a plaintiff must present facts upon which a jury could conclude that, more likely than not, the defendant’s failure to promote was motivated by sex discrimination. More specifically, the plaintiff must produce sufficient evidence to show that: 1) plaintiff is a member of a protected class; 2) defendant had an open position for which she applied or sought to apply; 3) plaintiff was qualified for the position; and 4) plaintiff was rejected for the position under circumstances giving rise to an inference of unlawful discrimination. See Evans v. Techs. Applications & Serv. Co., 80 F.3d 954 , 959-60 (4th Cir. 1996).

In this case, the District Court determined that the plaintiff had presented sufficient evidence to survive summary judgment under both the direct evidence and the burden shifting tests.   The case will now proceed to a jury trial or, more likely than not, the parties will reach a settlement.

For additional information about this case or other employment law matters, please contact Merritt Green at mgreen@gcpc.com or (703)556-6505.  Mr. Green leads General Counsel, P.C.’s Employment Law Practiceand has been representing employers (and occasionally employees) for over 18 years.

September 30, 2016 0

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