Smooth Transitions

What the Blue Line Means for Texas Employers

Rob Radcliff — Fri, 11 May 2012 03:24:59 -0600

Texas is a blue line state when it comes to the enforcement of non-compete agreements. What does this mean? It means that courts can perform or rewrite non-compete agreements so that they are enforceable under Texas law. What this really means is, the judge can rewrite the contract to a form that he or she thinks is palatable and fair.

In some states, the blue line does not apply. This means that if the court finds a non-compete is overly broad or unenforceable, there is no way to enforce the agreement and the parties can operate as if it never existed. In Texas, employers who may be concerned about the enforceability of a non-compete should always remember that they will be in a position in litigation to request that the court re-form the agreement to make it enforceable. This usually takes the form of the declaratory judgment action and could potentially give rise to attorneys' fees.

Considering Arrest/Conviction Records in the Hiring Process

Rob Radcliff — Fri, 04 May 2012 03:52:37 -0600

Last week, the EEOC provided new enforcement guidelines to be used for determining whether the use of arrest and conviction records is proper in the hiring process as it relates to Title VII. There has been a fair amount of electronic ink spilled on this topic and I have identified some good sources below for review.

The take away from the article and new guidlines is that employers cannot use arrest and conviction records with impunity. Unfortunately, it seems counterintuitive that an employer could not disqualify a potential candidate based upon a conviction. The EEOC seems to be saying that if that policy is not uniformly applied or if it has disparate impact, there could be ramifications against the employer.

I understand the distinction the EEOC makes between conviction and arrest records, although arrests usually are the result of some underlying conduct that the employer should consider. That said, it seems a little much that the EEOC is going out of its way to prepare these new guidelines and regulations with respect to convicted individuals. I am all for rehabilitation, but ultimately, the employer should be able to eliminate job candidates based upon convictions, when that criteria is uniformly enforced.

Below are some articles you might consider and the regulations from the EEOC:

Guidance from the EEOC -http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm

Q&A from the EEOC - http://www.eeoc.gov/laws/guidance/qa_arrest_conviction.cfm

Connecticut Lawyer Daniel Schwartz on the Issue

Ohio Lawyer Jon Hyman's Take

The Delaware Employment Law Blog Weighs In

Lack of Jury Trials Isn't Bad for Employers

Rob Radcliff — Tue, 01 May 2012 10:02:24 -0600

It should be no surprise that civil trials with juries are on a downward trend. A recent Dallas Morning News article cites a number of factors from tort reform, the expense of trial, activist judges, binding arbitration, and the Texas Supreme Court.

The most surprising was the theory that Judges distrust juries and therefore would rather resolve the case themselves as opposed to letting a jury. Certainly there has been a rise in the granting of summary judgments according to the article, but I'm not sure that indicates a judicial distrust.

The reality is that for employers and business owners this is good news. Employers do not want their employment disputes being dealt with by juries in most cases for the simple fact that everyone has been an employee, but not everyone has been an employer. Certainly jury trials are a fundamental cornerstone of our judicial system, but that doesn't mean they make sense for employers. As discussed here there are numerous ways to avoid juries from arbitration to jury trial waivers - consider them.

Firing Based on Weight

Rob Radcliff — Fri, 27 Apr 2012 03:19:28 -0600

A few weeks ago we discussed a Texas employer hiring new employees based upon their Body Mass Index. The dangers of considering weight in employment decisions were recently exemplified in a press release from the EEOC.

In that release, it was announced that a treatment facility for chemically dependent women and children was paying $125,000 to settle a disability discrimination suit filed in September 2010 by the EEOC. The suit alleged that the employer violated the ADA because it fired a former employee because of her disability, severe obesity, even though she was able to perform the essential functions of her job. Unfortunately, the employee died prior to the suit being filed. The EEOC's take on the settlement:

All people with a disability who are qualified for their position are protected from unlawful discrimination,” said EEOC General Counsel David Lopez. “Severe obesity is no exception. It is important for employers to realize that stereotypes, myths, and biases about that condition should not be the basis of employment decisions.

Courts have previously concluded that severe obesity may qualify as a disability regardless of whether it is caused by a physiological disorder. Hiring or firing policies based on weight may be actionable. Employers need to tread lightly if they are going to consider weight in a hiring/firing decision.(H/T disability law.blogspot.com)

Financial Advisors Still on the Move

Rob Radcliff — Mon, 23 Apr 2012 03:14:26 -0600

A recent article from Financial Planning suggests that financial advisors continue to be on the move in 2012. But the trend is not departures to the traditional wirehouses - instead, they are going independent:

Twelve percent of financial advisors change firms annually, according to [Chip] Roame, but two-thirds of those advisors are still “landing” at another wirehouse. Roame said he expects more advisors to shift to the independent channel. “I think the big elephants have moved,” he said. “The more interesting thing is who might follow.”

Roame expects the traditional wirehouses will try to meet these type of producers half-way by creating an alternative:

Roame said he expected one of the wirehouses would have already responded was by creating a “halfway house” as an alternative for advisors that were considering independence. This “halfway house,” which he predicts will happen at some point this year, would enable advisors some of the benefits of independence and ownership while remaining under the wirehouse umbrella.

FAs considering making a move should be aware that moving to a non-protocol firm could bring a potential lawsuit from their previous employer. No matter the move, FAs should always consider:

Are they employed at a protocol firm?
Would they be moving to a protocol firm?
If they are not moving between protocol firms, what is the likelihood that they will be sued over any restrictive covenants (non-compete - non-solicits) that exist in their contracts?
Is the financial upside of new employment going to outweigh the paying potential financial losses of moving to a new firm?
Is the new employer in a position to help the FA successfully move their business - are they up for the fight?
What does the new employer's employment agreement look like? Are there more restrictive covenants? Are they more burdensome?

These are but a few areas to consider. As with any employment move, the employee must make a smart decision based on the pros and the cons. The grass is always greener on the other side of the fence.

Synthes Continues to Sue

Rob Radcliff — Tue, 10 Apr 2012 12:44:53 -0600

At the beginning of the year, we predicted that health care related litigation would continue to rise through 2012 as that industry continues to grow, in large part because of our aging population. Mentioned in the post were some lawsuits filed by Synthes, a European-based medical device manufacturer. Synthes has historically enforced its non-compete and non-solicitation agreements against former sales persons around the United States. The medical device industry is big business and in many cases, based on strong relationships with doctors.

Synthes continues to enforce those agreements. In a recent case, Synthes filed suit against a former salesperson in the Denver, Colorado area, who left Synthes and went off to start his own competing medical device venture. Synthes sued and the employee counterclaimed. The counterclaim is interesting. Whether it has any merit, is another question. Basically, he asserts that Synthes tactics violate antitrust laws.

Whether you love or hate Synthes, you have to respect their tenacity and the seriousness with which they approach their post-employment covenants. As we have discussed here previously, employers with these type of agreements should uniformly enforce them, and not make exceptions or ignore violations of them. This both supports the actual claim in court and also acts as a deterrent when an employee is considered breaching a post-employment covenant. Bottom line, if you're going to draft these agreements, enforce them and take them seriously. Post-employment covenants make sense in certain situations depending upon your venue and law.

Is your BMI too high to work for this Texas Hospital?

Rob Radcliff — Fri, 06 Apr 2012 03:02:38 -0600

Bruce Carton of law.com tracked down a great story about a Victoria, Texas hospital (in between San Antonio and Houston) that has implemented a hiring policy that requires potential employees to have a Body Mass Index of less than 35. According to the Texas Tribune, the policy shapes up like this:

Existing employees who become obese over the course of their employment are not terminated;
The hospital offers to help job candidates get their body mass index down;
The policy is based upon the concept that an employee's physique "should fit with a representational image or specific mental projects of the job of a health care professional."

Suzanne Lucas provides her take on the policy and points out that BMI is not a good indicator of obesity. Of course, we can always debate over what constitutes obesity, the bottom line is that this country has a weight problem.

Now the legality of the policy is another issue. Being overweight is not a protected class, but a policy like this that has a disparate impact on a particular group could be.

"Health qualifications" for potential jobs are here to stay. Earlier in the year, a Texas hospital implemented a no smoking hiring policy. It would appear that health care business have a pretty good argument that nondiscriminatory policies which promote health, such as a no smoking or obesity policy make sense.

The bottom line is that more and more employers are going to implement these type of policies. Whether or not President Obama's health care legislation is upheld by the Supreme Court, the cost of health care continues to rise for private employers. This is going to force private employers to consider health-related issues as they related to their health premiums, and will flow through into the hiring process. Employers will have to be very careful in terms of what policies they ultimately implement to ensure they are not discriminatory.

Is Social Media Legislation Coming Your Way?

Rob Radcliff — Wed, 21 Mar 2012 08:21:04 -0600

Legislation regarding social media is on the rise. Commentators spend a lot of time monitoring the implications of social media in the employment and lawsuit context but the judicial branch is now weighing in as well. A number of legislatures have already enacted laws that address what happens to social media accounts like Facebook or Twitter upon a person's death. Some states are also considering restricting potential employers from requesting a person's social network password during the hiring process.

Where else could we see legislation? Like cases, the scenarios are endless: (1) laws that address employers monitoring employee activities; (2) use of social media by companies that conduct background screens both in and out of the hiring process; (3) use of social media screening in university or school applications; (4) the use of social media in lawsuits both criminal and civil; and (5) even use of social media in credit checks and loan applications. Of course, the use of social media information by companies like Facebook and Google are discussed routinely as they change their privacy policies. Certainly, legislatures will weigh on privacy issues as well.

The point is, as we contribute more and more to our online history through social media, a relatively new phenomena, there will be more ramifications for what that information can be used for by employers, advertisers, government agencies, etc. The legislative branch will continue to address the use of social media through legislation instead of letting the common law evolve because so many people are now online and it is a sensitive topic. We will continue to monitor this.

Avoiding Employee Theft

Rob Radcliff — Fri, 16 Mar 2012 03:51:33 -0600

Employees stealing from their employer is nothing new. Recently, a lawyer and his wife who were employed by the same firm were convicted of stealing in excess of $100,000 pounds from their firm's London office. They did it with bogus expense reimbursements. This story raises the importance of having clear policies in place for expense reimbursement.

One area that employers should always be sensitive to in terms of potential theft are expense reimbursements. I cannot tell you the number of times I have had to sit through a deposition where an employee/officer, or owner in a closely held company is raked over the coals over the propriety of their expense reports. Unfortunately, there are many instances where companies, especially smaller companies, do not have clear policies in place in terms of what is reimbursable and what is not. The reality of the situation is the employee simply submits the reimbursement to be signed off on without any real detail or scrutiny paid by management. Avoid these situations.

Companies need to have clear policies, regardless of their size, in terms of what items can be reimbursed versus what items cannot be reimbursed. In addition to having these types of substantive guidance, an employer also needs to have clear procedures in place in terms of completion of expense reports, approval of expense reports and further auditing of expense reports on down the line. It will always be difficult to uncover individuals engaged in systemic fraud, but having clear policies in place is a first step.

Recent Interview Link

Rob Radcliff — Mon, 05 Mar 2012 15:01:35 -0600

Here is a link to my appearance on Stephanie Thompson's Proactive Employer Employer Podcast. I hope you find it informative.

Common Sense Can't Be Taught

Rob Radcliff — Tue, 28 Feb 2012 03:05:46 -0600

Sometimes employers are stuck with employees who simply do not exercise common sense or good judgment. At the end of the day, they are left wondering whether the employee, who appeared to be so strong and qualified on paper, simply won't make the cut because they fail to exercise the judgment necessary for the job. It begs the question - can that common sense or judgment be taught - I don't think so. Certainly, as we gain more experience our judgment improves (hopefully) but common sense or street smarts seems another matter.

I was in a restaurant the other day and happened to look in the restroom on the towel dispenser, a picture of which I have included. Unfortunately, that dispenser made me wonder about the quality of personnel at the restaurant. I don't have an issue with any of the employees, but I wonder why such explicit directions were necessary to instruct an employee as to how to wash their hands. I believe this is simply part of the company's risk management policy but it makes one wonder.

If you have an employee that needs this level of instruction on how to wash their hands, I'm not sure they're actually going to be a very good employee. Similar to the hand washing example, there are certain situations that employees will deal with every day where common sense and good judgment are required. This ranges from dealing with superiors, to customers, to subordinates. Lack of the type of judgment that is necessary will be apparent and will not change. The employer is going to have to make a change, the question is not so much as if, just when.

Upcoming Interview on Employee Departures

Rob Radcliff — Fri, 24 Feb 2012 07:28:20 -0600

Next Friday, March 2, I will be appearing on Stephanie Thompson's Proactive Employer Employer Podcast. Stephanie's podcast is top notch and addresses a wide range of HR related issues. We will be discussing hiring/firing issues as well as post-employment covenants. Here is a little information about the podcast:

The Proactive Employer Podcast, hosted by Stephanie R. Thomas, is the leading weekly broadcast dedicated to EEO compliance and employment litigation risk management. The podcast covers a wide range of topics - HR best practices, social media in recruiting and hiring, compensation analyses, terminations and reductions in force, FLSA issues, gender and race discrimination, religious discrimination, disabilities, Department of Labor, EEOC and OFCCP issues, and current issues in employment law. Podcast guests include top employment lawyers, industry professionals, and educators. The listener base includes HR professionals, corporate counsel, employment attorneys, expert consultants, and others interested in EEO compliance issues in the United States and around the world.

The podcast airs every Friday morning at 8:30 AM Eastern on BlogTalkRadio, and is available for on-demand listening the same day here or via iTunes.

The $1 Jury Award for Specialized Bicycles

Rob Radcliff — Fri, 03 Feb 2012 16:46:03 -0600

I’ve been riding bikes and racing triathlons for several years and been able to ride in some amazing places. Below is a picture of my brother, my Dad, and me during a trip to France in 2010.

Specialized is a premier American bicycle manufacturing company that has had significant success in the European peleton and in the triathlon world. They are also very aggressive about defending their technology.

Specialized sued two former employees in California who were starting a competing bike company. The lawsuit claimed the employees were using proprietary information and violating their non-compete agreements.

The case went to trial and the jury awarded Specialized $1.00. The jury seems to have agreed that there was a breach of contract, but no real damage. Regardless, Specialized was able to slow down the progress of the fledgling company through litigation. As one of the former employees noted:

The bike industry is all about the small amount of innovation that brings new people in. We should all celebrate that. Between them and us, we spent 2.5 million dollars on this. It’s just so silly. Think of what we could have done with all of that (to improve bicycles).

No one really won in the lawsuit except the lawyers. Specialized has a $1 verdict and both companies have incurred significant legal fees. Now they can get on with the real competition - who can build the better bike.

The Upside of a Trial?

Rob Radcliff — Fri, 03 Feb 2012 10:35:47 -0600

Last week we talked about the considerations, frankly negative considerations, employers and business owners should consider before they go to trial. That post raises the following question: What, if any benefit is there to a trial for a company?

Frankly, I am not sure there are any, unless demands made by the Plaintiff are so extreme that settlement is simply not an option. Even when a company wins, it may lose, in terms of the attorneys’ fees incurred. Winning a trial or case is all relative.

If the Plaintiff offers to settle a case for $500 and you win the case, but end up spending $1,000 in attorneys’ fees, that may be a win in principle but not financially. Likewise, if a Plaintiff makes a settlement demand of $500 and the jury awards $100 and you’ve incurred attorneys’ fees of an additional $200, that is technically a win. Whether a case is ultimately a win or a loss is in the eye of the beholder. Principle is a wonderful thing. I have had many clients tell me that they would rather spend the money with me than pay the Plaintiff any money whatsoever. Unfortunately, that story never usually turns out that well.

The reality is, trials are few and far between in our system. It is usually very bad cases that are tried or cases where one side misevaluates their exposure or chance for success making a trial necessary. Whether to settle or try a case should at all times be a business decision based on the financial ramifications and the advice of attorneys. Keep the emotion out of it.

Courtroom Lessons for the Business Owner/Employer

Rob Radcliff — Tue, 31 Jan 2012 03:18:37 -0600

I know it's been a while since my last post, but a trial always gets in the way of blog posts. So after the dust has settled on the trial I have a few thoughts on what business owners and employers should always consider when considering the pros/cons of going to trial. Hopefully these are things that you already knew but better to discuss now than later. So, off we go:

Loss of Control - The judge and jury will be making the decision, not management. Unfortunately you can't always predict what the fact finder will do.
Trials are expensive - That's not groundbreaking news, but think about all of the extra costs: (a) multiple lawyers, paralegals, and support staff working around the clock on the case (depending on size of course); costs for courtroom presentation equipment (rentals); meals for all involved in the trial; and the costs involved in having you employers tied up in a trial.
Trials are a time-suck - Employee witnesses will have to be on call. Lawyers can never quite tell when the employee will testify. Of course, a client representative will have to be at trial the whole time.
Trials are stressful for all involved.
People (witnesses) don't always say what they should or what you think they will say;
Things go wrong during trials that you don't expect;
The trial is not the end - there are always filings after the verdict, maybe another mediation, maybe even an appeal; and
Did I mention trials are expensive?

IRS Misclassification Amnesty - Good or Bad?

Rob Radcliff — Thu, 12 Jan 2012 03:30:52 -0600

Recently the IRS came forward with an amnesty program for workers who improperly classify their employees as contractors. There are a number of issues in considering the program. These include the interplay between the IRS and the Department of Labor, the effect such an amnesty agreement would have on your business going forward, and whether the business actually misclassified its contractors.

The Proactive Employer podcast considered the issue recently. I would recommend that discussion as a starting point for anyone considering this issue. It is complex and can have fairly significant ramifications. Please consult with an attorney before you make a decision one way or the other as to proceeding.

Get Ready for More Healthcare Non-Competes

Rob Radcliff — Mon, 09 Jan 2012 03:40:48 -0600

Medical device manufacture, Synthes Medical Company, has filed a number of lawsuits against former employees alleged to have violated non-compete and non-solicitation agreements. The lawsuits illustrate the rise of litigation within the medical world over non-competes.

Synthes, with whom I have firsthand experience, is very aggressive in prosecuting former employees who have violated non-compete agreements and non-solicitation agreements, against its former salespersons. A lot of this litigation has to deal with spinal implants, which are not surprisingly, very lucrative.

The medical industry is growing, and will continue to grow as our baby boomer generation ages. The projections are staggering:

By 2035, in the absence of change, spending for Medicare alone (which is more likely to be impacted by aging Boomers) will have more than doubled to 8 percent [of GDP], and by 2080 it will have grown to 15 percent.

The forecast for medical industry litigation includes more non-compete disputes between doctors and their medical groups as well as on the sales side of medical devices such as the Synthes lawsuits. As with any non-compete agreement, employers need to make sure that if they are using these agreements they will stick. Meaning employers need to have a strategy in place to enforce them and not simply put them in an employment contract as an afterthought. This is specifically an issue when you have sales persons in different state jurisdictions with different laws.

Protecting Your Business In 2012

Rob Radcliff — Sun, 01 Jan 2012 07:46:43 -0600

Happy New Year!

Last year the Texas Supreme Court altered the non-compete landscape in Marsh v. Cook. As lower courts construe the opinion we will see what its impact is on employers and employees. The takeaway from the opinion should be that employers will attempt to offer other forms of consideration, like stock options, signing bonuses, etc., in exchange for post-employment agreements like non-competes and non-solicits. The days of limited non-competes/non-solicits based only upon the exchange of propriety information, trade secrets, or training appears to be over. This means industries that typically do not use non-competes could. That said, employers should be skeptical of the ramifications of the Marsh opinion until there is guidance from other courts.

Employers should be doing all they can to protect their business in 2012 from the departing employee. The cold reality is in an economy short on jobs, potential employees will be more willing to sign non-compete agreements. In addition to the run-of-the-mill non-compete, employers should also consider non-solicitation agreements, anti-raid provisions, and even a garden leave policy (all discussed here previously).

Besides post-employment covenants there are general day to day business practices that are a necessity. True trade secrets need to be protected through restricted access that incorporates some type of password as well as protections that prevent the employee from emailing such information or putting it on a jump drive and walking out the door. It routinely happens and employers need to be vigilant in protecting proprietary information.

Finally, have termination/transition policies in place. Once an employee is fired or determines they are going to leave, cut off their email and end their access to the computer network or other sensitive information. It also makes sense to audit any of their recent activity to determine if they have taken proprietary information through jump drives, email, or other storage devices. It pays to be paranoid.

The End of Year HR Punchlist

Rob Radcliff — Tue, 13 Dec 2011 10:13:52 -0600

Earlier in the week we discussed policies and procedures that should be in place to deal with end of year employee departures. Companies should also consider a number of other HR related issues as the year draws to a close. Here are my thoughts:

Evaluation of all employment policies, including the employee handbook;
A review of all federal and state law changes that may impact employment practices - talk to your lawyer;
A review of all employment contracts;
A review of all employment files - are they up to snuff?; and
An evaluation as to whether the company should adopt post-employment covenants including non-competes, non-solicitations, and garden leave policies.

Now is the time to make any necessary changes before the New Year begins. Let me know if you have any additions to the list.

The Inevitable End of Year Employment Move

Rob Radcliff — Thu, 01 Dec 2011 16:52:41 -0600

Generally, many employees will wait to move to another employer until after they have received any year end bonuses or commissions they are due. We are all familiar with stories where a top producer bolts after they get their end of year check.

For these reasons, it is important the employers be prepared to review company policies for employment transitions. This would include post-employment covenants such as non-competes.

Critical to the employment transition practice is ensuring that the employer has protected any proprietary or trade secret information that departing employees can access. Departing employees should immediately lose access to any type of proprietary or trade secret information. This should include locking the employee out of their email account or limiting access. That employee is now a competitor.

Employers who are vigilant about having these types of policies in place will ultimately protect their business and their product from an inevitable employee departure.