Garden Leave: A Live American Example

From Virginia Non-Compete Law Blog's GARDEN-LEAVE EMPLOYMENT CONTRACTS

Want an example? In Bannister v. Bemis Co., Inc., (2009 U.S. App. LEXIS 3648, 8th Cir. Feb. 25, 2009) a Garden-Leave clause was examined by a federal court in Arkansas. Bannister served as director of product development for Bemis. He signed a non-compete agreement which contained an 18-month post-employment restriction against working for a competing business. However, Bannister's contract provided he could receive his base-salary from Bemis if he was "unable to obtain employment consistent with his abilities and education solely because of the non-compete clause." This is called a "Garden-Leave" provision.

I call that a tidily succinct description of garden leave.

Virginia Non-Compete Law Blog goes on to make this suggestion:

My Take: If you bring highly sought after skills to you job and the employer wants you to sign a restrictive non-compete agreement, request a Garden-Leave provision in your employment agreement.

This sounds like a good strategy but for one thing: if the position does not pay a salary, there is no base salary to be paid during the garden leave period.

Overtime Wages-

Pay attention to The Forgotten Overtime Exemption from workforce.com:

Much less well known is the overtime exemption set forth in Section 7(i) of the Fair Labor Standards Act. Limited to retail or service establishments, this exemption focuses not on the duties of the employee, but on how the employee is paid. Qualifying establishments are relieved from paying overtime to employees who are paid the majority of their compensation in commissions on goods or services and who earn at least one-and-a-half times the minimum wage. Given that all of these conditions must be present before an employer may utilize the exemption, employers should be wary of the nuances associated with each requirement.

Companies with employees who set their own schedules or work uncontrollable numbers of hours, or that need to align labor costs more closely with revenue, should consider whether this exemption for might work for them.

Employees currently paid on an hourly or other basis can be converted to exempt 7(i) commissioned employees by basing their compensation on the amount of revenue that they or their work unit generate. Once properly implemented, the company can be more flexible about scheduling and need not worry about employees who may inadvertently cross the 40-hour threshold. Employees who generate more revenue for the company will see their compensation increase commensurately and the company can be assured that this higher compensation is fully funded by higher revenue.

Following up on "Tips for an EEOC Mediation"

Workforce.com published its second installment about EEOC mediation tips, 10-Plus Tips for Succeeding in an EEOC Mediation: Part Two . I suggest you read it. I wrote up the first installment under Tips for an EEOC Mediation.

Following up on "Indy Strippers Sue Over Wages"

The Indiana Lawyer reports the dancers of my Indy Strippers Sue Over Wages have been certified as a class for a class action suit, Court certifies exotic dancer suit as class action:

"Anyone who danced in the past three years at one Indianapolis strip club embroiled in a lawsuit over minimum wage may be able to collect on unpaid wages, ruled a District Court judge Wednesday.

Southern District Judge William Lawrence granted a motion for notice to potential plaintiffs and certified the matter as a collective action in Wendi R. Morse and Felicia Kay Pennington, individually, and on behalf of others similarly situated v. M E R Corp. d/b/a Dancers Showclub, No. 1:08-cv-1389."

Employment law - Practical Tip on Dealing With a Discrimination Charge

Workforce.com provides A Few Practical Tips on Responding to a Discrimination Charge. Remember that federal jurisdiction under Title VII begins at 14 employees.

Don’t panic when you receive a discrimination charge. Most people practicing in this area, including the investigators, would agree that the large majority of the charges filed will be found to be "without reasonable cause", meaning that the investigating agency will determine there are insufficient facts to support the allegations.

***

There is a "Notice of Charge of Discrimination" that accompanies the charge and commonly includes a very short response deadline. You should feel free to promptly request an extension of time for your response when you receive the charge; a 30-day extension is commonly granted.

***

If you determine that the filing date is more than 300 days from the date of the incident, the charge should be time barred and you should send a letter to the investigator explaining those circumstances. If the agency insists that you are mistaken, you should insist that they explain their position in writing and should include in your response an explanation that the charge is time barred.

***

Ideally, an investigation should have been conducted at the time the employee complained about being discriminated against by following the employer’s complaint procedure. If that did not happen, upon receipt of the charge it will be necessary that you and your team conduct a prompt, thorough and objective investigation to determine what happened. Doing it right is very important to effectively respond to the charge or to determine whether a settlement should be explored.

Ideally, the person conducting the investigation should not be an attorney. Many courts have ruled that the attorney-client privilege is lost when the attorney puts on the investigator’s hat. Rather, to maintain the privilege, the person making the investigation should report everything to the attorney by correspondence that clearly indicates the information is confidential and attorney-client privileged.

***

A brief, concise response, on the other hand, will be more favorably received by investigator, will probably be considered more credible and will put you off on the right step. You should keep in mind that unless you can produce credible, persuasive evidence such as witness statements and the comparative information discussed above, the investigating agency will usually believe the complainant’s version of what happened.

What notice does an employee have to give an employer for FMLA leave?

If the need is foreseeable, then read 29 CFR 825.302 from the federal Department of Labor.

Tips for an EEOC Mediation

I am sure no one wants to think of employment problems over the holidays - except lawyers, of course. So take a look at workforce.com's 10-Plus Tips for Succeeding in an EEOC Mediation: Part One after the New Year's parties:

"Simmering-pot employees have turned off, left the organization prematurely,
sabotaged their companies or gone out on extended stress leaves. Some of these
pots, if left unattended, will become the people who file charges with the Equal
Employment Opportunity Commission, alleging discrimination. The best goal for
your organization is to stay out of the EEOC process, and mediation can help you
do that. But if a charge has been filed and you’re before the EEOC, consider
these tips on how to prepare for success in a mediation. In part two of this
article, I’ll suggest some tips for the EEOC mediation itself, as well as some
ideas for steering clear of problems in the future."

Employment law: A Termination Checklist

workforce.com published Termination Checklist developed by Yvonne Mug. The article describes Ms. Mug as the HR manager for Summit Industries. I like it because it fits in with my philosophy that an ounce of prevention beats a pound of litigation. Do check it out.

Avoiding Lawsuits When Hired by a Competitor

Network World's How to Avoid Getting Sued by a Former Employer focuses on the IT worker but its general advice is not something that any employee being hired by a competitor should ignore.

I also think there are some good pointers here for employers. Litigation costs run in both directions.

Follow the link below for "Trade Secrets" for reports on trade secrets litigation and you will employees departing for competitors constitute the majority of cases.

As for the article:

Such underhanded business practices-both the recruiting to obtain trade secrets and the knee-jerk litigation-pose a threat to IT workers, whose specialized knowledge and skills remain in demand even during this economic downturn. IT professionals need to be careful about taking jobs with competitors because their former employers could try to sue them for "misappropriating trade secrets," even if they did nothing of the sort, says Kump. He expects such litigation to increase as the economic downturn continues.

This is not to say that IT professionals should avoid taking jobs with competitors (unless, of course, they've signed a non-compete agreement with their existing employer). They just need to be aware that the potential exists, and they must take measures to protect themselves.

Kump spoke with CIO.com about the rise in intellectual property litigation and ways employees can avoid it.

***

How can an employee protect himself or herself from such lawsuits?

A number of ways. There are steps they can take before they leave a job. That is, when they're ready to leave, to announce their
resignation and make a full disclosure of what they're taking and not taking. I advise people to make a list of everything they're taking from their office, such as family pictures and diplomas, and make it clear that you're not taking any [company] information with you. Employers will typically ask this of you.

I would also offer to show bags and boxes and anything you take out of the building. Give your employer an inventory and make sure your employer signs off on it. Make sure your employer has taken all information and systems. Access to passwords, if you have a BlackBerry with customer information on it, all of that should be rendered inoperable.

Another thing an employee should do if they think there's a possibility they could get sued-even if they haven't done anything
wrong-is to have their new employer indemnify them. Have an understanding with your new employer in writing that if for any
reason you're sued and you've done nothing wrong, that your new employer will cover your legal expenses

Some of those tips might have caught this kind of problem early: Former Silicon Valley engineers sentenced for trying to sell technology secrets to China

Trade Secrets: More Papermaster, IBM and Apple News

I find this case is staying interesting. For example, as MacWorld reports in IBM posts $3 million bond in Papermaster lawsuit the case has some points that apply generally.

The $3 million bond was put in place to pay Papermaster should the court decide IBM’s case is without merit and the injunction against Papermaster shouldn’t have been granted. Final damages will be decided by the court, but they won’t exceed the bond amount.

***

He also said that when he accepted the job at Apple, he signed an Intellectual Property Agreement in which he agreed not to disclose or bring onto Apple property any “confidential, or proprietary, or secret information” of IBM.

I have seen a few cases fail at this stage because of the lack of a bond. Indiana Trial Rule 65 deal with injunctions and says this about a bond:

(C) Security. No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained. No such security shall be required of a governmental organization, but such governmental organization shall be responsible for costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained. The provisions of Rule 65.1 apply to a surety upon a bond or undertaking under this rule.

I would not file a motion for a preliminary injunction without first securing the bond for the injunction. Of course, IBM need not have too much trouble affording the security for a bond.

Meanwhile, Mr. Papermaster reacts to the lawsuit with his own counterclaim. A very good move in my opinion as tactics regardless of its merits (not having read the Complaint or Counterclaim, I am not willing to not put in a qualifier here). Again from MacWorld:

Papermaster countersues IBM in effort to join Apple

In an effort to sever ties with his former employer, Mark Papermaster has countersued IBM, claiming among other things that Apple and IBM are not significant competitors.

Papermaster contends that IBM’s noncompetition agreement precludes him from working for any Business Enterprise or any major competitor of IBM. The lawsuit argues that since IBM business enterprise services and Apple’s business is the design, manufacturing and marketing of consumer electronic products, the two are not major competitors.

Providing further evidence of the noncompetitive nature of the companies,

Papermaster further explains that at IBM he was the vice president of Blade Development, while in his role at Apple he would be in charge of product development for the iPod and the iPhone.

The countersuit asserts the noncompetitive agreement “is unreasonably broad in that it purports to impose an unreasonably lengthy time limitation.

In the world of technology, any trade secrets that Mr. Papermaster
possesses would lose their value prior to the expiration of a year.”

Papermaster says the noncompetitive agreement is flawed in another way. The agreement says that it is “governed by, and construed in accordance with, the laws of the State of New York,” but he worked in Texas and

Apple is in California. Both of those states hold such noncompetition agreements are unenforceable.

This demonstrates a fairly common strategy for employees being subjected to a non-compete agreement. A point to employers who hire from their competitors, budgeting legal fees for defending and counterclaiming a lawsuit from the former employer is a good idea.

Thinking About Terminating an Employee?

Think about why you are firing the employee. Why? Think about the following from the workforce.com's ADA 'Association' Claim:

"The U.S. Court of Appeals for the 10th Circuit in Denver reversed, holding that the Trujillos raised a reasonable inference of PacifiCorp’s discriminatory motive to establish a prima facie case of association discrimination. The time proximity between Charlie’s expensive treatment and PacifiCorp’s investigation and termination of the Trujillos supported an inference of discrimination. The Trujillos also presented evidence that other employees accused of similar workplace misconduct were not fired. Trujillo v. PacifiCorp., 10th Cir., No. 06-8074 (5/7/08).

Impact: Even if there is a legitimate business reason for terminating an employee, disparate treatment of similarly situated employees by a company suggests a reasonable inference of pretext. Employers are advised that when considering taking action against workplace misconduct, they should take action that is consistent and is in line with company policy."

Terminating an employee in a fit of pique or bad temper is never a good idea. This may be evidence of a discriminatory intent at worst and grounds for filing an employment lawsuit at best.

Along with the advice above, I would add two things: 1) think about twice about why you are terminating the employee and 2) document everything.

Aging Workforce Increasing Age Discrimination Cases

Those employers with older (older being age 40 and over) employees need to read workforce.com's With an Aging Workforce, a Rising Risk of Discrimination Claims:

"With an economy that seems to be moving toward recession, the likelihood of litigation based on age discrimination claims is exacerbated. Many workers have seen their savings and retirement accounts take significant hits, thanks to a weakened stock market. The slumping real estate market compounds the problem. Equity that otherwise could be used for retirement is not available. Family homes sit with 'for sale' signs in the yard, and many people are strapped with multiple mortgages. All these factors increase the likelihood that baby boomers will look to the courts if they are terminated, no matter what the actual reason might have been.

The challenge for companies, then, is creating a structured employment environment that lessens the likelihood and potential severity of discrimination claims. Companies should:

*

Set expectations: In dealing with all levels and generations of employees, the first mandate is to clearly and repeatedly communicate the objective expectations of all positions. The playing field has to be even. Employees cannot reasonably be expected to meet the responsibilities of their positions if at the time of hire they do not clearly understand their ongoing targets and a defined set of boundaries in terms of reporting relationships and roles.

Employment law: Pregnancy Discrimination Persists

This interesting study comes from workforce.com Pregnancy Discrimination Persists 30 Years After It's Made Illegal:

"An analysis of Equal Employment Opportunity Commission data from fiscal year 1992 to fiscal year 2007 shows a 65 percent increase in pregnancy discrimination charges, according to a National Partnership for Women and Families study released Wednesday, October 29.

The problem is more acute for racial and ethnic minorities, the study says. From fiscal year 1996 to fiscal year 2005, pregnancy discrimination charges filed by women of color spiked 76 percent.

The survey also reveals that there is no safety in numbers for women. Of the EEOC claims made from 1996 to 2005, 53 percent were from the service, retail and financial services industries, which employ 70 percent of all women."

No good explanation for this outcome offered by the article.

Will Technology Lead to More Wage & Hour Lawsuits?

This is how I read workforce.com's E-mails, Phone Calls and Wage & Hour Problems whch does raise some interesting ideas that might just be on the horizon:

While a search of the Nexis database failed to turn up any instances so far of wage and hour lawsuits hinging upon Blackberry use, employment law specialists seem to think it’s inevitable, given both the proliferation of such devices and the clarity of the law on the issue.

"Nonexempt employees are being tethered to the company with Blackberrys and other devices," says Dan McCoy, an employment attorney and partner in the Mountain View, California, office of law firm Fenwick & West. If a worker gets a message from the boss or a client during breakfast or dinner and answers it, that counts as work time, just as surely as if the employee had come in early to the office or stayed late. "Blackberry time is work time," he says.

Similarly, an hourly worker who participates in a conference call during the drive home is on the clock, if his boss requires him to participate or doesn’t stop him from joining in, according to Robin Bond, the managing partner of Transition Strategies, a law firm based in Wayne, Pennsylvania.

Paul Lopez, director of the labor and employment practice at the firm of Tripp Scott in Fort Lauderdale Florida, advises companies to move proactively to protect themselves from overtime claims and possible lawsuits related to electronic devices.

The first step is to establish a clear policy on the use of Blackberrys and other devices outside the office, he says. Employees should be told that overtime spent using such devices must be documented, with possible disciplinary penalties for noncompliance.

However, a company should be careful not to state categorically that it will refuse to pay improperly documented overtime, Lopez explains.

"A lot of clients come to me and say, ‘I don’t have to pay this employee overtime, because they violated the overtime policy,’ " Lopez explains. "My response, is, ‘Eeehh, that’s not quite true.’ You can discipline them or fire them, but under the law, technically, you have to pay them. You don’t want to promulgate a policy that will lead to an FLSA complaint."

The burden of proof in overtime litigation rests primarily upon the employer, so it’s critical to have an effective system for documenting work done with electronic devices, Lopez says. One simple method is to require employees to copy any mail messages they send to their supervisor, as well as any spreadsheets, reports or other documents that they work on outside the office.

Employment law: Be Careful of What You Do Online

Yes, Blog Comments Can Tank Job Prospects from ABA Journal - Law News Now focuses on lawyers but do not think it might not apply to you or to your employers. Who it applies to depends on how tech savvy is the employer.

Writing in the Am Law Daily, Lynne Traverse of Bryan Cave gives an example. A student interviewing for a summer associate position listed her blog on her resume. When a lawyer checked out the blog, it contained an entry from the student’s spouse about the cities where she hoped to be working. The city where the Bryan Cave office was located was not among them.

Traverse explains that Bryan Cave invests a lot of money in summer associates, and wants to hire students who really want to work at the firm.

“Blogs are dangerous since they tend to contain random, stream of consciousness entries as well as posts from people other than the job candidate,” Traverse adds. Expect that potential employers will look at blogs as well as social networking websites. “Watch out for those party pictures and personal information you don't think an employer will see.”

Students should instead make sure their blogs help their job search by posting descriptions of meaningful student and community activities or discussions of legal issues.

Another Cost of Litigiation: A Bad REputation

I suggest every business owner read all of Workforce.com's Lawsuit Side Effect: A Bad Reputation but here are some highlights

The seven-, eight- and even nine-figure jury awards and settlements paid out by employers in lunch-break-related wage and hour lawsuits are only one part of the cost, experts warn.

They say highly publicized allegations of employee mistreatment can tarnish a company’s reputation with consumers, damage its employment brand and diminish the company’s value in the eyes of investors.

"The reputational risk is real," says Tim Smith, senior vice president of Walden Asset Management, a Boston-based firm that specializes in sustainable, socially responsible investments. "A company that doesn’t deal with the public directly isn’t as vulnerable, but for a consumer-
oriented outfit like a big retailer, these sorts of charges can be troubling."

Some of the consumer-brand damage may be self-inflicted; experts say that employees unhappy over what they perceive as unfair treatment are less likely to provide good customer service. "That ill feeling becomes part of your image," says labor law attorney Reuben Guttman, who is representing meatpacking plant workers in a wage and hour suit against Tyson Foods.

E-mails, Phone Calls and Wage & Hour Problems | workforce.com

While a search of the Nexis database failed to turn up any instances so far of wage and hour lawsuits hinging upon Blackberry use, employment law specialists seem to think it’s inevitable, given both the proliferation of such devices and the clarity of the law on the issue.

"Nonexempt employees are being tethered to the company with Blackberrys and other devices," says Dan McCoy, an employment attorney and partner in the Mountain View, California, office of law firm Fenwick & West. If a worker gets a message from the boss or a client during breakfast or dinner and answers it, that counts as work time, just as surely as if the employee had come in early to the office or stayed late. "Blackberry time is work time," he says.

Similarly, an hourly worker who participates in a conference call during the drive home is on the clock, if his boss requires him to participate or doesn’t stop him from joining in, according to Robin Bond, the managing partner of Transition Strategies, a law firm based in Wayne, Pennsylvania.

Paul Lopez, director of the labor and employment practice at the firm of Tripp Scott in Fort Lauderdale Florida, advises companies to move proactively to protect themselves from overtime claims and possible lawsuits related to electronic devices.

The first step is to establish a clear policy on the use of Blackberrys and other devices outside the office, he says. Employees should be told that overtime spent using such devices must be documented, with possible disciplinary penalties for noncompliance.

However, a company should be careful not to state categorically that it will refuse to pay improperly documented overtime, Lopez explains.

"A lot of clients come to me and say, ‘I don’t have to pay this employee overtime, because they violated the overtime policy,’ " Lopez explains. "My response, is, ‘Eeehh, that’s not quite true.’ You can discipline them or fire them, but under the law, technically, you have to pay them. You don’t want to promulgate a policy that will lead to an FLSA complaint."

The burden of proof in overtime litigation rests primarily upon the employer, so it’s critical to have an effective system for documenting work done with electronic devices, Lopez says. One simple method is to require employees to copy any mail messages they send to their supervisor, as well as any spreadsheets, reports or other documents that they work on outside the office.

Employment Law and Immigration Law: DHS Issues Supplemental Rule

I picked up this news from workforce.com with its article DHS Issues Supplemental 'No-Match' Rule, Pushes Enforcement:

While companies cope with financial market gyrations and a slowing economy, they have to keep an eye on immigration law.

In the latest move, the Department of Homeland Security took what it hopes is a decisive step toward forcing companies to act when employee names and Social Security numbers on tax forms don’t match information in the Social Security database.

On Thursday, October 23, Homeland Security Secretary Michael Chertoff announced a final supplemental rule that he said would answer most of the questions posed by a federal judge in Northern California who put an injunction on the original regulation. Chertoff is confident it will go into effect.

Under the regulation, companies would have to clear up “no-match” discrepancies within 93 days or fire employees in question. A no-match letter could serve as evidence that a company violated immigration law.

Indy Strippers Sue Over Wages

It seems I am getting further and ruther from employment law in my practice and this blog but reading Indy strippers sue club's owners from Muncie's Star Press leaves me thinking these women have a good case.

Wendi R. Morse, 27, and Felicia Kay Pennington, 26, claim Dancers Show Club owners violated federal labor laws by wrongly classifying them as independent contractors, according to a lawsuit filed Tuesday in U.S. District Court. The women's lawyers are seeking class-action status.

The lawsuit says the women worked only for tips, received no wages from the club and paid various fees back to the business. At the same time, they had no control over their schedules, were barred from working at other clubs and, the suit says, generally treated as employees and not contractors.

Clubs across the United States have been classifying strippers as independent contractors since the 1990s, according to news stories, but one advocate said that system is designed to take advantage of the women.

"Good for the girls who are doing this," said Mary Taylor, a Canadian author and business owner who worked as a stripper for 21 years at clubs throughout North America.

"It's easy to get into for a lot of women, but they are getting ripped off by these club owners," Taylor said. "They are holding them hostage."

Taylor echoed key allegations of the lawsuit, saying club owners routinely treat entertainers as independents while telling them when to work and for how long, as well as taking a cut of their earnings.

"How can you be self-employed when somebody is telling you what to do and taking your money?" Taylor said. "They are employees. They should be entitled to all the benefits that an employee has."

How The Federal Courts Treat Employment Discrimination Plaintiffs

According to a new report, plaintiffs in employment discrimination lawsuits are not so successful in federal court. Something to think about for both employers and employees.

ACS hosted a panel discussion on a new article published in the Harvard Law and Policy Review that concluded that workers bringing employment discrimination lawsuits increasingly fare poorly in the federal courts.

Studying data from the Administrative Office of the United States Courts, authors Stewart J. Schwab, dean of the Cornell Law School, and Kevin M. Clermont, law professor at the Cornell Law School, found that “the federal courts disfavor employment discrimination plaintiffs, who are now forswearing use of those courts.” The authors concluded that they’ve “unearthed an anti-plaintiff effect that is troublesome.”

Jackson Lewis - OFCCP Directs Employers on Counting Employees in Setting Affirmative Action Plan Goals

From Jackson Lewis some importnat information for employers - OFCCP Directs Employers on Counting Employees in Setting Affirmative Action Plan Goals:

"The Office of Federal Contract Compliance Programs (“OFCCP”) has updated its existing interim guidance regarding the use of the “new” race/ethnicity categories as part of affirmative action plan preparation. As part of the updated interim guidance, the OFCCP has advised that employers should count employees identifying themselves as “Two or More Races” as minorities in analyzing minority representation as compared to availability (when conducting utilization analyses and setting placement goals). Prior to this guidance, the OFCCP had not provided clear direction to employers about how to classify employees properly who identify themselves as “Two or More Races.”
In 2007, the EEOC changed its EEO-1 report form. Among other things, it:

1. Separated “Hispanic or Latino” from other race categories and instead classifying it as a separate “ethnic” category;
2. Added a “Two or More Races” race category; and
3. Divided the former “Asian or Pacific Islander” race category into two separate categories – “Asian” and “Native Hawaiian or Pacific Islander.”"

Do read they complete post.