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- Beware the Deadlock: Delaware Courts Step in on Corporate Dysfunction
- Insider Trading and Related Risks for Executive Branch Employees: Pay Attention to the STOCK Act
- From New York and Delaware Courts, a Double Blow of Bad News for Sergey Aleynikov
- Headed for Overtime? Trump Administration Will Decide Fate of New Time-and-a-Half Rule
- A Closer Look at the New Lawsuit By Baylor Football Coach Art Briles
- Can an Employer Back out of a Promise to Provide Advancement by Claiming That the Employee Committed Fraud?
- Suits by Suits Named to Blawg 100
- “Change of Control” Case Isn’t Governed By ERISA, Court Rules
- Court Nullifies CFO’s Employment Because of Prior Extortion Conviction
- The Yates Memo’s Illusory “Extraordinary Circumstances” Exception
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Blogs We Like:
The AmLaw Daily
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Connecticut Employment Law Blog
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DeNovo: A Virginia Appellate Law Blog
The Employer Handbook
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Screw You Guys, I’m Going Home: What You Need To Know Before You Scream “I Quit,” Get Fired, Or Decide to Sue the Bastards
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Showing 44 posts in Noncompete Agreements .
We’ve counted down our top posts from 2015, from American Apparel to Dr. Robert Schuller. Now, we look at the issues in executive disputes that are likely to draw the most attention in 2016. Read More ›
The turn of the calendar is always a good time to reflect on what has come before and preview what lies ahead. In this post, we count down our most popular posts of 2015 about executive disputes. Later, we’ll look at what to expect in 2016. Read More ›
On his way through the San Francisco International Airport with the hopes of boarding his flight to China, Silicon Valley former employee Jing Zeng was not greeted by the friendly faces of a flight crew, but rather the handcuff-wielding agents of the FBI. Detained on charges of stealing trade secrets, Mr. Zeng will have to remain in the US and explain the behavior that led up to his August 20th airport arrest. The Wall Street Journal explains that Mr. Zeng, a new employee with Machine Zone, maker of Game of War: Fire Age (you may have seen the ads prominently featuring model Kate Upton sporting medieval garb), sought to change teams and work under a different boss. His request was denied and the company eventually asked Mr. Zeng to leave. Mr. Zeng then allegedly began to download highly valuable user data from a proprietary database in an attempt to leverage his possession of the information for a more lucrative severance agreement. The company contacted the FBI, and Mr. Zeng’s arrest followed. Now, Mr. Zeng finds himself in the custody of federal authorities, although his LinkedIn profile indicates that he is “ready for next venture.” Read More ›
We recently discussed the SEC’s proposed rules pursuant to the 2010 Dodd-Frank Act regarding the clawback of executive compensation under various circumstances related to accounting restatements. Now it seems Hertz’s former CEO, Mark Frissora, may become one of the first test cases should these rules survive the comment period. According to Footnoted, upon Frissora’s resignation last September, he received over $10 million plus other benefits. But the company recently filed a 10-K for 2014 that not only included restated results for 2012 and 2013, but also made a disclosure that could suggest a possible future effort to claw back Frissora’s severance package. The disclosure blamed Frissora for creating an environment that “in some instances may have led to inappropriate accounting decisions and the failure to disclose information critical to an effective review of transactions and accounting entries.” Perhaps another interesting twist is whether any potential clawback will have an effect on Frissora in his new role as CEO of Caesar’s Entertainment, a position he assumed two weeks ahead of Hertz’s delayed filings.
California is known for its skeptical treatment of employers’ efforts to enforce non-competes, but it may not be as friendly toward all employees as originally suspected, according to The National Law Review. In 2014, California resident Stacey Sabol-Krutz left her position with Quad Electronics, a Michigan-based employer, to take a position with a rival company, which was also based in Michigan. Sabol-Krutz had started working for Quad in Michigan, and signed her employment contract there, but moved to California in 2011. Her employment contract specifically named her new employer as a company that Sabol-Krutz wouldn’t join for 12 months after leaving Quad. After Quad found out about Sabol-Krutz’s new job, it sued her for breach of contract. She, in turn, filed suit in California, attempting to invalidate the agreement under California law. The California court, noting the absence of a choice of law provision in the agreement, found that Michigan law applied, using a “governmental interest” test. Although courts may refuse to apply a choice of law provision when construing restrictive covenants (as we illuminated here), Sabol-Krutz’s move to California to work for an out-of-state employer did not win her the protection of California law. Read More ›
National employers sometimes include choice-of-law provisions in their employment agreements, selecting one particular state’s law even for employees who don’t work in that state. For example, a company based in Massachusetts might ask its California employees to sign agreements selecting Massachusetts law. Applying one state’s law to all of the employer’s relationships can make outcomes more predictable, especially when the employer knows that law well.
But not always, as the New York Court of Appeals held earlier this month in Brown & Brown, Inc. v. Johnson. In Brown & Brown, the Court of Appeals refused to apply an employment agreement’s selection of Florida law, holding that New York law should determine whether a customer non-solicitation provision in that same agreement was enforceable. Read More ›
In our last post, we counted down our most popular posts of 2014, from A-Rod to Walgreen. Now it’s time to take a look at the issues in executive disputes that are likely to draw plenty of attention in 2015.
1. Dodd-Frank Bounties and Whistleblower Litigation on the Rise
In November 2014, the SEC released its annual report on its Dodd-Frank whistleblower award program. The theme of the report is that Dodd-Frank is paying off – both for the SEC and for whistleblowing employees. The SEC reported that it issued whistleblower awards to more people in its 2014 fiscal year than in all previous years combined, including a $30 million bounty to one whistleblower in a foreign country. The number of whistleblower tips received continues to increase, and we expect news of more substantial awards in 2015. Meanwhile, litigation over various Dodd-Frank issues, such as whether a whistleblower claim is subject to arbitration, whether the shield against whistleblower retaliation applies overseas, and whether a whistleblower must report to the SEC in order to bring a retaliation claim, will continue to percolate in the federal courts.
2. The Supreme Court Weighs in on Employment Issues
A couple of key Supreme Court cases will address employee rights that apply across the board, from the C-suite to the assembly line. In Young v. United Parcel Service, the Court will decide whether, and in what circumstances, the Pregnancy Discrimination Act requires an employer that accommodates non-pregnant employees with work limitations to accommodate pregnant employees who have similar limitations. And in EEOC v. Abercrombie & Fitch Stores, Inc., the Court will address whether an employer can be liable under the Civil Rights Act for refusing to hire an employee based on religion only if the employer actually knew that a religious accommodation was required based on knowledge received directly from the job applicant. Read More ›
Who doesn’t love the year-end countdown? We’re here to offer you one of our own – our most-read posts in 2014 about executive disputes. The posts run the gamut from A (Alex Rodriguez) to Z, or at least to W (Walgreen). They cover subjects from sanctified (Buddhists and the Bible) to sultry (pornographic materials found in an executive’s email). Later this week, we’ll bring you a look at what to expect in 2015.
Without further ado, let the countdown begin!
8. The Basics: Dodd-Frank v. Sarbanes-Oxley
This post is an oldie but a goodie. It includes a handy PDF chart that breaks down the differences in the Dodd-Frank and Sarbanes-Oxley whistleblower laws. Each of these laws continues to be a hot-button issue for plaintiffs and employers.
7. When Employment Relationships Break Bad
America may have bidden adieu to Walter White and his pals on Breaking Bad, but employment relationships continue to spin off in some very unpleasant ways. Such was the case with Stephen Marty Ward, who ended up in federal prison after he threatened his employer with disclosure of its trade secrets, as we covered in this post. Read More ›
Netflix, the internet media giant, sued its former vice president of IT Operations, Mike Kail, in California Superior Court, claiming that he “streamed” kickbacks from vendors and funneled them into his personal consulting company. According to the complaint, Kail—who is currently the CIO of Yahoo—exercised broad latitude in both vendor selection and payment. Netflix alleges that he took in kickbacks about 12-15% of the $3.7 million that Netflix paid in monthly fees to two IT service providers, VistaraIT Inc. and NetEnrich Inc. According to the Wall Street Journal, one line in particular from the complaint piqued experts’ interest: “Kail was a trusted, senior-level employee, with authority to enter into appropriate contracts and approve appropriate invoices.” According to Christopher McClean, an analyst at Forrester Research Inc., this suggests Netflix allowed Kail too much freedom. McClean opined that when individuals are empowered to both choose a vendor and then approve payment, corporate malfeasance can follow. This is particularly important in the field of information technology, where tech companies vie for business in an ever-competitive market by lavishing incentives on CIOs. Companies that do not incorporate an audit function into vendor selection and payment should consider revisiting their policies going forward.
We recently discussed the hefty $185 million judgment against AutoZone in favor of a former store manager who alleged discrimination and retaliatory discharge following her pregnancy. While this case arose in California, it appears the auto parts retailer is zoned for another similarly-themed legal showdown, this time across the country in West Virginia. In the recent complaint, the plaintiff, Cindy DeLong, claimed that she was placed on a 30-day performance improvement plan for hiring too many women in the stores she managed. She was ultimately fired before the 30 days expired. As you may recall, in the California case, plaintiff Rosario Juarez claimed AutoZone enforced a “glass ceiling” for its female employees, denying them opportunities for promotion. It seems Ms. DeLong managed to chip away at the ceiling as a district manager. But, according to Courthouse News, she now alleges that her practice of hiring women rendered her “not a good fit for the company.” Read More ›
Most law students spend several weeks in a first-year contracts class studying the concept of consideration. Consideration, in essence, is what a contracting party receives in exchange for promising to do something. A promise without consideration is not an enforceable contract. If A promises to wash B’s car next Tuesday and fails to do so, B cannot sue A on Wednesday, because A’s promise lacked consideration. But if A promises to wash B’s car and B promises to give A $20, or $1, or a glass of water, the promise is enforceable and B can sue if A fails to perform. Courts generally do not examine the adequacy of consideration, only its existence.
Because consideration can be minimal, many lawyers forget about it after that first year of law school. But it remains a necessary element of most contracts, and it recently arose in a peculiar way in a Connecticut case involving a dispute over an employment contract. See Thoma v. Oxford Performance Materials, Inc., 153 Conn. App. 50 (2014).
The plaintiff in the case, Lynne Thoma, was an employee of a manufacturing company. During her employment the company obtained new financing, and the investor insisted that Ms. Thoma enter into an employment agreement. This “first agreement” gave Ms. Thoma a fixed salary plus benefits for a 24-month period with automatic 12-month renewals. The company could fire her without cause on 60 days’ notice, but it would then be obligated to pay her salary for the remainder of the term plus six months. The first agreement also included a noncompete provision for the period of Ms. Thoma’s employment plus six months thereafter.
The company almost immediately decided it did not like certain terms of the first agreement and it required Ms. Thoma to enter a second agreement, which by its terms stated that it superseded any prior agreements. The second agreement did not discuss salary or severance, but it expressly stated that Ms. Thoma was an at-will employee. It also included a noncompete provision with apparently inconsistent terms: one section stated that she would not compete “during the period of her employment” and the other said that if she was terminated she would “continue to comply” with the noncompete provision.
The company fired Ms. Thoma about 16 months after the parties executed these agreements. Ms. Thoma sued, claiming that the company breached the first agreement by firing her without notice before her term ended and by failing to pay severance. The company claimed that the second agreement allowed it to fire her without notice at any time and did not require severance payments. But the trial court found, and the appellate court agreed, that the second agreement was not enforceable because it lacked consideration. Read More ›
Over the past few days, we’ve been covering the non-compete dispute between American Realty Capital Properties, Inc. (ARCP) and the Carlyle Group LP and Jeffrey Holland. (Here are Part 1 and Part 2 of our series in case you need to catch up). It’s time to end the suspense and tell you how the judge, the Honorable David Campbell of the U.S. District Court for the District of Arizona, resolved the dispute.
Judge Campbell issued his ruling on the same day as the oral argument, denying ARCP’s request for a temporary restraining order against Carlyle and Holland. He decided that ARCP had not made the necessary showing of a “likelihood of success on the merits” of its claim that Holland would violate his employment agreements by marketing Carlyle’s investment products. It said that Holland’s “non-solicitation provisions appear[ed] to be unreasonably broad,” because “read literally, they would prevent Defendant Holland from soliciting any form of business from any client of Plaintiff, anywhere in the world.” Further, the applicable Maryland and Arizona law did not allow the court to “blue pencil” these provisions – i.e., to rewrite them to be legally enforceable. Similarly, the confidentiality provisions in Holland’s agreements were also too broad to enforce, because they would have forever prohibited Holland from using any information related to ARCP’s customers.
The ARCP-Carlyle-Holland saga involves a couple of additional twists. Soon after the ruling, ARCP dismissed its Arizona case without prejudice. It then filed an identical case in New York for breach of contract. Carlyle and Holland moved for attorneys’ fees in Arizona, relying on an Arizona statute that allows a successful party to recover “reasonable attorneys’ fees in any contested action arising out of contract.” The court awarded Carlyle and Holland $46,140 for five days of attorney work (of the $134,182 they sought).
Thus, Carlyle and Holland won the battle, with some additional compensation for their troubles thanks to Arizona law. However, the war over Holland’s work for Carlyle is now raging in a different forum.