Laborsphere

Forum Selection Clauses and Non-Compete Agreements

The Issue: You are a California employer with out-of-state headquarters, and your executive works and lives in California. Your employment agreement has a one-year post-termination non-compete. Can you enforce it?

The Solution: In general, no, but the answer may depend on whether you have a valid forum selection and choice of law clause that provides for resolution in a state that permits reasonable post-termination non-competes.

Analysis: In general, California employers cannot enforce post-termination non-competes and a party cannot circumvent California restrictions on non-competition with a choice of law provision designating a more non-compete friendly jurisdiction. However, the Supreme Court’s recent decision in Atlantic Marine Construction Co.,
Inc. v. U.S. District Court for the Western District of Texas, 134 S. Ct. 568, 571 U.S. ___ (Dec. 3, 2013) held that contractual forum selection clauses should be enforced in all but the most exceptional cases, and therefore may be helpful to employers who seek to enforce non-competes against employees who work or live in states, like California, that disfavor restrictive covenants.

Indeed, some recent California federal district court cases have focused on whether the employment agreement has an out-of-state forum selection and choice of law clause. In Meras Engineering, Inc. v CH20, Inc., the Washington-based employer was permitted to enforce its Washington forum selection and choice of law clauses against its California sales associates who left for a California competitor. The Washington court concluded it was proper to apply Washington law as provided by the employment agreements. The California court dismissed the California employees’ lawsuit in favor of the Washington forum selection clause.

Similarly, in two other recent California district court cases, Plaintiffs were former California employees who signed employment agreements with restrictive covenants and Pennsylvania forum selection clauses. In both cases, the employees argued the cases should not be transferred because the more restrictive covenant friendly Pennsylvania courts would enforce the non-compete, which contravenes a strong California public policy. Both California courts however, focused on the reasonableness of the forum selection clause, rather than on the clauses’ effect. Both found that the possibility a Pennsylvania court might apply Pennsylvania law to the non-compete clause was not a sufficient basis to invalidate the forum selection clause.

In light of these recent cases, California employers should consider whether they have a reasonable and enforceable basis for selecting an alternative forum and choice of law for their executive agreements, and, in consultation with
counsel, draft carefully tailored restrictive covenants that comply with that state’s law.

Obligations for Employers Before, During and After a Storm

As cleanup from the Nor’easter that pummeled the East Coast last week continues, and the prospect of more snow looms, we hope that you and your families, as well as your businesses and employees, are safe and warm and that the lights are on. As this has been one of the more problematic winters in recent memory, we wanted to remind employers of some of their obligations before, during and after a storm.

Temporary Closings

Unless your agreements or policies provide otherwise, you are generally not required to pay non-exempt employees when they are not working. Therefore, if your business is closed and your employees do not report to work, you are not obligated to pay non-exempt employees. However, make sure that these employees are not checking work e-mails, communicating with supervisors about work-related issues or otherwise working from home, because non-exempt employees are entitled to receive pay for these activities even if they do not physically report to work.

Note that some states require an employer to pay employees for reporting to work, even if the business closes and the employer sends them home. For example, a New Jersey employer must pay employees who report to work at least one hour of pay. A New York employer must pay employees who report to work at least four hours of pay (or the number of hours in the scheduled shift if it is less than four hours). With regard to exempt employees, they are generally entitled to receive their full salaries, even if the business is closed – at least if the shutdown lasts for less than a week. If a business is closed for an entire week and an exempt employee performs absolutely no work during that time, the employer is generally not required to pay the employee for the week.

When a business is temporarily closed, the employer can require exempt employees to use accrued vacation time for the time off, but this requirement should be set forth clearly in the Employee Handbook and any employment contracts.

Cleanup

After a storm passes, employees whose homes remain without power, who are repairing damage to their property or whose children’s schools remain closed, may seek additional time off from work. While an employer that can afford to do so may allow additional flexibility to these employees in order to give them peace of mind and boost their loyalty and morale, these requests may otherwise be handled pursuant to the employer’s contracts and policies.

Other Issues

In addition to the above general points, employers should also be aware of state laws that affect certain employees and certain industries. For instance, in New York and New Jersey, the prohibition against mandatory overtime for health care personnel includes an exception for a declared state of emergency. New Jersey also provides protections for employees who miss work because of their responsibilities as volunteer first responders.

Conclusion

Extreme weather and natural disasters that disrupt business create big headaches for employers and employees. We recommend clear and consistent communication with your employees to avoid confusion about your expectations. Also, maintaining sound employment policies and consulting with counsel when issues arise is critical for avoiding additional headaches resulting from ensuing workplace legal liability.

Webinar – 2014 CFO Alliance Sentiment Study Results

Drinker Biddle partnered with The CFO Alliance to collect survey responses from a broad sample of more than 500 senior financial executives across the United States in order to provide insights into the strategic planning and financial outlook of these executives.

Please join Labor & Employment Group co-chairs Cheryl Orr and Tom Barton, along with several of their partners from across the firm, for a one-hour webinar presentation on the results of The CFO Sentiment Study followed by a live Q&A. Participation and feedback is appreciated, as we will be creating a series of live and online events, discussions, and other materials centered on the top issues and opportunities for business leaders.

Date: Thursday, February 20, 2014
Time: 1:30 p.m. Eastern

Topics include:
•     Human Capital
•     Technology
•     Growth
•     Economic & Political Outlook
•     Financing & Budgeting
•     Risk
•     Trade
•     Government Regulation

Webinar – Church Plan Update: It’s a Changing World -What Church Plan Sponsors Need to Know

On Monday, February 24, 2014, the Drinker Biddle Employee Benefits & Executive Compensation Team will present a free one hour webinar on hot topics that church plan sponsors should be considering for 2014. The webinar will be led by Chicago partners David L. Wolfe and Mark E. Furlane. Some of the topics to be covered during the webinar include:

An update on church plan litigation, including the recent ruling against Dignity Health and what this means for your church plan;
How church plan sponsors can best position themselves to defend against such an attack;
What church plan sponsors need to know about maintaining their church plan status in 2014;
Pros and cons for various employee benefit plans.

To register click the RSVP button:

Date: Monday, February 24, 2014
Time: 1:30 – 2:30 pm central

David L. Wolfe
David is a partner and member of the Employee Benefits & Executive Compensation Practice Group. He represents clients in a full spectrum of industries with an emphasis on tax-exempt organizations. He is a co-founder and member of the Steering Committee for the development and continuing sponsorship of the HR/Hospital Advisory Board (co-sponsored by Deloitte) for senior HR executives in tax-exempt health care systems.

Mark E. Furlane
Mark is a partner in the Labor & Employment Practice Group. Before joining the firm in 1979, Mark spent nearly five years as a lawyer for the U.S. Marine Corps where he gained extensive trial experience. In Mark’s 30 years of private practice, he has represented employers in nearly all labor and employment issues confronting today’s employer. He focuses his practice on employment law, with an emphasis on employment, benefits and fiduciary litigation and employment counseling.

See LaborSphere’s prior coverage of recent church plan litigation here.

Accounting Firm Partner Cannot be a Whistleblower Under New Jersey’s Conscientious Employee Protection Act

Editor’s Note – The below appeared in Legal Briefs, Drinker Biddle’s periodic summary of judicial decisions affecting accounting and financial services professionals. To view the entire issue click here.

Accounting Firm Partner Cannot be a Whistleblower Under New Jersey’s Conscientious Employee Protection Act

The district court for the District of New Jersey recently ruled that an accounting firm partner may not claim he was a whistleblower who was improperly fired by his firm. In Largie v. TCBA Watson Rice, Civil Action No. 10-cv-0553 (D.N.J. Aug. 20, 2013), the court considered the plaintiff Largie’s claim that he had been wrongfully terminated in retaliation for his attempted disclosures about alleged fraudulent practices at his accounting firm. The firm contended that it had fired Largie for his chronic absences and for attributing fees from the firm’s clients to another accounting firm. Largie was the director of the firm’s taxation department and an equity partner, holding a 10.5 percent interest in the firm. He also set his own schedule and did not report to anyone else. Without reaching his claims of fraudulent practices, the court found that Largie was not an employee who was entitled to protection under the CEPA statute. Largie’s ability to influence the operations and activities of the accounting firm meant that he had the power to save himself from the kind of unlawful retaliatory actions the CEPA statute was intended to prevent.

New Jersey Expands Protections Against Pregnancy-Based Discrimination By Employers And Other Entities

Update 1/23/14 – On Wednesday, January 22, 2014, Governor Christie signed S2995 into law. LaborSphere’s original post on the legislation appears below.

New Jersey is on the precipice of expanding anti-discrimination protections to both pregnant women and new mothers and those recovering from childbirth. The State Senate and now the State Assembly have passed identical measures with only one dissenting vote in either legislative body. The expansive legislation now awaits the signature of Governor Chris Christie in order to become law.

Amendments to New Jersey Law Against Discrimination

In order to address the perceived vulnerability of pregnant women in the workplace as well as to foster the goal of healthier pregnancies and recovery from childbirth, the legislation passed by New Jersey’s legislature expands the anti-discrimination and anti-retaliation protections of New Jersey’s Law Against Discrimination (“NJLAD”). Should it pass, both pregnant women but also those who have recently given birth or have medical conditions related to pregnancy will be statutorily protected against disparate treatment and retaliation by employers, labor organizations, landlords, lending institutions as well as an array of other entities that offer public accommodations.

Further, not only does the pending legislation add “pregnancy” to the array of protected categories covered by the NJLAD. It also specifically requires employers to provide “reasonable accommodations,” such as bathroom breaks, breaks for increased water intake, periodic rest, assistance with manual labor, job restructuring, modified work schedules and temporary transfers to less strenuous or hazardous work.

The legislation implied but does not specifically state that any such requested accommodations will likely need to be based on the advice of a physician. As such, it appears that pregnant women and those who have recently given birth cannot merely demand that an accommodation is “reasonable” and necessary absent some input from her physician.

Further, employers are not obligated to agree to any requested accommodation, even if it is supported by a physician’s recommendation, if such an accommodation would impose an “undue burden” as defined by the statute. The proposed legislation provides specific factors to be utilized in determining whether an accommodation would impose undue hardship on the operation of an employer’s business. These include:

overall size of the employer’ business with respect to the number of employees;
number and type of facilities;
size of budget;
the type of the employer’s operations, including the composition and structure of the employer’s workforce;
the nature and cost of the accommodation needed, taking into consideration the availability of tax credits, tax deductions and outside funding; and
the extent to which the accommodation would involve waiver of an essential requirement of a job as opposed to a tangential or non-business necessity requirement.

New Protection To Employees Seeking Information About Claims

Perhaps the start of a new trend, among the proposed amendments to the NJLAD is also a provision that protects any employee against reprisals by employers for asking coworkers or former coworkers for information that is part of an investigation or in furtherance of a possible claim under the NJLAD. Such information may include requests for data regarding pay, compensation, bonuses or benefits. Significantly, this new protection extends beyond pregnant women and those who have recently given birth.

Impact of Amendments

If enacted, the amendments to the NJLAD would override the New Jersey Supreme Court’s 2005 ruling in Gerety v. Atlantic City Hilton Casino Resort, 184 N.J. 391 (2005). In that case, New Jersey’s highest court held that the NJLAD does not protect against the firing of a female worker who exceeded the leave available under state and federal as well as the defendant-employer’s policy. Under the proposed amendments, it is likely that the accommodations requested in the Gerety case, by a plaintiff who had a difficult pregnancy with twins, would be considered reasonable and covered under the NJLAD.

More broadly, while the federal Family Medical Leave Act and New Jersey Family Leave Act each allow for a maximum of twelve weeks of pregnancy-related leave, under the proposed amendments, the amount of leave available to a woman who is pregnant or recovering from childbirth is not as clearly defined. To the extent a women seeks an accommodation – including additional leave or a reduced work schedule – because of pregnancy and childbirth-related conditions, an employer has, at the very least, an obligation to review and consider such requests.

Should the proposed amendments to the NJLAD be passed, we recommend a review of leave policies as well as training for managers to identify requests for accommodations. Each request for accommodation must be considered carefully and should it appear to impose an undue burden, then the statutorily defined factors must be taken into account.