Noncompete Answers - Company Lost The Customer Contract; Employer Owes Me Wages

On the ever-popular topic of non-competition agreements, I continue to get tons of questions. I'm answering some more today.

Is My Noncompete Agreement Enforceable If My Employer Owes Me Wages?

Q: My former employer wrote such an ambiguous non-compete that it virtually eliminates any chance of me finding any employment in my field. Plus they owe me $9500 and say they won't pay unless I provide them with proof I'm not competing.

They made exceptions to the non-compete during my employment and now say that I'm violating the agreement by continuing to do the exceptions that they allowed.

They are in Illinois - I am in Florida. 

Mr. High School

Hi Mr. High School. You raise several interesting issues, so I'll touch on all of them quickly. The one that I hear most often is whether a noncompete agreement is enforceable if your employer owes you wages. The answer is a whopping, clear-as-mud, maybe. If your noncompete agreement is part of an employment agreement that sets out your wage rate and other terms and conditions of employment, then the failure to pay those wages is a breach of the agreement. If they breached before you started working for a competitor, then the breach should eliminate your obligations. However, this may vary from state to state (and judge to judge) so I can't predict how a judge in the state where it ends up in court would see it.

If the noncompete agreement is separate and doesn't include any promises about wages, then the issue is less clear. I'd still argue that the failure to pay the wages owed negates your obligations, but the question would really depend on the specific facts and contract language. I'd suggest talking to an employment lawyer in your state about this to be sure.

If they've made exceptions to the noncompete and allowed you (or coworkers) to compete in specific circumstances or with specific companies, it will be really tough for them to argue that they have a legitimate interest to protect in enforcing the restrictions against you alone (or you now, when you've previously been allowed).

You also mention that they're in a different state than you. If the agreement says which state's law applies, then that's probably which state law you'll be dealing with. If the agreement is silent on which state's law applies, it's probably the state where you executed the agreement. Frankly, Florida law is so horrid on noncompetes that you're probably better off if you can apply Illinois law (but I'll defer to any Illinois lawyers out there who disagree.)

My Company Lost It's Contract - Can I Stay?

I got two questions on this topic. Here they are:

Hi I signed a contract with a company that states I cannot work for myself, or any other company in my line of profession for 1 yr.. My contract is up in may and my boss has moved to South America. Since being over there he has messed my wages up and hardly replies to my emails. The customers are not contracted with this company and I would like to take them on myself. If my company has gone elsewhere and I took over the duties for the customers they left behind, where do I stand?

Lee B.

Hi Lee. I answered the issue about the unpaid wages above. I'll answer your question about your company moving after the question below.

Sounds like this is more of a hot topic than I knew. I am a victim also--I started working for company x in March 2004. A while after I started, the manager's position came open and they offered it to me. I am pretty sure it was at this time they made me sign a non-compete. (I am contract labor). The company that owned the building I was working in then was purchased by another company. In 2008 this building closed down and I transferred to another building. About 6 months later I was again asked to sign a non-compete. Now the company "x" that I work has lost their contract in the building so I am being told because of the non-compete I cannot stay and do the same type of work for the new company.

I applied and was going to be hired by the company that owns the building for a totally different type of job, but they are now saying they have a "policy" that states I cannot work for them for 12 mos. then have to reapply, when I was originally told by my supervisor that I could do any other job in the building other than the services they provide. Now that has changed. So, now am waiting for an answer from the new company as to whether or not they can get me out of the non compete--which is slim to nothing chance. If not I will be looking for a new job and am restricted can't do the three jobs listed above, OR work in any of the buildings owned by current building I'm in.

I live in a rural area where there are virtually NO JOBS so I may be in the unemployment line because of this stupid non compete! I will never sign one again. 

Tired of This

Hi Tired of This. I'm tired of ridiculous noncompete restrictions too, which is why I enjoy fighting them when I can. To answer Lee and you, if your company has either abandoned a geographic area of business or lost the customer through someone's fault other than yours, such as through competitive bidding, then I think it will be really tough for them to prove there is any legitimate interest to protect in enforcing a noncompete agreement against you.

Remember, agreements that are for the sole purpose of preventing competition are illegal. They violate antitrust laws. Noncompete laws are an exception to antitrust laws. Your employer must show a legitimate interest to protect. Legitimate interests might be things like trade secrets, confidential information that's truly confidential and not available from public sources, and customer goodwill. If they can't show a legitimate interest other than preventing competition (or spite) then they should lose in court.

The problem is, most employees don't have the resources to fight if they're sued, and most new employers will just fire you if they get a nastygram from your former employer because they don't want to be in the middle of a lawsuit. I'm hoping that the Department of Justice and some state Attorney's General will start stepping up for the common man and enforcing antitrust laws against bullying employers.

In the meantime, you should contact an employment lawyer in your state about your rights.


If you have a question on noncompete agreements, discrimination, whistleblowing, employment contracts or any other employment law issue, and don't mind having me answer it publicly, feel free to ask it in the comments section. If you ask me here, you're asking for general information and not for legal advice. The question and answer will be public and will not be covered by attorney-client privilege, nor will it establish an attorney-client relationship. If you need legal advice or have an urgent legal issue that needs to be dealt with, contact an employment lawyer in your state.

You Say Let's Talk Severance/Your Employer Hears I Quit (Or, Employees Are From Pluto, Employers Are From Uranus)

As sometimes happens when you've been practicing as long as I have (hint - I may have had a pet with a name ending in -saurus), you find yourself chatting with an opposing counsel with whom you've had many encounters over the years. These conversations can sometimes lead to some frank exchanges. I had one of these conversations a few days ago.

The topic was what it means when an employee says they want to talk about a severance package. He insisted it meant the employee had resigned. I hear this all the time from management-side lawyers, and I understand where they're coming from.

However, my clients never see it that way. I told this fellow attorney-saurus that I've never had a single client who meant they were quitting when they said to their boss or HR that they wanted to discuss severance. My colleague seemed shocked by this. "Then what did they mean?" he asked.

I had to explain that employees who say they want to discuss severance are usually making a cry for help. They've gone to the boss or HR with some dire problem. Maybe they've been sexually harassed or discriminated against. Maybe it's a bullying situation. Sometimes they've blown the whistle and are suffering retaliation. They've reported it and gotten no relief. So they say, "Fine. Let's talk severance."

What they probably mean is, "If you won't help me, you risk losing me as an employee." They're usually hoping that this final cry for help will result in some action being taken. They sometimes mean, "Rather than torture me into making me quit, let's just part ways amicably now." They're still hoping the employer will come to their senses.

I'm not sure why there's such a large communication disconnect between employer and employee on this, but my management-side colleague seemed genuinely surprised by my analysis. So I thought I'd share it.

Employers use any mention of a severance package to get rid of a complaining employee. They'll claim you quit before you can finish your sentence. And guess what? If you quit, you usually don't get severance. To an employer, severance goes to employees who have been laid off or fired with little or no cause. Quitters get squat.

So I'll say this to employers: Listen more carefully. If you like this employee, you may be able to salvage things if you act quickly. Plus, if they've just reported sexual harassment, discrimination or blown the whistle on something illegal, you might have handed them a lawsuit by escorting them quickly to the door.

To employees everywhere, be warned: If you even mention a severance package, your employer will claim you quit. Wait for them to bring it up. Then you might actually get some money to tide you over while you're looking for something else. If you were the victim of discrimination, illegal retaliation or sexual harassment, you might also have leverage to negotiate a better package if the employer fires you for reporting it.

I'm sure there are other things that employees and employers hear differently. Do you have any other examples where employees are from Pluto and employers are from Uranus? I'd love to hear them.

Old Workers Rule! (Age Discrimination Drools) - Guest Post

By Associate Attorney who now chooses to be anonymous, Donna M. Ballman, P.A., Employee Advocacy Lawyers

Do you remember walking down the beach and seeing an older gentlemen wearing one of those delightfully tacky, yet funny, t-shirts stating, “Old Guys Rule!” You look at the shirt, then the man, and you smile thinking, “Yeah! That old guy does rule! More power to the old people!” Okay, maybe your thoughts weren't that dramatic, but you probably at least know someone over the age of 40 who still needs and/or wants to work, and who you are fond of. Or maybe, you are one of those 40+ workers declaring your own awesomeness. Since when did 40 become “old” anyway? Isn’t 40 the new 30? [Donna’s note: And here I thought 50 was the new 30.]

As a result of improving healthcare and standards of living, the number of people over the age of 60 is expected to increase to 2 billion by the year 2050. In the year 2000 there were only about 600 million people over the age of 60 worldwide. Our government has the responsibility of ensuring that older Americans are able to enjoy a decent standard of living, while contributing to society, as long as they want and are able to. The first step towards ensuring older Americans’ ability to make a living is to modify current laws that make it easy to discriminate against workers over the age of 40.

Currently, Federal Courts do not treat discrimination based on age the same as discrimination based on other categories of protected workers, such as race, sex, national origin and religion. An employee bringing suit based on one of these other protected categories only needs to demonstrate that the protected category was a contributing factor in the adverse employment decision. In such cases, the burden of proof then shifts back to the employer to show that it would have made the same decision regardless of the discrimination.

On the other hand, employees who claim that they were discriminated against due to their age must demonstrate to the Court that age was the “but for” cause of the adverse employment action.

This unequal treatment under discrimination laws appears to be changing. Just a few weeks ago, the Protecting Older Workers Against Discrimination Act (POWADA), a bi-partisan bill, was reintroduced to the House and Senate. This bill appears to have strong support from both parties and in both houses. Perhaps, this is because there are no Senators under the age of 40 and only a handful of Congressmen and Congresswomen under 40. Whatever the case may be, under POWADA, when an employee demonstrates discrimination was a “motivating factor” behind an adverse employment decision, the burden would then shift back to the employer to show that it would have made the same decision regardless of the unlawful discrimination.

POWADA would be a win for older employees who have been unfairly discriminated against in the workplace. All forms of workplace discrimination should be treated equally under the law, and POWADA would be a positive step towards making that a reality. If POWADA is enacted into law, the old guy on the beach will become that much cooler. He will now be able to keep his job, make more money, allowing him to buy a matching hat for his t-shirt! Perhaps it would read, “Old Guys Rule the Workplace.”

Answers to Questions On Veterans' Rights, Right To Copy of Handbook

This week I'm answering questions posted on VOW to Hire Heroes Act Fixes Stupid Legal Loophole for Military and Stupid HR Stuff: Can Anyone Tell Me the Point In Not Giving Copies of Contracts and Policies?

Targeting Veterans For Drug Testing

What if an employeer gives an disabled veteran more than one urine test a month and then marks the last form as possible suspesion/cause. Does a disabled veteran have any recourse for legal action? this employer also has me under a arbutrary agreement for employment.

David

Hi David. If you're being targeted for more tests than coworkers because you're a disabled veteran, that may well violate your USERRA rights, as well as the ADA. If, however, you are being tested under the company's random drug testing policy the same as any other employee, then I don't know of any law that treats veterans differently than other employees.

Drug testing laws vary by state, and drug tests are extremely unreliable. The National Workplace Institute says this:

Commonly used drug tests yield false positive results at least 10 percent, and possibly as much as 30 percent, of the time.

Unreliability also stems from the tendency of drug screens to confuse similar chemical compounds. For example, codeine and Vicks Formula 44-M have been known to produce positive results for heroin, Advil for marijuana, and Nyquil for amphetamines. Other substances known to cause false positives include Nuprin, Contac, Sudafed, certain herbal teas and poppy seeds.

Although more accurate tests are available, they are expensive and infrequently used. And even the more accurate tests can yield inaccurate results due to laboratory error. In October, 1990, the National Institute on Drug Abuse launched an investigation into the widely used federal drug testing procedure after learning that a government- certified laboratory incorrectly reported workers had tested positive for illegal methamphetamine when in fact they had been using over-the-counter cold or asthma medicines.

Some state laws and union contracts allow random testing  no more than once a month. Otherwise, it must be for good cause shown. Many times, an employee who has a workplace accident must submit to a drug test. Some states prohibit or limit drug testing in the workplace. A recent summary of state drug testing laws is here.

Employer Won't Give Copy of Handbook

What can you do if your former employer refuses to or cannot provide you with a copy of the employee handbook you signed. I ask this because I was fired without a written warning and remember that it was specifically stated in the handbook that a written warning is it be given before termination. 

Jessica

Hi Jessica. This is one of the stupid things that companies do all the time, and I don't get it. Why on earth have a handbook you want employees to comply with, and then not give them a copy? How can they comply if you won't let them see it? Better yet, may employers make employees sign saying they've received the handbook, but won't give them the handbook. If that's your situation, I think it's outright fraud on the part of the employer.

Some states require that employers give you a copy of anything you signed if you request it. If you're in one of those lucky states and you signed a paper from the handbook itself, you may be legally entitled to a copy.

Otherwise, there's no law that I know of requiring employers to give you a copy of their own handbook. However, it will be tough for them to utilize key defenses to some employment laws if they don't. For instance, if you don't report sexual harassment under a known employer policy, it's a defense to a sexual harassment claim. Where the employer won't give you a copy of the handbook, you could argue that the policy was not a known policy.

I think any employer that won't give employees a copy of the employee handbook is idiotic.

As always, talk to an employment lawyer in your state if you think your employer broke the law.

Today is the last day to nominate blogs for the ABA Blawg 100. If you enjoy reading this blog, I'd appreciate your nomination, which you can do in a minute or less here. Thanks for your support.

Answers to Your Nepotism Questions

This week I'm answering some questions that were posted on my old post, Nepotism Is Not Illegal.

My husband was passed over for a job he was qualified for because of nepotism. This in law enforcement in Utah, and he has been passed over twice based on the fact that my brother already works for the department. So now is there anything he can do? Or does he just have to roll over and take it?

Ilse

Hi Ilse. It sounds like your husband is being subjected to an employer's own anti-nepotism policy. While nepotism is generally not illegal, some employers, especially government employers, have rules or even laws prohibiting hiring of relatives. That's because sometimes relatives take advantage and hire their no-account nephew, their drop-out daughter, or their burn-out uncle. Other employers have more specific anti-nepotism policies saying employees cannot hire or supervise their relatives.

Utah's Nepotism Act apparently makes it unlawful to appoint, supervise or make salary or performance recommendations for a relative. That means your brother can't make the decision to hire your husband, but it doesn't sound like there's a complete ban on hiring relatives. Maybe it's in the union contract or somewhere else. If the ban is simply that your brother can't supervise or hire your husband, then I'd suggest having your husband reapply and hand them a copy of the law showing that it doesn't prohibit the department from hiring him.

Here are some more state anti-nepotism laws.

What about nepotism in a nonprofit nursing home where 99% or more of their income is from Medicare/Medicaid?

Steven

Hi Steven. I haven't found any prohibition against a privately-owned nursing home hiring relatives of employees or owners, whether or not they have income from Medicare or Medicaid. If your employer wants to fire you so they can hire their son, daughter or wife, it's probably legal for them to do so.

I have a question regarding refusal to hire because of relation. I worked with my husband (when we were still dating) at his current employer. I submitted a resume because they stated I was not applying within the department so I was eligible. And I left on good terms. But now that my resume has been submitted, they say no because of the nepotism policy they have in effect. Can they deny my employment for this reason? AND if so, would they have been able to fire one of us after we got married while I was already employed there?

Ed

Hi Ed. Yes, an employer can deny you employment if it violates their anti-nepotism policy.  Some states, like Florida, have laws saying that employers can't discriminate based on marital status. However, I don't know of any law that prohibits an anti-nepotism policy. You can be fired for marrying a coworker, but can't be fired just because you got married in general. For employees being fired because they married a coworker, I usually look at that situation under sex discrimination laws. If only one of the two married partners is being terminated, it might be sex discrimination. Most employers tell the couple that they must pick which one is to leave, or both will be fired.