Answers To Your Questions On Noncompete Agreements

I was just going through some of my old blog posts when, what to my wondering eyes should appear, but new(ish) questions on some posts from long, long ago. The post with the most questions is  Non-Compete Agreements - Top 5 Ways To Get Out of Yours, which I wrote in 2010. Since I'm a fan of all things undead, I thought I'd pick a couple of neglected questions and bring them back to life by answering them here.

Please remember that asking me questions in my blog doesn't create an attorney-client relationship, nor are my answers legal advice. I'm glad to discuss legal issues generally and offer my thoughts. Asking here is for public consumption, as are my answers.

Fired 10 Days After Signing Noncompete

Here's a question from Jeremy M:

My state (Kansas) has a law saying employment can be enough consideration at the time of hire, but I can not find anything relating to a condition of continued-employment. After a year of employment with-out a non-compete at a local sales firm I was threatened with my job unless I signed a non-compete. It was during the holidays last year and I was the sole-provider for my family. After a couple of weeks of almost daily mentions I finally signed under pressure, only to be terminated 10 days later. It truly felt like it was a setup.

Do you know where I can research more regarding the consideration clauses of my state? I don't feel I have the resources for a employment lawyer, and am considering self-representation. Thank you for any insight!

 I'm so sorry to hear about this Jeremy. You'd be surprised how common it is for employers to demand an employee sign a noncompete where the only consideration is continued employment, then fire the employee shortly after firing. That's very likely considered fraud in the inducement, which means that they never intended to continue your employment when they demanded you sign, so the fraud might void the noncompete. The elements of fraud in the inducement are: 1) A false statement of material fact; 2) The person making the statement knew it was false or made the statement with reckless indifference as to its truth or falsity; 3) They made the statement knowing you'd rely on it; 4) You did rely on it and were damaged. Sounds like your situation.

Some states also recognize fraud by omission, where one party has special knowledge that the other party couldn't discover, or where they had a duty to disclose, and treat the omission the same as if they'd made a false statement. Unless something really drastic happened in those 10 days, such as losing a major customer or being hit by a meteor, the company probably knew you were going to be fired when you signed.

I looked for a place online that outlines the noncompete laws in all 50 states and found one here by the firm Beck Reed Riden LLP in Boston. Their chart says Kansas is one of the states that allows continued employment as valid consideration. However, if they never intended to continue your employment, that might also be a failure of consideration.

I'd suggest talking to an employee-side employment attorney in Kansas about your rights. You can search for attorneys by state on the National Employment Lawyers Association website. NELA members represent employees.

Can Customers Follow Me If I Don't Have a Non-Compete?

Here's a question from Arsalan:

Hi Donna,
I am switching jobs and going to another company who is a potential competitor to my current employer. There are clients at my current employer who are asking me if they can come to my new employer because they want me to provide them the services. I do not have a non-compete with my current employer. Should I encourage the clients to come to my new employer and it's asking for trouble.

Thanks!

 Hi Arsalan. If you don't have a noncompete, then make sure you don't have a non-solicitation agreement. That's an agreement saying you can't solicit the company's customers to follow you to your new employer or to leave/reduce business with your former employer. If you have neither, then you're probably free to do business with your former employer's customers.

A couple of things come to mind to watch out for. If the customers have contracts with your former employer, don't ask them to or encourage them to break or cancel the contracts. You might get sued for something called tortious inteference with a contractual relationship. If the customer already left them or intends to leave them, then you probably won't be tortiously interfering.

If the company has a confidential customer list, then be careful. You might get accused of violating trade secrets law if you take the customer list with you and start using it. You're better off using publicly available information if you can. For instance, if you sell a computer program for banking, get a banking directory or Google "banks" and start from there. In most states, publicly available information is not a legitimate interest for your former employer to protect even if you do have a noncompete.

When in doubt, talk to an employment lawyer in your state about your rights and responsibilities. Good luck!

That's all for the zombie Q&A for now. I'll try to resurrect some old questions again in a future post.

Your Rights Regarding Pre-employment Credit Checks

Nevada has just joined the ranks of 9 other states that have outlawed the use of credit history to discriminate against potential employees. However, they're still a minority. Still, there’s a clear trend in the states. According to the National Conference of State Legislators, “42 bills in 24 states and the District of Columbia have been introduced or are pending in the 2013 legislative session relating to the use the credit information in employment decisions. Out of the total 42 bills, 39 address restrictions on the use of credit information in employment decisions.”

In most states, pre-employment credit checks are legal. Employers argue that bad credit are an indication that the person may embezzle or be dishonest. I say nonsense. People with good credit embezzle all the time. People with bad credit may have just had a run of bad luck, a nasty divorce, uninsured medical bills, or some other unavoidable financial disaster. Being poor is not the same as being dishonest.

The recession brought this issue to a head. Suddenly 10% of the population was unemployed. People with stellar credit found themselves in trouble. While government tends not to pay attention to issues affecting the poor, when it hits the middle class, suddenly everyone cares.

There have been multiple attempts to address this situation in Congress. All have failed. In my opinion the current Congress won’t do anything until the problem starts to impact the upper class. We have a very anti-employee majority in office. The only way things will change is if voters speak up and tell their representatives to make employers butt out of their finances.

So, what do you do if you're in the unlucky majority of states that still allow this invasion of your privacy?

I suggest honesty. If you have bad credit, be ready to explain your situation. Tell the interviewer your plan to address the situation. While being “in over your head” may be considered an indicator of potential dishonesty, it doesn’t mean you’re going to become an embezzler. If you can demonstrate that you have a plan to get out from under the debt, the HR department might feel reassured.

What are your rights if an employer runs your credit history?

If your potential employer is going to run a credit check, then they must comply with the Fair Credit Reporting Act. This requirement covers anything the employer is getting from a consumer reporting agency that covers personal and credit characteristics, character, general reputation, or lifestyle, but not the HR department running your name on Google, checking out your Facebook page, or reading your blog.

If they are going to run a credit check, they have to give you a document solely for the purpose of telling you they intend to conduct a credit check. It was probably shoved in with a stack of papers they handed you with your application or pre-employment forms. They need your permission in writing.

They must also tell you if they’re about to deny a job, reassign, or terminate you because of what was disclosed in a credit report. They must give you written notice with a copy of your credit report and a document called "A Summary of Your Rights Under the Fair Credit Reporting Act.” This process does not apply to truckers.

Once the employer decides to use the report against you, they must then give another notice, this time telling you the name of the agency that did the credit report, saying the agency isn’t the one that made the adverse decision, and telling you how to dispute the information in the report with the agency. This notice can be verbal or in writing, unless you’re a trucker, in which case it must be written.

If an employer runs your credit history without permission, they’ve broken the law. If they don’t jump through all the hoops required under the Fair Credit Reporting Act, you have potential claims against them. In that case, contact an employment lawyer in your state to discuss your options.

The EEOC views the use of employment credit checks as potentially discriminatory against women and minorities. If you’ve been denied a job or had other adverse action taken against you by an employer based on bad credit, you might want to explore the possibility that you have a discrimination claim with an employee-side employment lawyer in your state..

Why Should Employers Have All the Injunction Fun? How To Stop Your Ex-Employer From Harassing You

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

When you leave a job and start working somewhere else, you may be greeted with a letter from your former employer threatening legal action against you unless you quit your new job. The ex-employer may claim you are bound by a non-compete agreement, non-solicitation agreement, or a confidentiality agreement. Your ex-employer may allege that you were privy to trade secrets or other confidential information and claim you are forbidden from working for the new employer, because it is a competitor of your ex-employer. (Ms. Ballman has tackled the ins and outs of these agreements in length in prior posts, so I will not waste your time explaining these dreadful contracts).

Most employees who get letters like this are forced to quit the new job, usually because they cannot afford to defend against a lawsuit if the employer makes good on his wicked promise. However, you may be able to get an injunction against the employer’s anti-competitive and restrictive actions.

An injunction is a court order that would require your former employer to perform an act or restrain the employer from acting in a particular way. In order get a court to issue an injunction, the you’ll have to prove (1) the likelihood of irreparable harm, (2) the unavailability of an adequate remedy at law, (3) a substantial likelihood of success on the merits, and (4) that a temporary injunction will serve the public interest.

Almost every state has an antitrust statute, or similar law, prohibiting anti-competitive behavior in the market place. Federal law also provides injunctive relief in limited circumstances. Sometimes these antitrust statutes specifically permit injunctive relief against the types of behavior discussed above. For instance, when a person violates Florida’s Anti-Trust Law, the aggrieved party is entitled to injunctive relief against threatened loss or damage and even authorizes attorney's fees and costs to a plaintiff who substantially prevails on such a claim.

Make sure you check your local state statute to see if similar relief is available. Some states do not have antitrust laws, others only have criminal penalties for antitrust violations, and some only permit a civil action to be brought by the state attorney general.

It is common for employers to move for injunctions against ex-employees it believes are violating non-compete agreements and the like. This is usually because antitrust laws, such as Florida’s, have specific provisions providing that the violation of an enforceable restrictive covenant creates a presumption of irreparable injury to the person seeking enforcement of that covenant. This makes it much easier for the employer to obtain an injunction. However, non-compete laws are an exception to anti-trust laws. They are only enforceable if they are supported by a legitimate business interest, not expired, not over-broad, and that satisfy other requirements that vary from state to state.

Normally, proving “irreparable injury” is an uphill battle. In most cases, the irreparable injury must be immediate. This is probably why many employees have not been successful in getting courts to issue injunctions against former employers. However, it is a positive sign for employees that state law makers have drafted these statutes providing injunctive relief. It demonstrates that legislators recognize the importance of preventing monopolies. This means you may be able to persuade a court to enjoin your employer if it tries to restrict you from freely working and competing in the marketplace.

If you believe your ex-employer’s actions may be considered an illegal restraint on trade or commerce, you should contact an employee-side employment attorney in your state. Proving the elements for injunctive relief and antitrust violations can be difficult and you should have an attorney assist you.

If you are successful in getting the injunction, the Court will attempt to maintain the status quo. This means, for the time being, no more pesky letters from your ex-employer. You may now freely enjoy your new job without your ex trying to ruin it all for you.

Top 6 Signs Your Unpaid Internship Should Be Paid

In honor of my daughter landing her first internship, I thought I'd go through once again an issue that comes up every summer. Many internships that are unpaid are exploiting young people for free labor instead of providing a meaningful learning experience.

If your internship is more about scut work and less about learning, you are probably an employee who needs to be paid, not an intern. Here are some top signs that your unpaid internship is really a job that should be paid: 

1. You aren't learning: An internship is supposed to provide training similar to that you would receive in a vocational school. In other words, you should be learning something helpful to your future career. If you're sorting mail, licking envelopes, filing, digging ditches or picking up the boss's dry cleaning, that work has to be paid. Internship assignments are supposed to build on each other to help you develop more skills, similar to the way each chapter of a textbook builds on the other.  
2. You have someone else's job: If you find out you're the temp covering for someone on maternity leave or you replaced a salaried guy they thought was making too much money, you have a job, not an internship.
3. You're on your own: Let's say they toss you in a room and say, "Here's the manual. Do this project on you own. Tell me when it's done." You are an employee.
4. The company benefits, not you: This is where most intern programs go seriously wrong. The company is supposed to be giving training that benefits you way more than it benefits them. If they can make money off what you're doing, or if you're saving them from having to pay another employee, you probably have to be paid. 
5. They promise a job at the end: The whole point of the internship is probably that you want them to hire you somewhere down the line. However, if you are guaranteed a job if you complete a specific training period, you're likely a trainee and must be paid. 
6. Where's my check?: If you go into a job thinking you're going to be paid and they announce only after you start that you're an unpaid intern, you're probably an employee. If you didn't understand before you accepted that there would be no pay while you're training, then you're probably entitled to be paid.

 The Department of Labor has been cracking down on illegal unpaid interships for several years. If your employer screws up, they may owe you wages, overtime, liquidated damages that equal the wages they failed to pay, and your attorney's fees. Here in South Florida, we also have some counties with wage theft ordinances that can even triple the amount you're owed. If your internship isn't what you thought it would be, have until the end of the statute of limitations (generally 2 years under the Fair Labor Standards Act) to wait to see if you get the job you thought you were earning. If you sue, you can sue on your own behalf and on behalf of all the other interns who didn't get paid.

Even if you sign a waiver saying you agree not to be paid, it won't hold up if the internship is really a job, so talk to an employment lawyer in your state about it.

Internships can get you college credits, contacts, community service hours for high school, and maybe even a paid job down the line. That's what the good ones are supposed to do for you. Just beware the ones that turn you into slave labor. Before you accept an internship, get a clear understanding of your job duties, whether you'll be paid, and what the employer expects of you.

If you aren't going to be doing something that puts you on your career path, turn it down. If you find out that it wasn't what you expected, get out of there.

Time is money. That's what they say in business. Make sure you get your money's worth out of your internship. If not, wouldn't you rather spend your summer taking classes, getting a paid job, or texting your friends?

If you have a terrific internship, great. I wish you the best. If not, talk to an employment lawyer about your rights.