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Ten Key Considerations When Taking a Job with a Competitor

Posted By by Benjamin I. Fink on June 5, 2018, Tuesday, June 5, 2018

 

Moving from one competitor to another can be fraught with danger for the unwary employee.  Doing things the wrong way can lead to time-consuming, stressful and expensive litigation and even loss of the new opportunity.  Here are a few key considerations when making a move from one competitor to another:

  1. Before making the move, talk to a lawyer who has experience in this area of the law about the “do’s” and “don’ts” during and after the transition.
  1. Be sure to know what agreements you signed with your employer, including any restrictive covenant agreements containing non-compete, customer non-solicit, employee non-recruitment/no-hire and non-disclosure/confidentiality covenants.
  1. Be sure you understand what rights and obligations you have under these agreements and the applicable law.
  1. Do not take any information that your employer may consider to be confidential or proprietary either by downloading the information to a flash drive or other external storage device, printing the information and taking the hard copies, emailing the information to a personal or other email address, uploading the information to a cloud storage service such as a Dropbox or in any other manner.
  1. If you have company confidential or proprietary information on any personal electronic devices (such as home computers, personal tablets or smart phones), be sure to engage in an appropriate and defensible process to delete or destroy that information or return it to your employer.
  1. While still employed by your current employer, do not talk to clients or customers to request they move their business to your new employer.
  1. While still employed by your current employer, do not recruit or solicit employees to join you in leaving to join a competitor.
  1. Be sure your new employer knows what restrictive covenants you have signed and what limitations those covenants place on you in your new position.
  1. Be sure your new employer will be supportive of you acting lawfully both before and after your transition. For example, if you are in sales, be sure to discuss with your new employer whether customers will be notified of your transition and, if so, whether such notification comports with your legal and contractual obligations to your former employer.
  1. Consider whether to ask your new employer to cover any legal expenses incurred in defending yourself if you are sued even after doing things the “right” way.

Authored By

 

Benjamin I. Fink Ben Fink, a shareholder in Berman Fink Van Horn P.C., concentrates his practice in business and employment litigation with a particular emphasis on non-compete, trade secret and other competition-related disputes.With...

 

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Recent Supreme Court Class Action Waiver Ruling: Impact on Employers

Posted By by Kenneth N. Winkler on June 1, 2018, Monday, June 4, 2018

 

In a recent landmark opinion, the U.S. Supreme Court held that class action waivers in arbitration agreements are enforceable.  On May 21, 2018, in a 5-4 decision, the Supreme Court confirmed that employers can use arbitration agreements requiring employees to waive the right to file class action lawsuits and to arbitrate employment disputes individually. 

What Legal Question did the Court Answer?

The Court consolidated three cases, Epic Sys. Corp. v. LewisErnst & Young, LLP v. Morris, and N.L.R.B. v. Murphy Oil USA, Inc., in considering the issue, summarized by Justice Gorsuch in the majority opinion as follows: “Should employees and employers be allowed to agree that any disputes between them will be resolved through one-on-one arbitration? Or should employees always be permitted to bring their claims in class or collective actions, no matter what they agreed with their employers?”  Epic Sys. Corp. v. Lewis, No. 16-285, 2018 WL 2292444, at *3 (U.S. May 21, 2018).  Each case involved an employee seeking to bring individual and collective claims and an employment agreement requiring the employee to waive any right to class or collective action. 

The Court’s Answer – Honor the Arbitration Contract Terms

The Court held that arbitration agreements providing for individualized proceedings must be enforced.   In so holding, the Court emphasized that the Federal Arbitration Act (“FAA”) directs courts to treat arbitration agreements as “valid, irrevocable, and enforceable”, and that courts are required to rigorously enforce arbitration agreements according to their terms. 

The National Labor Relations Act does not Conflict with Class Arbitration Waivers

Although the National Labor Relations Act (“NLRA”), enacted subsequently to the FAA, guarantees employees the right to take part in “concerted activities for the purpose of collective bargaining or other mutual aid or protection”, the Court found no conflict between the FAA and NLRA.  The Court noted that the NLRA “does not express approval or disapproval of arbitration.  It does not even hint at a wish displace the Arbitration Act …”  Though the NLRA was enacted in 1935, the National Labor Relations Board did not take the position that class action waivers violated the NLRA until 2012.  Thus, the Court declined “to read into the NLRA a novel right to class action procedures that the Board’s own general counsel disclaimed as recently as 2010.”

What does the Court’s Decision Mean to your Business?

This decision confirms that employers can use arbitration agreements to avoid employment-related class action lawsuits including wage and hour, harassment, and other discrimination claims.  Employers should take this as an opportunity to consider (or reconsider) using arbitration agreements with their employees.  While this decision certainly weighs in favor of arbitration agreements, each employer should consider its own needs and interests in determining what makes the most sense for it. 

In that regard, here are some pros and cons of employee arbitration agreements to consider:

  • The major difference between the courtroom and the arbitral forum is that there is no jury in arbitration. Juries inherently bring some unpredictability to the ultimate outcome which may be mitigated through a private arbitrator. 
  • The arbitration process is more private. Confidentiality concerns are more favorable in arbitration.
  • Arbitration agreements work both ways. An employer insisting on arbitration also foregoes its right to litigate federal claims (such as FLSA and Title VII claims) in federal court, which can be a more favorable forum for employers.
  • Arbitration proceedings often end in an evidentiary hearing. In arbitration, there may be no dispositive motion practice and arbitrators are more likely to deny a dispositive motion even where such motion practice is allowed.  Oftentimes, employers are able to dispose of employment actions in court through dismissal or summary judgment.  An employer may be hampering its ability to do so by agreeing to arbitration.
  • Arbitration can be more expensive. Even though arbitration is designed to be an efficient and quicker way to obtain a decision, it can be very expensive, namely, because the parties have to pay the arbitrator for the hours incurred in handling the dispute.

The Supreme Court’s decision certainly favors employers concerned with class and collective employment actions.  Nevertheless, each employer should carefully consider all pertinent factors and seek individualized advice when deciding whether or not to implement arbitration agreements.

 

Authored By

Ken Winkler
 

Kenneth N. Winkler Ken Winkler, a shareholder at Berman Fink Van Horn, has practiced employment law since 1994. His practice concentrates on counseling employers and business owners on the numerous laws and regulations...

 

Daniel H. Park Work hard at work worth doing. This is what drives Daniel Park in every aspect of his life. At Berman Fink Van Horn, Daniel demonstrates this in everything he does. A...

 

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For What It’s Worth … Court Rejects Minority Discount in Valuing Stock

Posted By by William J. Piercy on May 21, 2018, Tuesday, May 22, 2018

 

In May 2018, the Georgia Court of Appeals issued a decision with sweeping implications for the valuation of shares of closely held companies in Georgia. In Wallace v. Wallace, three brothers, Phillip, Gary, and Doss collectively owned all of the issued stock in a successful family business passed down to them by their father. 

The company’s bylaws and shareholders’ agreement required that all shareholders work for the company.  Should one of them quit, the company had the right and the obligation to purchase the departing employee’s stock at fair market value within 60 days.  Doss terminated his employment in 1994, but because he intended to return at some point, the company did not demand or attempt to purchase his shares at that time.

However, after nine years, Doss still had not come back.  Consequently, in 2003, the company, controlled by Phillip and Gary, demanded that Doss sell his stock back to the company.  Doss refused.  As often happens in these situations, the relationship between Doss and his brothers deteriorated precipitously.  In 2015, Doss filed a lawsuit against Phillip, Gary and the company for breach of fiduciary duty, breach of contract, and other claims.  They counterclaimed, alleging that Doss breached the shareholders’ agreement by not selling his shares back in 1994 when he stopped working. 

The trial court first addressed whether and when Doss breached the shareholders’ agreement.  Doss argued that he did not breach when he left in 1994 because the company never even offered to buy his shares.  Accordingly, his obligation to sell was not triggered.  At the same time, Doss agreed that the company was obligated to buy him out and argued that his stock should be valued as of 2015, when the company first asserted legal claims against him. 

For their part, Phillip, Gary, and the company argued that the company had the right to redeem Doss’s stock at its 1994 value, the year Doss left the company’s employ.  The date on which the company was to be valued was important because, Doss’s stock was worth about $54,000 in 1994, and closer to $2,000,000 by 2015. 

The trial court agreed with the company, and ordered it to pay Doss $54,000 for his stock.  Unsurprisingly, Doss appealed.  The Georgia Court of Appeals concluded that the proper valuation date should not have been 1994 or 2015, but instead 2003, when the company first asked Doss to sell back his shares.  The Court of Appeals then sent the case back to the trial court for a determination of the value of Doss’s interest in the company in 2003.

In determining the value of Doss’s ownership in the company in 2003, the trial court concluded that it was appropriate to apply a minority discount.   A minority discount is an economic concept reflecting the notion that a partial ownership interest may be worth less than its proportional share of the total business. The concept applies to equities with voting power because the size of voting position provides additional benefits or drawbacks. 

A debate has long raged in valuation circles as to whether the stock held by a minority shareholder should be valued in an amount equal to the percentage of the value of the entire business commensurate with the percentage of the stock held by the shareholder, or if a discount should apply because of the lack of control that comes with a minority ownership interest.  Those in favor of the minority discount argue that someone who owns a non-controlling interest, for example 25% of the outstanding shares of a company, has little say in the direction, operations, or management of the business.  As a result, his ownership is subject to the whims of the majority owner who owns, in our example, 75% of the outstanding shares.  Correspondingly, proponents of the minority discount also often argue in favor of a control premium, which adds even more value to a majority ownership interest. 

Doss again appealed the trial court’s ruling, this time arguing that the application minority discount to the value of his shares was inappropriate.  The Georgia Court of Appeals agreed with Doss, and reversed the trial court’s ruling.  In so doing, the Court of Appeals stated that “valuation discounts for lack of marketability or minority status are inappropriate in most appraisal actions, both because most transactions that trigger appraisal rights affect the corporation as a whole and because such discounts give the majority the opportunity to take advantage of minority shareholders who have been forced against their will to accept the appraisal triggering action ….  [A]ppraisals should generally award a shareholder his or her proportional interest in the corporation after valuing the corporation as a whole, rather than the value of the shareholder’s shares when valued alone.”

This is a significant development in Georgia law.  While the Wallace case does not go so far as to establish a bright line rule that bars the use of a minority discount in valuing shares of a closely held corporation, it certainly expresses skepticism about the propriety of doing so.  This skepticism should be taken into account when analyzing rights and options in the often contentious world of shareholder buyouts.

 

Authored By

 

William J. Piercy Healthy business relationships are an essential component of business success.  When disputes cause business relationships to sour, declining productivity and revenues are sure to follow.  Bill works with business owners...

 

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Protecting your Company’s Competitive Edge

Posted By Benjamin I. Fink on May 17, 2018, Friday, May 18, 2018

 

UPDATE May 2018

You might not think about non-competes, employee and customer non-solicits or trade secrets and confidential information very often. But we do. They are core to your business and help maintain your competitive edge. And we’re proud to play a key role in shaping this area of the law through our practice and thought leadership. 
 

All companies, regardless of size, have sensitive information and valuable customer and employee relationships. There are simple measures that every business owner and manager can take to protect these assets. For that reason, we’ve compiled this update to share with you practical steps you can take to prevent departing employees from competing unfairly or using confidential information or trade secrets.


We encourage you to take a few minutes to review this update. We’re proud of this content and believe you will find it to be helpful. In fact, many days a year, you can find us on the road, leading and participating in industry and professional conferences addressing these important topics. This is what we do.

 

Sedona-ConferenceBenjamin Fink Invited to Attend Prestigious Conference

By invitation-only, Ben Fink was among approximately 75 thought leaders in trade secrets law to attend the Inaugural Sedona Conference® on Developing Best Practices for Trade Secret Issues. Ben and the other attendees discussed potential recommended practices for trade secret practitioners and jurists.

The Sedona Conference brings together the brightest minds in a dialogue-based, think-tank setting with the goal of creating practical solutions and recommendations of immediate benefit to the bench and bar. It is a nonprofit, research and educational institute dedicated to the advanced study of law and policy in the areas of antitrust law, complex litigation and intellectual property rights.

 

Protect Your Business: Trade Secrets & Confidential Information

In the trade secret world, the American Intellectual Property Law Association’s Trade Secret Summit is a premier conference that Benjamin Fink and Neal Weinrich are fortunate to attend and help organize every year. The information shared and thought-provoking conversations with industry peers make this conference an annual highlight for Ben and Neal. A few conference insights and take-aways on this subject include:

  1. Implement appropriate measures to protect company trade secrets. There are lots of steps companies can take to protect information that is valuable to their business. The following motto is a simple way to help companies think about how to protect their trade secrets: “State it, Stamp it, Secure it, Shred it, Sign it, Supplement it, and Substantiate it.” A knowledgeable legal advisor will counsel his or her clients to take these proactive measures.
  2. Create a formal trade secret protection plan. This can be more complicated than it seems. For that reason, you should involve in-house counsel, business decision-makers and outside counsel in the process.
  3. Lastly, carefully consider where you store your company’s confidential information and trade secrets. A recent BFV blog post, “Be Wary of Storing your Trade Secrets in the Cloud,” highlights an important consideration relating to where you store proprietary information.
Where You’ve Seen Our Team:
  • Inaugural Sedona Conference| Developing Best Practices for Trade Secret Issues (Invited Participant)
  • State Bar of Georgia Institute of Continuing Legal Education/Restrictive Covenants & Trade Secrets in GA | Restrictive Covenants in Employment & other Agreements (Seminar Chair & Speakers)
  • Practical Law Commercial Transactions,” Georgia series (Thomson Reuters, 2018) (Authors)
  • American Intellectual Property Law Association/Trade Secret Summit | Drafting & Litigating Noncompete and Trade Secret Matters Outside your Jurisdiction (Moderator)
  • State Bar of Georgia Institute of Continuing Legal Education/Business Litigation Seminar | Restrictive Covenant Litigation (Speaker)
  • SHRM Atlanta Legal Summit| Worried About Leaving Employees Becoming Thieving Employees? (Speakers)
  • Georgia Institute of Continuing Legal Education/Restrictive Covenants & Trade Secrets in GA |Trade Secrets, Confidential Information & Computer Fraud and Abuse (Speaker)
  • Atlanta Bar Association | Update on Georgia Employment Law (Speakers)
  • Georgia Institute of Continuing Legal Education/Restrictive Covenants & Trade Secrets in GA | Injunctions, Declaratory Judgments & Protective Orders (Speakers)
  • Atlanta Bar Association CLE by the Hour | TRO’s, Preliminary Injunctions, Trials…Oh My! (Speaker)
  • Federal Bar Association Annual Meeting | Trade Secret Protection Goes Federal (Moderator & Panelists)

READ MORE 
WATCH OUR VIDEO, “What is a Trade Secret?”

Yes, Even Your Business has Confidential Information

Nearly all businesses have valuable information that can be considered confidential. Think about your ordinary course of business. A typical day likely involves sharing and receiving confidential information with employees, customers and suppliers and during other commercial engagements where confidential information is exchanged.

As a business owner or manager, steps should be taken to protect confidential information within your organization. It should be a business priority. Below are some valuable tips, as excerpted from a series of articles authored by Ben and Neal in “Practical Law Commercial Transactions,” Georgia series (Thomson Reuters, 2018):

  • Limit access to confidential information and trade secrets to employees with a need-to-know.
  • Implement computer, e-mail and internet policies that govern employees’ access and use of company systems.
  • Train employees to prevent the inadvertent disclosure of sensitive information.
  • Implement robust physical and electronic security measures.
  • Have contingency plans and procedures to address when any leaks are detected.

CLICK HERE for additional tips and sample contract provisions (“Practical Law Commercial Transactions,” Georgia series).

Tips when Hiring from a Competitor

Many times, the most qualified and experienced candidates for positions you are seeking to fill in your business are those who are currently working for your competitors. If you are not careful, the hiring of an employee from a competitor can be fraught with peril.

While much of the decision as to whether to hire someone from a competitor may be driven by the types of restrictive covenants the person has signed (non-compete, customer non-solicit, employee non-recruitment and non-disclosure/confidentiality), there are certain steps you can take to minimize the risk of any litigation or liability regardless of whether of any restrictive covenants are involved. Here are a few of those steps:

 

  1. During the interview process, be sure to advise candidates that you expect them to comply with their legal and contractual obligations before and after the end of their employment with their current employer. This should include ensuring that employees comply with any fiduciary duty or duty of loyalty they may have to their current employer. The parameters and scope of this duty are state specific, so you need to be sure to know the law of the state or states involved.
  2. If the candidate is customer facing in his or her current position, you should be sure that you and the candidate are on the same page as it relates to notifying customers of the transition and/or soliciting clients once the employee has joined your company. How this is handled will be dictated by the nature of the restrictive covenants, if any, the candidate has signed and the applicable state law regarding the employee’s fiduciary duty and duty of loyalty.
  3. During the interview process, candidates should be reminded of their obligation not to take any information that constitutes confidential information or trade secrets of their current employer.

Authored By

 

Benjamin I. Fink Ben Fink, a shareholder in Berman Fink Van Horn P.C., concentrates his practice in business and commercial litigation with a particular emphasis on non-compete, trade secret and other competition-related disputes.With...

Neal Weinrich
 

Neal F. Weinrich Neal Weinrich is a shareholder at Berman Fink Van Horn. Neal’s practice focuses on resolving business disputes through litigation, arbitration, and mediation. The emphasis of Neal’s practice is litigation involving restrictive...

 

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Deal Vetoes SB 315,But Prohibitions Against Computer Misconduct Remain

Posted By Malone Allen on May 15, 2018, Friday, May 18, 2018

 

Georgia has garnered national attention in the last few weeks with the news that Governor Deal vetoed SB 315, which would have codified a new crime in Georgia for the unauthorized access of a computer or computer network. But don’t be fooled: the Georgia Computer Systems Protection Act (the “GCSPA”) – the Act that would have been modified by SB 315 – still provides robust protections against and penalties for improper computer access in Georgia.

The GCSPA, codified at O.C.G.A. section 16-9-93, currently makes it illegal to: use a computer without authorization and with the intent of taking the property of another; use a computer without authorization and with an intent to delete or remove data from said computer; use a computer with the intent of examining another person’s personal data without authorization; or disclose a password or passcode without authority, among other provisions. The GCSPA provides for civil relief against anyone that violates its provisions. In other words, the victim of a GCSPA violation can file a civil lawsuit for damages against the bad actor.

The GCSPA defines “without authority” to include “the use of a computer or computer network in a manner that exceeds any right or permission granted by the owner of the computer or computer network.”  O.C.G.A. § 16-9-92(18).  Georgia courts have construed this definition broadly, upholding GCSPA convictions when former employees improperly take electronic information in conjunction with their resignations.  DuCom v. State, 288 Ga. App. 555, 654 S.E.2d 670 (2007).

SB 315 would have broadened the GCSPA, making it illegal to access a computer without proper authority. The law would not have required any intention of performing any other illegal act on the accessed computer (such as removing data). Instead, mere unauthorized access would have been enough to constitute a crime and subject the user to civil penalties.

Perhaps unsurprisingly, the bill was met with significant resistance from the tech community due to how broadly the new provision could be interpreted. For example, information security firms were concerned that performing “white hat” hacking – hacking to find weaknesses on computer networks to repair those weaknesses – would be illegal under the new law.

In reaction to pressure from the tech community, Governor Deal vetoed the proposed law. Thus, for an act of unauthorized access to violate the GCSPA, the law remains that the user must also be acting with some intent to perform some additional action, such as taking, manipulating, or deleting data on the computer. Of course, even with Governor Deal’s veto, victims of computer misconduct may also have remedies under the federal Computer Fraud and Abuse Act, which prohibits accessing a computer or computer system and obtaining information from that computer without authorization or by exceeding authorized access.

As the digital world becomes more perilous and data security becomes paramount, Georgia businesses, employees, and computer users should be aware of their rights, obligations, and remedies under both state and federal law. As always, if you have questions about the GCSPA or other related laws, the attorneys at Berman Fink Van Horn P.C. are here to help.

 

Authored By

 

Malone Allen Malone has a mind for complex matters. From debate team to law school to legal issues at Berman Fink Van Horn, Malone has a passion for delving into problems and...

 

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Implications of General Data Protection Regulation for US Companies

Posted By Thomas E. Sowers on May 10, 2018, Friday, May 18, 2018

 

The European Union’s (EU) General Data Protection Regulation (GDPR) goes into effect May 25th.  The GDPR offers strict new rules around protecting personal data of EU citizens for transactions that occur within EU member nations.

It is important for US companies selling goods or services in the EU, or with a web presence, to understand the scope of the GDPR as compliance with the new standards will be challenging for all companies who are subject to them and the fines for non-compliance are severe. While large, data-driven US companies have likely been planning for the GDPR for months, smaller US companies handling small amounts of EU personal data will also have to plan for the new rules. 

Here is a brief overview of what US companies should be aware of relating to the GDPR:

Basically, any company that stores or processes personal information from EU residents located in the EU, even if the company does not have a physical presence in the EU, must comply with the new rules.

The GDPR very broadly defines the personal data which companies must protect, so not only does the GDPR protect basic identity information (name, address, government issued ID number), it also protects behavioral data collected from cookies used for profiling individuals. 

Unless a permissible lawful basis for processing the personal data of an EU resident exists (items listed in Article 6 of the GDPR which include processing necessary for compliance with a legal obligation and processing necessary for the vital interests of the EU resident), EU residents must consent to the processing of their data.  The consent must be freely given, specific, informed and unambiguous (pre-checked opt-in boxes do not qualify as valid consent).

Companies may not keep personal data for longer than necessary and EU residents have the “right to be forgotten,” meaning the right to request the deletion of their personal data.

The GDPR divides companies processing personal data into two categories: data controllers (companies that own the data) and data processors (outside third parties who help process or manage the data on behalf of data controllers). Data controllers and data processors will have joint liability under the GDPR, meaning a data controller could be liable if a third-party vendor fails to comply.  The GDPR contains a detailed list of the contractual requirements that should be in place in any agreement between a data controller and data processor.

The requirements of the GDPR are demanding. Given the intentionally broad applicability of the regulation, any US company doing business in the EU or with a web presence intended to attract customers in the EU, are going to be subject to it.  These companies, if they have not already done so, should invest the time and resources to fully understand how they use, process, store, transfer and share personal data and the obligations under the GDPR that come with this.

 

Authored By

 

Thomas E. Sowers Thomas E. Sowers is a shareholder in the Firm. Tom’s practice focuses on representing businesses and their owners in a wide range of legal issues. Much of Tom’s practice involves...

 

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Perpetuating Pre-Lawsuit Testimony in Georgia

Posted By Daniel H. Park on May 8, 2018, Friday, May 18, 2018

 

You may be surprised to hear that Georgia law provides for pre-lawsuit depositions in limited circumstances. The Georgia Civil Practice Act sets forth an equitable proceeding to perpetuate a person’s own or another person’s testimony prior to the filing of a lawsuit by petition to the Superior Court.  O.C.G.A. § 9-11-27.   

This rarely used procedure is limited to circumstances where testimony might be lost to a potential litigant unless immediate steps are taken to preserve such testimony.

The caveat is that the petition may only be used to preserve and perpetuate known testimony, not “to be used for the purpose of ascertaining facts to be used in drafting a complaint”.  Worley v. Worley, 161 Ga. App. 44 (1982). This is far narrower than the scope of information that may be sought in depositions in the normal course of discovery where a party may seek discovery regarding any matter, not privileged, which is relevant to the issues of the case. Given its narrow scope, this pre-lawsuit procedure is most often used when a person essential to a case is seriously ill or injured, or dying, before suit is filed. 

The verified petition seeking to perpetuate testimony must show:

  1. That the petitioner expects to be a party to litigation but is presently unable to bring it or cause it to be brought;
  2. The subject matter of the expected action and petitioner’s interest therein, the facts which the petitioner desires to establish and reasons for desiring to perpetuate the testimony;
  3. The names or a description of the persons the petitioner expects will be adverse parties and their addresses.
  4. the names and addresses of the persons to be examined and the substance of the testimony which the petitioner expects to elicit
  5. A request for an order authorizing the petitioner to take the depositions.

If an order to perpetuate testimony is granted, the depositions may then be taken in accordance with the Civil Practice Act and may be used in any action involving the same parties and subject matter subsequently brought.

 

Authored By

 

Daniel H. Park Work hard at work worth doing. This is what drives Daniel Park in every aspect of his life. At Berman Fink Van Horn, Daniel demonstrates this in everything he does. A...

 

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Security Staff Sues NFL, Blows Whistle on Contractor Misclassification

Posted By Kenneth N. Winkler on May 4, 2018, Friday, May 18, 2018

 

Nine former NFL security representatives recently filed a federal lawsuit against the NFL claiming they were misclassified as independent contractors and unlawfully fired by the league because of their age. They also claim they were unlawfully denied compensation and overtime pay. 

As security representatives, the plaintiffs were responsible for providing game day services, as well as stadium inspections, prescription drug audits, background checks, and investigative services as directed by the NFL.  According to the complaint, the plaintiffs were between the ages of 61 and 74, were qualified for their positions, and were replaced by younger and less qualified individuals. The complaint alleges that the NFL announced that the plaintiffs were terminated because the NFL was “moving in a different direction.”  The plaintiffs claim that this explanation was phony and actually meant the league wanted to hire younger people as security representatives.  

The league could have a challenge proving that the plaintiffs were not qualified.  One plaintiff, for example, claims that he is “an avid gym-goer and weight lifter, he has a second degree black belt in Karate, a brown belt in Tai Kwon Do, and celebrated his 70th birthday by doing shoulder shrugs with 600 pounds.”

The case is intriguing beyond the underlying discrimination allegations and the fact that the NFL is a party.  It highlights the ongoing battle over independent contractor classification. To have standing to sue for discrimination and unpaid overtime, the security representatives must establish that they were actually employees and not independent contractors.  This is because independent contractors are not covered by state and federal employment laws.

This case highlights some of the key risks an employer should consider when thinking about classifying workers as independent contractors:

  1. A dispute over classification can arise in an unexpected context. In this case, for example, the issue arose from a claim of unlawful termination. Had the plaintiffs in this case not been fired, they likely would never have opposed the classification.  Often, a contractor’s status becomes an issue because the contractor files a claim for unemployment benefits and not because the contractor was unhappy with the classification arrangement.  
  2. Misclassification can lead to a variety of problems and liability. The plaintiffs’ complaint in this case alleges multiple causes of action including: age discrimination under federal and New York state law; wage theft under federal and New York state law; and alleged violations under ERISA.
  3. Proper classification of an individual as an independent contractor can be difficult to determine and is the source of major litigation. There is no universal test that the courts and agencies use to determine independent contractor classification.  Federal agencies such as the NLRB, EEOC and DOL all use different tests.  State laws also vary and change. For example, the California Supreme Court recently issued an opinion that rejected an independent contractor test it used for decades for a new rigid test that will make it more challenging to classify an individual as an independent contractor.

This case serves as a reminder that employers would do well to continually review their relationships with workers to assess whether they are properly classifying their workers.

 

 

Authored By

Ken Winkler
 

Kenneth N. Winkler Ken Winkler, a shareholder at Berman Fink Van Horn, has practiced employment law since 1994. His practice concentrates on counseling employers and business owners on the numerous laws and regulations...

 

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Tips When Hiring from a Competitor

Posted By by Benjamin I. Fink on May 1, 2018, Tuesday, May 1, 2018

 

Many times, the most qualified and experienced candidates for positions you are seeking to fill in your business are those who are currently working for your competitors.  If you are not careful, the hiring of an employee from a competitor can be fraught with peril.

While much of the decision as to whether to hire someone from a competitor may be driven by the types of restrictive covenants the person has signed (non-compete, customer non-solicit, employee non-recruitment, non-disclosure/confidentiality), there are certain steps you can take to minimize the risk of any litigation or liability regardless of whether of any restrictive covenants are involved. Here are a few of those steps:

  1. During the interview process, be sure to advise candidates that you expect them to comply with their legal and contractual obligations before and after the end of their employment with their current employer. This should include ensuring that employees comply with any fiduciary duty or duty of loyalty they may have to their current employer. The parameters and scope of this duty are state specific, so you need to be sure to know the law of the state or states involved.   
  1. If the candidate is customer or client facing in his or her current position, you should be sure that you and the candidate are on the same page as it relates to notifying customer or clients of the transition and/or soliciting clients once the employee has joined your company. How this is handled will be dictated by the nature of the restrictive covenants, if any, the candidate has signed and the applicable state law regarding fiduciary duty and duty of loyalty.
  1. During the interview process, candidates should also be reminded of their obligation not to take any information that constitutes confidential information or trade secrets of their current employer.
  1. In the hiring process, be sure employees agree, in writing, that during their employment with you, they will not use or disclose any confidential information or trade secrets of their former employer.

  2. In the hiring process, you will also want to take affirmative steps to ensure no information that could conceivably constitute confidential information or trade secrets of the former employer are retained by your new  employee or brought to you by the employee. Once confidential information or trade secrets of a competitor make their way onto your computers or network, it can be very costly to identify, locate and remove the    information to remediate the problem.

Setting these expectations early on in the recruitment process can significantly reduce the chances of any issues arising after the person becomes employed by you.  Likewise, in the unfortunate event of a lawsuit by the former employer, taking these steps can significantly reduce any potential exposure you may have from the hiring of an employee from a competitor.  Failure to follow these protocols can result in significant defense costs and potential liability for your company and the new employee for breach of contract, breach of fiduciary duty or duty of loyalty, tortious interference, misappropriation of trade secrets, computer fraud or theft and many other related tort and statutory claims.

If you find yourself in any of the above situations, please let us know if we can help. 

Authored By

 

Benjamin I. Fink Ben Fink, a shareholder in Berman Fink Van Horn P.C., concentrates his practice in business and commercial litigation with a particular emphasis on non-compete, trade secret and other competition-related disputes.With...

 

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PREPARING FOR A COMMERCIAL CLOSING

Posted By by Ruari J. O’Sullivan on April 30, 2018, Monday, April 30, 2018

 

For commercial transactions, gone are the days of the sit-down closing. The proliferation of instant communication technologies and document transfer systems are primarily to blame. As a result, commercial closings take place, almost exclusively, electronically. While there are many benefits to these remote closings, such closings have their own issues that typically can arise as a result of the speed with which numerous and conflicting messages can be distributed and the fact that these closings often rely on tangentially-involved third parties. Here are some general tips to help buyers and sellers (of real property, business assets, or business ownership interests) prepare for electronic closings:

  1. Be cognizant of which date is selected for closing: Typically, in a purchase and sale agreement, a closing date will be set out a certain number of days in the future that will allow sufficient time for a purchaser to perform requisite due diligence: 30 days, 45 days, 60 days, 90 days, etc. Often, the business day falling closest to the stated time-period is selected as the date for closing. Sometimes this date is set before attorneys are involved at the letter of intent stage. We recommend that purchasers and sellers, and their attorneys, take a closer look at the date set for closing, and follow these guidelines:                  

                         i. Unless other important considerations exist, be wary of setting a closing date on a Friday. Let’s face it – workplaces around the country on Fridays are not paragons of industrious and efficient activity and are often not fully staffed because of extended weekend plans. While the parties directly involved in the closing (attorneys, closing agents, the buyer, and seller) may be giving their full attention to the closing on the closing date, electronic closings often rely on the actions of third parties. For example, bank wires, which require multiple human approvals, are notoriously slow on Friday afternoons. Similarly, last minute changes requiring the input of a third party (i.e., expanding insurance coverage) can be more difficult to confirm on a Friday. If the purchase involves an operating business, a closing scheduled for Friday that fails to close can leave a lengthy limbo period over the weekend, especially where a buyer and seller had already put in place third-party transition teams and had begun the process of notifying vendors or suppliers of upcoming terminations or orders. 

                         iiBe wary of Mondays, also. A few of the considerations that apply to Friday closings also apply to Monday closings. Unless the deal is large enough that it will warrant unfailing attention by all parties involved throughout the weekend, gaps in deliverables that existed Friday afternoon will likely exist Monday morning. Closing may have felt far enough away on the Friday before closing, but on Monday buyers and sellers and other third parties often realize that they had not made adequate arrangements to timely close without a mad scramble. 

                         iiiSet Closing in Advance of Actual Deadlines. When an actual deadline (like a tax exchange deadline) exists, communicate the deadline to your attorneys and, perhaps, under the advice of your attorney, the other parties to the transaction so that everyone can be on the same page. Unless other considerations exist, make sure the date for closing is set at least a few days, more if possible, before the deadline to ensure that the closing will occur in time. 

     2   If possible, schedule to be available the days leading up to, and after, a closing. Invariably, in the days leading up to closing, revisions to agreements will need to be approved, documents will need to be signed, and important decisions will have to be made. Closing statements are often not finalized and agreed to until the actual date of closing. Although many of us have busy schedules, plan to have access to phone and email in the days around closing. If your schedule will leave you out of pocket around closing, you should communicate your availability to your attorney well-in-advance of closing and provide alternative contact information if necessary. 

      3.   Be responsive. For large transactions, closing documents may go through many iterations before being finalized. Because of the speed in which documents can be revised and distributed electronically, parties are more apt to send around minor revisions to documents. The timeframe for getting documents finalized can be significantly chomped up if a buyer or seller fails to review or approve revisions for just a couple of days. Ultimately, this lag increases the number of open items that closing agents, party attorneys and third parties will have to juggle at the time of closing. Additionally, matters may arise that could affect a purchaser or seller’s decision to move forward with a transaction; responsiveness may ensure you are able to walk away without penalty or amend the deal to more favorable terms.

      4.   Deliver what you must. If you have reason to believe that the other party to a transaction will attempt to renege on its closing obligations, in order to be entitled to all the remedies for default under a purchase agreement, you may still have to show that you were ready, willing and able to close on the date set for closing. Because there is no sit-down closing, you will have to do more than just show up to a physical location. In order to ensure you meet this standard for remote closings, deliver (to the closing or escrow agent, or other side, as appropriate), to the best of your ability, all documents required to be delivered to you under the purchase agreement, which may include deeds, assignments, or bills of sale. If you or your attorney cannot finalize all documents without the approval or input of the other side, send signature pages to such documents to the appropriate closing party to be held in escrow, and try to produce a written record showing that you submitted requested revisions or comments to closing documents to the other side. For a purchaser, demonstrating that you are ready, willing and able to close should also entail wiring the required purchase price to the appropriate closing or escrow agent. Your attorney should be able to guide you through this process.  

As always, hiring an attorney with experience in commercial closings early in the purchase and sale process (prior to the drafting of a purchase and sale agreement) is the best way to ensure that a remote closing is handled as smoothly and professionally as possible. An experienced attorney will remind you of the considerations discussed above and walk you through any and all difficulties that may arise. If you have any questions leading up to the purchase and sale of commercial real property, business assets, or business interests, please feel free to reach out to me directly. 

 

Authored By

 

Ruari J. O’Sullivan Ruari O’Sullivan takes the proactive approach. In working with business owners, he anticipates their issues and puts structures in place to protect their interests. In negotiating complex transactions, Ruari keeps the...

 

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