Our friends in the Intellectual Property Group know that an employer’s trade secrets are among its most valuable assets. In this podcast, Carol Steinour Young shares the ways in which employers can protect trade secrets in the midst of employee defections.
Every year, Pennsylvania’s appellate courts seem to issue a handful of decisions addressing the enforceability of non-compete agreements. However, there are relatively few court decisions addressing non-solicitation agreements. A non-solicitation agreement is the less restrictive cousin of the non-compete. Under a non-solicitation agreement, a former employee is permitted to work anywhere, including competitors of his or her former employer. A non-solicitation agreement merely prohibits a former employee from soliciting (or perhaps even contacting) the former employer’s customers, prospective customers and/or employees. In Metalico Pittsburgh, Inc. v. Newman, the Superior Court of Pennsylvania recently addressed some fundamental points regarding enforcement of these less restrictive agreements.
In Metalico, two executives of a scrap metal broker left their employer (“Metalico”) to join a competitor, Allegheny Raw Materials, Inc. (“ARM”). Upon joining Metalico, they had both signed employment agreements which included non-solicitation provisions that prevented them from soliciting any of Metalico’s suppliers for up to two years after their employment ended. Their employment agreements were each for three year terms and, once these terms expired, the agreements were not renewed. Both executives continued to work for Metalico for a period of time as “at will” employees; i.e. their salaries and bonuses were no longer contractually guaranteed.
After leaving Metalico, both executives began soliciting Metalico’s suppliers for their new employer. Metalico sued to enforce the non-solicitation provisions in the expired employment agreements. The trial court ruled for the executives and refused to enforce the non-solicitation restrictions, holding, once the employment agreements expired, they “were replaced with at-will relationships that did not include non-solicitation provisions.”
On appeal, the Superior Court of Pennsylvania reversed the trial court and enforced the non-solicitation restrictions. The Court began with the basic premise that both executives received adequate consideration for their non-solicitation covenant when they signed [their agreements] “as part of their initial employment relationship.” Citing several earlier decisions, the Court then observed that “it is possible for a non-solicitation covenant to survive the end of a term of an employment contract, when the employee stays on as an at-will employee” if the written agreement provides for this. Looking to the terms of each executive’s employment agreement, the Court then noted that the non-solicitation provision was clearly intended to be in effect during three relevant time periods: (a) during the three-year term of the employment agreement; (b) during any period of continued employment after the employment agreement expired; and (c) up to two years after the executives left Metalico’s employment.
Since the non-solicitation restrictions were supported by adequate consideration (i.e. initial employment) and were never mutually disavowed by the parties, the Superior Court held that the restrictions remained enforceable – notwithstanding the expiration of the agreements in which they appeared.
It is not uncommon for employees to continue working for a company after their written employment agreements expire. The Metalico case serves as a good lesson as to how to draft restrictive covenants that will survive the expiration of the agreement in which they appear. Another approach taken by many employers is to have employees sign two separate agreements – an employment agreement with a fixed term, and a separate restrictive covenant agreement that remains in effect for the duration of employment and for a fixed period afterward. Regardless of which approach is taken, the Metalico case demonstrates that careful drafting is the key to ensure enforceability.
Employers with 100 or more employees (and federal contractors with 50 or more employees) must submit an EEO-1 Report annually, detailing the race, gender, and ethnicity of its workforce. In September of 2016, the Equal Employment Opportunity Commission (“EEOC”) issued a revised EEO-1 Form, which would have required employers to submit extensive data related to employee compensation. For each EEO category, the revised EEO-1 Form would have required employers to identify the number of employees in each of twelve pay bands. Starting with 2017 data, the filing deadline was also pushed back to March 31.
Over the past several months there were calls from the business community for the new Director of the Office of Management and Budget (“OMB”) to initiate a review of the revised EEO-1 Form pursuant to OMB’s authority under the Paperwork Reduction Act – which requires every federal agency to obtain approval from OMB to collect information from the general public in order to ensure that the benefit of the information collection outweighs its burden. On August 29, 2017, the OMB answered that call and issued an immediate stay of the compensation data collection portion of the revised EEO-1 Form. The basis of the stay? Since issuing the revised form, EEOC released data file specifications for employers to use to submit the data. OMB stated that these specification were not included in the public comment process and the specifications change the burden estimate. OMB also found that the revised EEO-1 Form contrary to the standards of the Paperwork Reduction Act and questioned the utility of collecting the information.
So what does this mean for employers submitting EEO-1 Reports? Most importantly, the compensation aspects of the revised EEO-1 Form do not need to be reported. However, the revised filing deadline remains intact. So the 2017 EEO-1 Reports are not due until March 31, 2018. Just as before the revised EEO-1 Form was issued, the reports must contain data related to employee race, gender, and ethnicity. Finally, for our federal contractor subscribers, the stay does not impact the filing of your VETS 4212 form, which must be filed by September 30, 2017.
For years, employers have struggled with properly completing the requirements of the I-9 Form. Every employee hired after November 6, 1986 must have an I-9 Form on file with the employer. The Form is proof that the employer has examined documents sufficient to establish the employee’s right to work in the United States. While the purpose of the I-9 is relatively straightforward, some large employers have faced fines amounting to hundreds of thousands of dollars for errors these Forms.
With the electronic Form’s release on July 17, 2017, many of the violations that created liability should be a thing of the past. The new form provides drop down boxes which offer options in filling out sections of the form. The options will help in eliminating some of the common errors employers have made in the past like properly completing sections on; citizenship, immigration status, document title and state of residence. The form’s electronic version also provides instructions for completing each section when the user clicks on the question mark in that section.
In spite of these revisions which are designed to assist in preparation of the form, some employers have chosen to print the form and fill it out on paper. As a result, many easily avoidable mistakes remain an issue. We advise clients to fill out the form on a computer if at all possible, thus taking advantage of the individualized instructions and drop down boxes in each section of the new I-9 Form. We note as well that the “N” at the end of the release date in the bottom left hand corner of the form means that it is the only version currently authorized for use. Finally, we continue to see employees who use E-Verify failing to fill out I-9s in the mistaken belief that participation in the E-Verify program releases them from the requirement to have an I-9 for each employee. It does not. You must prepare a new I-9 for every employee regardless of whether you participate in E-Verifying.
The new electronic I-9 Form is available at USCIS website. Use it online and make your lives easier.
This post was contributed by Logan Hetherington, a McNees Summer Associate. Mr. Hetherington is a rising third year law student at Penn State Dickinson Law School and is expected to earn his J.D. in May of 2018.
Well, if you are an organization that has employees, you do! Although they may be a bit unappealing and often overlooked, worksite notices are required under both federal and state law. In fact, many municipalities and cities also have ordinances that require certain notices to be posted at the workplace. Willful failure to meet posting requirements may lead to citations and other penalties.
The postings are not only important because the government says so, they also serve an integral role in educating employees. Many of the required notices inform employees of their rights, and duties, under particular statutes. This can aid employers in several ways. For example, if employers have up-to-date notices posted where employees can frequently see them, the employers shield themselves from future issues when dealing with employee grievances because the employee cannot claim ignorance. Moreover, management will be more aware of potential illegal conduct which could put the employer in the hot seat and (hopefully) make better decisions with respect to employee relations.
The majority of required worksite notices can be acquired from the United States Department of Labor or state departments of labor. The notices and posters may be obtained free of charge from these agencies, or, employers can purchase them from private retailers. However, employers should be aware that many of these postings have specific requirements. The posters and notices must be placed where employees can openly see them and many must be posted in Spanish or other language versions if employees don’t speak English. Additionally, not all employers have to post the same notices. Government contractors, for instance, are obligated to post specific notices regarding prevailing wages and other employee rights. Likewise, smaller employers may not be subject to some posting requirements.
Even though most worksite postings are easily accessible, many employers may be surprised to learn that their posters and notices are actually out-of-date. The content of the notices change as the law does. Consequently, governments routinely revise their posters and notices but typically don’t inform employers of these revisions. Employers should routinely check their postings and update them as necessary. Our Labor and Employment Group maintains a list of required federal and Pennsylvania worksite notices. We also aid employers in navigating the complex overlap between federal, state, and local posting requirements and can help employers ensure that they are in compliance with postings and the statutes which trigger them.
On April 27, 2017, the Senate confirmed R. Alexander Acosta as the Secretary of Labor. More than four months after President Trump took office, the U.S. Department of Labor finally had a new leader.
In the ten weeks since Secretary Acosta took office, the DOL has been very busy, with a number of important actions that directly affect employers.
- Withdrawal of Joint Employer and Independent Contractor Interpretations. On June 7, the DOL announced that it was withdrawing its 2016 and 2015 Administrator Interpretations on joint employment and independent contractors. With this action, the Trump Administration DOL confirmed that it would walk back from the more expansive interpretations of joint employer status and employment status in independent contractor situations adopted by the Obama DOL. This action does not mean that employers no longer face risk from possible joint employer or independent contractor situations. Instead, the DOL has indicated that it will return to the more traditional interpretations of these concepts used by the DOL under prior Administrations.
- Revising the Persuader Rule. On June 12, the DOL issued a notice of proposed rulemaking to rescind and revise the enjoined so-called Persuader Rule. The Obama-era Persuader Rule would have greatly expanded the reporting and disclosure requirements imposed on employers and consultants (including lawyers) with respect to labor relations advice and services under the Labor-Management Reporting and Disclosure Act’s “persuader activity” regulations. The Obama-era Persuader Rule was permanently enjoined in November 2016, and it appears that the Trump DOL will be taking action to formally rescind the blocked rule and perhaps issue new regulations that could further modify existing reporting and disclosure requirements.
- Return of Opinion Letters. On June 27, the DOL announced that its Wage and Hour Division will reinstate the practice of issuing opinion letters to provide guidance to employers and employees on the laws it enforces. The Obama DOL had ceased issuing opinion letters in 2010, and the return of opinion letters will be welcomed by employers as a useful tool when interpreting the requirements of the Fair Labor Standards Act and other federal wage and hour laws.
- Compliance Date Pushed Back for Electronically Submitting Injury and Illness Reports to OSHA. Also on June 27, the DOL’s OSHA announced that it was delaying the compliance date for electronic reporting of injury and illness data set forth in its May 2016 regulations from July 1, 2017 until December 1, 2017. Under the Obama DOL, OSHA intended to use the electronic submission of this data to post injury and illness data on its website from all workplaces with 20 or more employees and for those in certain high-risk industries, making the information publicly available for unions, plaintiffs’ attorneys, and others. In its June 27 press release, OSHA indicated that it intends to revisit and further consider the controversial rule.
- Clarification of Position on the FLSA Overtime Exemption Regulations. On June 30, the DOL filed its Reply Brief with the Fifth Circuit Court of Appeals in the pending appeal of the preliminary injunction blocking the 2016 salary-related changes to the FLSA white-collar overtime exemption regulations from taking effect. As we have discussed at length in this blog, the Obama-era regulations more than doubled the minimum weekly salary requirement for most white-collar overtime exemptions from $455 to $913. In November 2016, a federal district court enjoined the regulations from taking effect on December 1, 2016, and the DOL appealed this decision.
In its Reply Brief, which was the first opportunity for the Trump DOL to state its formal position on the controversial regulations, the DOL argued that the injunction blocking the regulations should be reversed, because it was based on the legal conclusion (which the DOL still believes is erroneous) that the DOL lacks the authority to impose any minimum salary requirement as part of the exemptions’ tests. However, the DOL asked the Fifth Circuit not to address the validity of the specific minimum weekly salary level of $913 set by the 2016 regulations, because the DOL intends to revisit the salary level through the issuance of new regulations in the future.
The DOL’s position, as set forth in its Reply Brief, raises additional questions and seemingly muddies the waters even further. Specifically, if the Fifth Circuit ultimately agrees with the DOL’s position as stated its Reply Brief, what would be the fate of the challenged 2016 regulations and their $913 weekly salary requirement? What would be the minimum salary required for the FLSA white-collar overtime exemptions before the DOL could issue new final regulations on the minimum salary level? On June 27, the DOL sent a Request for Information related to the overtime rule to the Office of Management and Budget for its review, indicating that it intends to initiate the rulemaking process on this issue. However, it will take many months, if not a year or more, for the DOL to complete the rulemaking process and issue a final rule to supersede the challenged 2016 overtime regulations.
Unfortunately, the DOL’s Reply Brief seemingly raised more questions than it answered, which is not good for employers who simply wish to know the legal requirements they must meet. We now will await oral arguments on the appeal and a decision sometime in the future.
With a Secretary of Labor now in place, we expect the DOL to continue its recent pace of activity. Stay tuned.
Back in 2015, Pittsburgh enacted a paid sick leave ordinance, following a trend among cities throughout the country. Pittsburgh’s paid sick leave ordinance required employers with fifteen employees or more to provide up to forty hours of paid sick leave per calendar year. Employers with less than fifteen employees were not spared. The ordinance required that those employers provide up to twenty-four hours per calendar year. The impact: 50,000 workers would receive paid sick leave.
But, what authority did Pittsburgh have to impose such a requirement?
The Pennsylvania Restaurant and Lodging Association, among others, challenged whether Pittsburgh actually had authority to enact the ordinance. Initially, the trial court found that the Steel City had no such authority. Pittsburgh appealed, arguing that because it had adopted a Home Rule Charter, it had authority to exercise broad powers and authority.
A few weeks ago, the Commonwealth Court of Pennsylvania issued its opinion, agreeing with the trial court that Pittsburgh indeed lacked the necessary authority. The court found that the Home Rule Charter Law has an exception with respect to the regulation of businesses. The exception specifically provides that “a municipality which adopts a home rule charter shall not determine duties, responsibilities or requirements placed upon businesses, occupations and employers . . . except as expressly provided by [separate] statutes . . . .” Although Pittsburgh attempted to point to various statutes which it felt provided it with the needed authority, the court was not convinced. Struck down by the court, it was – and remains – the worst of times for Pittsburgh’s paid sick leave ordinance.
But, what about Philadelphia? It is a home rule charter municipality. It has a paid sick leave ordinance. Does the Commonwealth Court’s opinion effectively render its ordinance invalid, too? Nope. Philadelphia’s authority is derived from a different law, which applies only to cities of the first class (oh, and Philly is the only First Class City in Pennsylvania under the law). It includes no such limitation on the regulation of businesses. Yet, while Philadelphia’s statute may be unaffected by the court’s opinion, it may not be best of times for Philadelphia’s ordinance either. The Pennsylvania State Legislature is making efforts to affect Philadelphia and all municipalities. Senator John Eichelberger’s Senate Bill 128 would ban municipalities from passing sick leave and other leave requirements that are stronger than those required by federal and state governments. The bill was voted out of committee and is set for consideration by the Senate.
So, for our blog subscribers with businesses only in the city limits of Pittsburgh, there is no requirement that you establish a paid sick leave program for your employees. However, Philadelphia’s paid sick leave ordinance remains alive and well, and you must abide by its requirements. While some do not expect the General Assembly to move this bill through both chambers before the end of the current session, we will track the bill’s progress and update this blog should it be considered and voted on by the Senate. So, stay tuned for future posts on legislation effecting Philadelphia’s and all municipalities’ authority to impose paid sick leave requirements.
A few weeks ago, a jury in New Jersey federal court found that Lockheed Martin discriminated against a former employee. The employee claimed that Lockheed violated federal and state laws by discriminating against him on the basis of age, including by paying him less than his younger co-workers. The jury’s award: $51.5 million ($1.5 million in compensatory damages and $50 million in punitive damages). Although the claim was only partially based on unequal pay, and although the punitive damages award is constitutionally suspect (U.S. Supreme Court precedent holds that punitive damages should generally not be more than ten times the amount of compensatory damages), the award is indicative of an ever-emerging emphasis on pay equity.
Since January of 2016, several states have enacted equal pay statutes, and several others have pending legislation. California, New York, Maryland, and Massachusetts all have statues that prohibit pay discrimination on the basis of sex (Maryland’s also includes gender identity). Each of these statutes makes it easier for employees to establish pay discrimination claims, including requiring no proof of intent. One state, however, allows employers to establish an affirmative defense. Under Massachusetts’ statute, which is set to go into effect in July 2018, an employer has an affirmative defense if it completed a self-evaluation of its pay practices within three years of the claim, and it made reasonable progress toward eliminating pay differences revealed by the self-evaluation.
It is not just states that have turned their focus toward compensation. Our federal contractor subscribers – recognizing that Lockheed Martin is a federal contractor (the biggest, actually) – may find themselves wondering how aggressive the Office of Federal Contract Compliance Programs (OFCCP) has become with respect to compensation. If its lawsuit against Google is any indication, OFCCP has become quite aggressive. Typically, during a compliance audit OFCCP will require employers to provide compensation data for all current employees to ensure no disparity across races and genders. With Google, it went further. It demanded wage histories, changes in compensation, and employee contact information. When Google refused, OFCCP filed a lawsuit seeking an injunction and threatened to cancel all of Google’s federal contracts.
Finally, even if you are not in a state that has current or pending pay equity statutes, and even if you are not a federal contractor, employers may need to report compensation in the future. For employers with 100 employees or more, the Equal Employment Opportunity Commission has proposed to collect compensation data by sex, race, and ethnicity for each job category. Thus, starting in March 2018 – assuming no changes occur under the new Trump administration – those employers will be required to include compensation information in their EEO-1 report. According to the EEOC, this “will provide a much needed tool to identify discriminatory pay practices where they exist in order to ensure that fair pay practices are put in place.”
Considering all this momentum toward ensuring pay equity, compensation has possibly become one of employers’ greatest vulnerabilities. Now may be the time to conduct an internal analysis – preferably one shielded by attorney-client privilege – to determine whether disparities exist within your compensation structure. Stay tuned for future podcasts, webinars, and seminars that will address this issue in part.
On November 3, 2016, the National Labor Relations Board issued a Decision and Order in Trump Ruffin Commercial, LLC, finding that the Trump International Hotel, Las Vegas unlawfully refused to bargain with UNITE HERE International Union after the union won a representation election among the Hotel’s housekeeping, food and beverage and guest service employees.
….In other news, just five days later, Donald Trump was elected President of the United States with the pledges to Make America Great Again, to cultivate more good paying jobs for Americans and to undo much of the agenda of the Obama administration.
Over the past several Presidential transitions, the Human Resources community has become accustomed to the swinging pendulum in the areas of labor and employment law. We know change is coming. We’re just not always sure what exactly it will involve. Everyone remembers the threat of unions being certified on the basis of a card check, right? That didn’t happen in 2009, but of course quickie elections did. So making specific predictions on Inauguration Day can be dangerous. But as the new Administration now has officially taken over, we have to at least try.
Here’s an easy one: President Trump is unlikely to be appointing what we would call traditional candidates to run the departments and agencies that regulate the American workplace. While he has nominated some people who have significant governmental service on their resumes, the current list includes a fair share of people with no such experience – – CEOs, philanthropists, investment bankers, a neurosurgeon, even the co-founder of World Wrestling Entertainment. These appointments do not signal “business as usual” for the federal government, nor did the President who, in his inaugural address, pledged to transfer power from Washington back to the American people.
At first blush, this would portend wholesale rollback of workplace regulations. Indeed, President Trump’s nominee for Secretary of Labor, fast-food executive Andrew Puzder, has been a critic of substantially increasing the minimum wage and a vocal opponent of the Obama administration’s efforts to make more workers eligible for overtime pay. And critics have noted similar opposition by other nominees to what has been the recent mission or focus of the agency that they may be leading (See Governor Rick Perry and Betsy DeVos).
But here’s the rub: a substantial portion of President Trump’s electoral base of support likely will not support the pendulum swinging back in ways that make their workplaces less safe or adversely impact their earnings. So…this will be a bit more complicated.
What can we say now in January 2017 with confidence?
- We’re not going to get back all of that time we spent learning the ever changing minutiae of the Affordable Care Act. But we can certainly anticipate that there will be new regulation impacting employer provided health insurance.
- We will see change in leadership at the Equal Employment Opportunity Commission. The current EEOC Chair’s term will end in July 2017, and the new Chair will likely fill the now vacant EEOC General Counsel position. That new leadership is less likely to retain the current EEOC’s focus upon pay equity issues and seeking to expand gender identity and sexual orientation protections through selective litigation. And let’s not forget the agency’s proposed regulations that would require employers to provide compensation data and hours for all employees as part of the EEO-1 reporting process. We think that it is unlikely that these requirements will become effective in March 2018, as currently planned.
- The NLRB will be looking at the bureaucratic version of Extreme Home Makeover. Readers of our Annual NLRB Year in Review will recall that the Obama Board has involved itself in everything from revising the representation election timeline, to creating rights to use your email system for organizing activity to uncovering the dastardly hidden meaning of the most innocuous provisions of your employee handbook. They expanded the concept of joint employment to the point you might have to sit at the bargaining table to discuss wages, benefits and working conditions of people who are not even your employees. And then when they were done with that, they even tried to get involved in college football! The party’s soon over at the Board. President Trump will have the opportunity to fill two current Member vacancies on the Board as soon as he gets down to work. More critically, by November he will have the opportunity to replace NLRB General Counsel Richard Griffin Jr., an Obama appointee, former union lawyer and spearhead for most of the NLRB’s most aggressive initiatives.
- OSHA recordkeeping requirements should be reduced. We know how this has been an area of focus over the past 8 years and has caused more work for employers. And the new silica rules and anti-retaliation rules that seek to effectively prohibit mandatory post-accident drug testing and safety incentive programs may soon be on the cutting room floor.
So, that’s enough prognostication on Day 1 of the Trump Administration. Stay tuned!
The Philadelphia City Council recently passed Bill No. 160840, a wage equity ordinance (the “Ordinance”), that will amend Philadelphia’s Fair Practices Ordinance to prohibit employers or employment agencies from inquiring about the wage history of potential employees. Among other things, the Ordinance also includes an anti-retaliation provision, which prohibits any form of retaliation against a prospective employee for failing to comply with a wage history inquiry.
More specifically, the Ordinance provides that it is an unlawful employment practice for a covered employer to:
- inquire about a prospective employee’s wage history;
- require disclosure of wage history;
- condition employment or consideration for an interview on disclosure of wage history; or
- retaliate against a prospective employee for failing to comply with any wage history inquiry.
Furthermore, the ordinance also makes it an unlawful employment practice for an employer to “rely on the wage history of a prospective employee from any current or former employer when determining the wages for such individual at any stage in the employment process,” which includes the negotiation or drafting of any employment agreement. However, the Ordinance does provide an exception that permits an employer to rely on any wage information that is knowingly and willingly disclosed by an applicant.
It is important to note that this Philadelphia Ordinance will take effect 120 days after it is signed into law by Mayor Jim Kenney, who has expressed his support. Accordingly, if the Ordinance is signed this month, employers in Philadelphia can expect to see the Ordinance take effect in May of this year.
In anticipation of the enactment of this Ordinance, Philadelphia employers can prepare by:
- removing any questions on employment applications that may in any way seek information about salary or wage history;
- train hiring managers and interviewers to avoid asking questions about an applicant’s wage history;
- refrain from relying on an individual’s wage history (if known) when deciding the appropriate wages/salary to pay a prospective employee; and
- review existing policies and practices to ensure compliance with the Ordinance.
This Philadelphia Ordinance is recent example of a growing trend to prohibit employers from requesting and relying on an applicant’s wage history. This trend has emerged in an effort to address what many call the “gender pay gap.” In light of these recent actions by state and local governments, employers across Pennsylvania and beyond should stay informed about further developments in this area, as similar laws may soon be proposed and enacted in other locations.