Legal Bites

After undergoing some revisions, a bill codifying the scope of allowable provisions in Massachusetts non-compete agreements is advancing on Beacon Hill. The legislation is a mixed bag for Bay State employers, in some places simply codifying common law doctrines, but elsewhere pulling back from restrictions found reasonable by the courts. In some areas, the legislation could actually assist employers by removing uncertainty as to the reasonableness of a non-compete???s terms, thus avoiding a costly legal battle over reasonableness down the road. The following is a list of notable provisions in the bill:

The Good

??? The bill does not alter current law allowing prohibitions on a former employee soliciting customers or employees to jump ship to a competing employer.

??? The bill???s provisions do not apply to restrictive covenants entered into as part of the sale of a business or assets of a business.

The Bad

??? Non-competition agreements cannot be enforced against employees making less than $75,000 per year (adjusted upward by $1,500 for each year after the bill???s passage). This provision could be troublesome to employers who have key employees earning under the $75,000 threshold, especially in the central and western parts of the state where salaries are lower than in Boston.

??? The bill creates a strict one-year limit for the duration on non-competition agreements, and further provides that non-competes lasting six months or less are presumptively reasonable. While this provision may cause difficulties for employers that have relied on non-competes lasting longer than six months, the bill could actually assist employers by making it easier to enforce agreements lasting six months or less.

??? The bill provides that continued employment is not sufficient consideration for a non-competition agreement presented to the employee after employment has commenced. Instead, the bill states that consideration of ten percent of the employee???s annual salary will be deemed ???presumptively reasonable??? compensation. Thus delay could be costly.

??? The bill mandates that employees be given notice that of a required non-competition agreement seven days??? prior to commencement of employment, or when a written job offer is communicated, whichever is earlier. If a job offer is oral, the prospective employee must either be simultaneously told of the required non-competition agreement, or be provided written notice prior to his or her resignation from a current job. If the bill passes, employers would be well advised not to rely on the ???prior to resignation??? provision, as a new hire???s decision to quit his or her old job a few days early could invalidate your non-compete agreement.

The Ugly

??? The bill mandates that a court shall award attorneys??? fees and costs to an employee if the court declines to enforce a material restriction in the agreement or finds that the employer acted in bad faith, among other reasons. There is a provision allowing for the employer to be awarded attorneys??? fees, but such an award is left to the court???s discretion and requires the challenged provisions to be those deemed ???presumptively reasonable,??? the agreement to have been enforced without substantial modification, and the employee to have acted in bad faith. This is an extremely high standard for an employer to meet.

??? The bill allows a court to refuse to enforce any provision in a non-competition agreement, even those deemed presumptively reasonable, in ???extraordinary circumstances,??? or ???where otherwise necessary to prevent injustice or an unduly harsh result.??? Expect these phrases to become standard in the lexicon of plaintiffs??? attorneys, as their vagueness could essentially serve as a catch-all to override the bill???s provisions.

Stephen D. Coppolo, a member of the Employment Counseling and Litigation Practice Group, contributed this report.

Emily Kysel has a rare and potentially fatal allergy to paprika. She is so sensitive to the spice that she had a serious attack and had to leave work after she smelled the buffalo wings that her co-worker was eating a few cubicles away. At one point, she nearly died from eating chili containing paprika. Recognizing Ms. Kysel???s disability, her employer, the City of Indianapolis, agreed to allow her to have a service dog in the office. The dog, a golden retriever named Penny, was trained to jump on Kysel whenever she smelled paprika. She cost Kysel $10,000. On the very first day that Penny went to work with Kysel, one of Kysel???s co-workers suffered an asthma attack because she is allergic to dogs. The City informed Ms. Kysel that afternoon that Penny was no longer welcome in the office. Kysel was offered indefinite unpaid leave if she felt she could not work without the dog. Kysel then filed a complaint with the Equal Employment Opportunity Commission, alleging that her employer violated the Americans with Disabilities Act by failing to accommodate her disability. A lawyer for the City thinks that it has done enough to accommodate Kysel???s disability, including barring employees from eating food that contain paprika at their desks. Kysel disagrees, pointing out that the City allows blind employees to bring their service animals to work.

To view the related article as published in the New York Times online, click here.

The manager and owner of French Gourmet, a San Diego bakery, were arraigned in federal district court on April 21, 2010, on charges that they conspired to engage in a pattern or practice of hiring and continuing to employee unauthorized workers, a misdemeanor, in addition to 14 felony counts, including making false statements and shielding undocumented alien employees from detection. If convicted, the manager and owner face a maximum of five years in prison and a $250,000 fine on each count. The indictment also seeks criminal forfeiture of proceeds gained from the restaurant’s unlawful activities. According to the indictment, the resaurant’s managers certified on the firm’s Employment Verification Forms (I-9) that the documents they examined appeared to be genuine, and to the best of the their knowledge, the employees listed on the I-9 were eligible to work in the United States. The managers then put the illegal workers on the company’s payroll and paid them by paycheck until they received letters advising them that the Social Security numbers of the employees did not match the names of the rightful owners of the Social Security numbers. The indictment alleges that the restaurant then conspired to pay the undocumented employees in cash until the workers produced a new set of employment documents with different Social Security numbers. The criminal case against the restaurant and its managers is supported by employee and payroll records seized by ICE agents in a May 2008 search of the restaurant, which also resulted in the arrest of 18 undocumented workers. The lesson to employers: ensure compliance with I-9 requirements and establish an I-9 policy that includes completion and retention of Form I-9 for all employees, a strict policy against the employment of individuals who do not provide the proper eligibility documents for Form I-9, periodic reverification of employees, I-9 training for all employees who are part of the hiring process, and regular auditing of employees??? status.

Last week, Santa Clara County, California voted 3 to 2 to pass an ordinance prohibiting restaurants from giving away toys with meals that contain high levels of fat, sugar, sodium, and calories.?? This includes meals that contain more than 485 calories and 600 milligrams of salt.???? It means that even Happy Meals that substitute apple slices instead of French fries will face the toy prohibition.?? You can read the ordinance here: http://www.sccgov.org/keyboard/attachments/BOS%20Agenda/2010/April%2027,%202010/202926863/TMPKeyboard203046978.pdf

Restaurants in the county have 90 days to comply with the law.?? They can either improve the health of their offerings or stop giving away toys.?? The County cites the fact that 1 in 4 children in the County are obese, and that disproportionately, these children come from lower income homes that fast food chains typically market to.??

Interestingly, 87% of residents in the County oppose the ban.?? Nutritionists, however, say it levels the playing field.?? In their opinion, children don???t beg to go to Burger King or McDonalds because they love the taste of the food.?? They go because they want the toy or to play on the playground.??

It will be interesting to watch where this leads.?? Will it be found unconstitutional for interfering with interstate commerce? ??Surely it will be extremely burdensome on restaurants to offer different foods in Santa Clara than elsewhere in the country.?? It would also impact their business to stop giving away toys there.?? While this is precisely what the County wants, it may violate the Commerce Clause.

Additionally, many parents are complaining that the ???Happy Meal ban??? infringes on their rights to parent their child.?? They feel that if they choose to let their children eat an unhealthy meal on occasion it is their prerogative and the County should not be dictating what their children can and can???t eat outside of school.?? The County argues, however, that this is a safety and welfare issue and is the same as controlling other food safety issues.

If this law is upheld, what will follow? Prohibiting restaurants from providing coloring sheets and crayons if they sell unhealthy foods? Will kid friendly restaurants be held to a higher standard? Should they be? ??If this is successful, will other counties and states follow suit? Stay tuned.??

??For more information, see the following articles:

http://www.nytimes.com/2010/04/28/business/28mcdonalds.html

http://articles.chicagotribune.com/2010-04-27/features/ct-talk-happy-meal-ban-0427-20100426_1_happy-meals-toying-restaurant-meal

http://news.yahoo.com/video/business-15749628/where-happy-meals-are-illegal-19362009