Thursday, October 18, 2007

Restrictive Covenants for Your Employees to Sign?

I hear all the time that it's not worth having employees sign a noncompete or other restrictive covenant agreement because they are unenforceable. This is more of an urban myth. While restrictive covenants (namely, noncompetes, nonsolicitation and confidentiality agreements) may be challenging to enforce, they can be a valuable tool for a company to use.

Generally speaking, the law governing restrictive covenants is state-specific, so what is binding and enforceable in Ohio may not be sufficient under Georgia law. I usually tell employers that they should view restrictive covenant agreements as deterrants and not ironclad documents. Whether a restrictive covenant is enforceable can depend on the employer's industry, employee's scope of duties, regularity of contact between the employee and customers, the duration of the covenant and geographic territory in which the employer is trying to restrict the employee.

An employer should decide what it is trying to accomplish by having an employee sign a restrictive covenant agreement:
  • Are we trying to prevent the employee from taking keep personnel with them to another job if they leave?
  • Are we trying to prevent the employee from leaving and opening a competing business?
  • Is there confidential or proprietary information that the employee could misappropriate for his/her own benefit?
  • Are there customers that the employee has closely worked with that might stop using the employer's services if that person ceases employment?

A restrictive covenant should be drafted in a manner that is the least restrictive as necessary. In states like Georgia, courts will not "blue pencil", meaning they will not rewrite the agreement to make it enforceable if it is overly broad or vague; the restrictive covenant is either enforceable on its face or it fails in its entirety.

Litigating a restrictive covenant agreement can be tricky. If a court rules that it is unenforceable, then every employee who signed the same agreement will be able to claim that his/her agreement is also unenforceable. The employer then has to go back to all employees and have them sign revised agreements (presumably "new and improved"). What if an employee refuses to sign a new agreement? Is the employer prepared to terminate that person for not signing.

Challenging stuff to say the least...

Monday, October 8, 2007

Know who you really are interviewing

I just read an article about an attorney who applied for a position and was disbarred for misrepresenting information on her resume. It seems that the attorney's immediate prior employer was her husband. She did not explain this on her resume, nor did he disclose that she was married to her boss, despite the fact that she used her husband's letter recommendation in support of applying for the position. This scenario shows you that you never know who you are interviewing or how accurate references or resumes are that are submitted to your company.

I have a client that never calls the reference on a resume; they call the supervisor of the employment reference. After all, who is going to provide a reference to someone that's going to say something negative about the applicant?

Also, after making an offer to someone, it's a good idea to conduct a criminal background, credit check (particularly if the position involves A/P, accounting or finance) and to verify employment. I defending a recent employment discrimination case, a plaintiff completely omitted an employer on her resume for employment after leaving my client's employ. Further, in inquiring further, we learned that the person had mispresented her educational background, including claiming to have earned a degree from a particular university. All it took was a call to the registrar's office to learn that they had no record of the person having graduated.

Ask yourself: if a person would lie about their education or employment history to get this job, what would he or she billing willing to lie about to keep this job?

Friday, October 5, 2007

EEO-1 Reports

Effective the end of September, covered employers must use the new EEO-1 reporting form. An employer with 100 or more employees or a federal government contractor with at least one government contract of $50,000 and 50 or more employees is a covered employer and must file an EEO-1 Report form annually.

According to the EEOC, the "EEO-1 report is the principal reporting form by which certain employers provide the federal government with a count of their workforces by ethnicity, race and gender, divided into job categories."

Changes include:
  • Adding a new category titled "Two or more races not Hispanic or Latino";
    Separating "Asians" from "Pacific Islanders";
  • Adding a new category titled "Asians not Hispanic or Latino";
    Adding a new category titled "Native Hawaiian or Other Pacific Islander not Hispanic or Latino";
  • Extending the EEO-1 data collection by race and ethnicity to the State of Hawaii; and
    Strongly endorsing self-identification of race and ethnic categories, as opposed to visual identification by employers.
  • Dividing "Officials and Managers" into two levels based on responsibility and influence within the organization: "Executive/Senior Level Officials and Managers" and "First/Mid-Level Official and Managers"; and
  • Moving non-managerial business and financial occupations from the "Officials and Managers" category to the "Professionals" category.
This is not an area or issue to take lightly, as there are penalties for noncompliance. The EEOC can obtain a court order requiring you to make a future filing and, for federal contractors, record keeping violations could lead to debarment from future contracts.