your best legal outcome with
effectiveness, efficiency, & expertise

Category: Employment Matters

The Internet is Forever

Practical Guidelines For Employers

Involving Employees and Prospective Employees

Over the course of the last year, especially during the most recent election cycle, the airwaves have been inundated with news of individuals caught in one scandal after another involving their use of the Internet and various social media platforms.   In certain circumstances these “scandals” have led to the individuals being terminated by their respective employer.   In more extreme cases, it has led to criminal investigations.

A question I often hear from my clients is how far can they go in utilizing the Internet and social media platforms to investigate either the current or prospective employees of their business.   These clients want to utilize these investigations to address a problem before it becomes a social media firestorm that would negatively impact their business.  Business owners also want to prevent a problem in the first place by avoiding hiring a potentially troublesome employee.  

General Guidelines

In my presentations to business people on the subject, I always open the discussion with the statement “the Internet is forever.”   Any statement, posting, or email, even if deleted shortly after its occurrence, remains in existence.   There are search and cache programs designed for the very purpose of retrieving deleted items, and individuals who have seen controversial posts often will take a screenshot of the post as proof of its existence.   A business owner must assume that any posting, statement, or other use of the Internet will always exist and can be potentially accessed by others.   As such, they must act and react accordingly.

The next subject I discuss is even though the Internet and social media platforms are very public situations, an employer still needs to make certain it complies with federal and state rules and regulations concerning discrimination.   One example is Title VII of the Civil Rights Act and protected classifications outlined therein (e.g. race, gender, age, sexual orientation, religion, etc…).  Another example is disability discrimination as outlined by the Americans With Disabilities Act.   Both of these federal statutes, and similar state statutes that address these areas, would prohibit an employer perusing information that he or she would not be entitled to if requesting the information from the employee.  

Prospective Employees

Although employers should avoid use of the Internet and social media to discover protected information as outlined above, an employer is not prohibited from conducting research about prospective employees in other areas.

Researching through social media if an employee appears to be reliable, honest, speaks negatively about others, his/her emotional maturity level, criminal behavior, and similar issues are acceptable areas to research.   For example, prospective employees who post statements online such as “I lied to my supervisor about a project deadline, but he is too dumb to notice.  Ha Ha,” “I hate working with these clients,” or “I want to punch my co-worker in the face” are all legitimate social media red flags that the employer can use in the determination of whether to hire someone or not.  

When a prospective employee social media search is conducted, it should be under guidelines established by the company, which will directly outline the parameters.  It should either be conducted by one individual (such as the HR Director) or by a small group of individuals who are directly responsible for the hiring of the position in the company.   It should not be a time of an employee free-for-all to see who can find the most information the quickest.   In addition, an employer must avoid obtaining this information utilizing deception.   For example, creating a fictitious character and then having the prospective employee “friend” the character in order to gain access to information is problematic and should be avoided.

Current Employees

Often employers are caught in the crossfire when an Internet “scandal” occurs involving an employee.   The best defense in this situation is a good offense.

First, employee handbooks and employment agreements should include sections and provisions concerning an employee’s conduct.   Emphasizing that as an employee they are representing the company and that certain negative actions and behaviors will have a detrimental effect.   As such, negative actions and behaviors both inside and outside the workplace may directly impact their employment and be a cause for termination.   Putting an employee on notice from the start is both an effective deterrent and affords protection for the employer if something does occur.

Second, if a negative event has occurred, the company should have written procedures in place for a quick investigation and determination of what is to happen next.   In addition, these procedures should designate certain company personnel to quickly investigate and address the issues as quickly as possible.   The Internet works at the speed of light with a ripple effect that can turn into a tsunami if a company does not address a situation quickly and effectively.

In addition to the circumstances discussed above, sometimes employers learn of the actions of employees through social media that may not involve a “scandal.”  Nevertheless, these actions impact the company and can create personnel issues.   This below example, that I have heard of more than once, outlines this situation:

An employee contacts his/her employer (usually outside of business hours) notifying that a family member is facing a medical or other crisis.   As such, he/she must take several days off to travel across the country to take care of the crisis.   The employer accommodates the request and makes arrangements for others to complete the work previously assigned to the absent employee.   Shortly thereafter, the employer discovers (usually by information from other employees) through social media sites that that employee is not taking care of a family crisis.   Instead, he/she lied about the crisis and is in Mexico with their significant other on vacation.

Under this example, the employer is within its rights to trigger their investigation process and to determine whether termination is necessary.   The primary consideration is to follow the policies and procedures that are in place.

Conclusion 

In the fast-paced social media climate that is now in existence, a business needs to be aware of its impact on employees.   A business with established principles and guidelines in place for these occurrences (and to prevent troublesome employees  from being hired in the first place) will both allow for these matters to be properly investigated and also avoid running afoul of statutory mandates.

© 2017 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

Hands-Off and Anti-Piracy Provisions in Employment Contracts

 

Hands-Off and Anti-Piracy Clauses: Narrowly-Tailored Restrictive Covenants

Most business owners are familiar with non-compete agreements which restrict an employee from competing with a former employer after the employee leaves the company. Non-compete agreements vary and can include language that prohibits an employee from working in the same industry for a specific period of time or within a certain geographical area. However, many businesses are unaware that non-competes or “covenants not to compete” are actually just one of several “restrictive covenants” available in the employment law context.

“Hands-off” or “anti-piracy” provisions are one type of restrictive covenant that prohibits a former employee from contacting customers or using proprietary information gained as a result of his or her position. Properly drafted, this type of restrictive covenant allows employers to hold onto their customers without compromising employees’ rights.

Carefully crafted anti-piracy or hands-off provisions can be very helpful for Arizona employers, who occasionally run afoul of state law by including overly broad non-compete provisions in their employment contracts. Instead of attempting to completely curtail a former employee’s activities, employers can draft narrowly-construed provisions that protect valuable customer relationships and information.

Arizona Case Examples

In practice, hands-off and anti-piracy provisions are aimed at preventing former employees from stealing customers from their former employers. This becomes especially relevant in service industries and sales-based companies, where employees tend to interact one-on-one with clients, building relationships, trust, and familiarity. When these personnel move on, there is always a risk that the client – reluctant to start over with someone new – will follow. Employers are also aware that salespeople and customer service managers often leverage their customer contacts to obtain more lucrative employment offers elsewhere. Hands-off restrictive covenants aim to stop this behavior without prohibiting past employees from earning a living.

One of the most often-cited cases in the realm of hands-off restrictive covenants is Olliver/Pilcher Insurance, Inc. v. Daniels, a 1986 decision by the Arizona Supreme Court. The defendant, Robert Daniels, was sued by his former employer, an insurance company, for allegedly violating the terms of his employment agreement. The Supreme Court ruled that the applicable provision was not a standard non-compete agreement; rather, it was a hands-off provision that prohibited Daniels from soliciting business from his former group of clients. When Daniels left his old insurance firm, 19 clients went with him, prompting the lawsuit and perhaps justifying the company’s position. The Arizona Supreme Court ruled that the hands-off provision would have been enforceable by itself. Unfortunately for the employer, it also contained language that imposed a 67 percent commission penalty on Daniels for each former customer that signed on with his new employer, regardless of whether Daniels had directly worked with them in the past. The provision also applied to the entire state of Arizona, even though Daniels’s business had been almost exclusively concentrated in the northern region of the state. Because of these overly-broad and punitive restrictions, the Court ruled the hands-off provision completely invalid.

In contrast, the Arizona appellate court upheld a hands-off provision in Alpha Tax Services, Inc. v. Stuart (1988). In this case, two former employees, tax preparers, broke off from Alpha Tax to form their own tax preparation service. Shortly after opening their own business, they mailed hundreds of fliers and coupons to their former customers. They also, utilizing the information acquired from their past employer, contacted and solicited former customers directly by phone. Citing Olliver/Pilcher, the court held:

“This type of agreement, which has been called an antipiracy or hands-off agreement, is less restrictive than a covenant not to compete and is designed to prevent former employees from using information learned during their employment to divert or to steal customers from the former employer. Such an agreement, statewide in scope, is not considered unreasonable or oppressive and is valid.”

-In a more recent opinion, Orca Communications Unlimited, LLC v. Ann J. Noder et al. (2013), the Court of Appeals ruled that a company’s hands-off provision was invalid because it was too broad in scope. The employment agreement attempted to restrict Ann Noder, Orca’s former president, from drawing prospective as well as former clients away from Orca. The court ruled that, although Orca had a right to protect its interests in any current clients, it could not claim any interest in former or future clients.

Drafting Effective Hands-Off and Anti-Piracy Provisions

As the case law demonstrates, employers must be careful when including hands-off provisions in employment agreements. As with non-compete clauses, provisions that prohibit an employee from interacting with former clients or using information gained during their employment must always balance the employer’s legitimate business interests against the employee’s right to earn a living in his or her chosen field. Because the law in this area is complex and the costs of making the incorrect decision are high, it is imperative to work with an experienced employment and business law attorney who can help you get it right.  

© 2015 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC. for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

The Ins and Outs of Non-Compete Agreements

 

Use and Popularity of Employee Non-compete Agreements

Employee non-compete agreements are popular tools utilized by many types of employers when hiring new employees. It is easy to understand why. Employees today are considerably more mobile than in past generations. When a new job opportunity arises, an employee is more likely to move on than his or her predecessors were. The days of spending one’s entire working career with a single employer are a thing of the past. With such a fluid workforce, understandably, employers need to protect their information, including accounts, relationships, and access to customers. In many situations, an employer accomplishes this by requiring a new employee to sign a non-compete agreement.

Arizona courts have held that these covenants not to compete must be narrowly tailored to protect an employer’s legitimate business interests. A non-compete agreement cannot be overly restrictive when it comes to duration or to geographic scope. In other words, businesses cannot handcuff a former employee’s job prospects for the sake of their bottom line.

How can a business draft a non-compete agreement that holds up in court? If one provision within the agreement is found to be invalid, is the entire agreement found to be invalid? To examine these circumstances, one must look to the “blue pencil rule.”

Why You Want “Severable Portions” in Your Non-Competes

If you are an Arizona employer, “severable portions” should be part of your evolving business vocabulary. Also known as step-down clauses, these provisions in an employer’s non-compete agreement refer to either a specific alternative time or a territorial provision that creates the restrictions in the covenant agreement. To be enforceable, the non-compete agreement must provide a clearly stated alternative as to either time or geographic location in its restrictions.

The blue pencil rule allows a court to strike out restrictions that conflict with each other within an agreement. However, it is not acceptable for the employer to include both provisions in their agreement and to simply give the Court “revision authority” so as to attempt to be more restrictive in its agreement language. Doing so risks the validity of the entire agreement.

The Arizona Supreme Court addressed this very issue in Varsity Gold, Inc. v. Porzio. In this case, the drafting party included a reformation clause that granted the Court authority to revise the non-compete agreement in question to conform to acceptable standards in lieu of a step-down provision. The Court held that granting it revision authority to modify the non-compete agreement was not a valid step-down provision and as such, deemed the entire agreement unenforceable. The court stated, “Although we will tolerate ignoring severable portions of a covenant to make it more reasonable, we will not permit Courts to add terms or rewrite provisions.”

Covenants not to compete are complex documents that can be easily invalidated by Arizona courts. Laws favor employees as the non-drafting parties. It takes a carefully crafted agreement to ensure that the parties on both sides of a non-compete agreement are protected and understand their rights and obligations.

©2015 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

Let’s Be Reasonable: Geographic and Time Limitations in Non-compete Clauses

 

When employees move on to other pursuits, they take their knowledge of the former employer with them. If you are a business owner, a well-drafted non-compete agreement can ensure that former employees do not directly compete with your business. Because many employees leave to work for competing firms (or start their own), a non-compete agreement is essential to protect, at least for a time, what you have worked so hard to build A business must draft its non-compete agreement in such a way that it will protect itself to the greatest extent possible, but remain legally enforceable. Creating such an agreement often involves a delicate balancing act that a business must constantly keep in mind.

In general, non-compete agreements “are disfavored and thus are strictly construed against employers.” Hilb, Rogal and Hamilton Co. of Ariz., Inc. v. McKinney. For example, to be enforceable, non-compete agreements must include reasonable time and geographical limits. What courts consider “reasonable” is generally determined on a case-by-case basis, but certain guidelines have been established. Arizona courts have held that these limitations must be specifically tailored to protect an employer’s legitimate business interests. In Valley Med. Specialists v. Farber, the Arizona Supreme Court held that non-compete agreements will be enforced as long as they are “no broader than necessary to protect the employer’s interest.”

Non-compete agreements that attempt to impose lengthy time restrictions and overly broad geographical limitations will not be enforceable. As an example, no court in Arizona has ever upheld a non-compete agreement that imposed a statewide geographical limitation. In Liss v. Exel Transportation Services, Inc., the court ruled that a non-compete agreement essentially banished an employee from his chosen industry. The agreement prohibited the employee, a truck driver, from “directly or indirectly engaging in any work associated with motor freight transportation services for three years, regardless of where the business is located.” Unsurprisingly, the court held that the agreement was overly broad. Therefore, employers must carefully draft these agreements to balance their business interests against their employees’ right to earn a living.

Reasonableness Factors

Arizona courts will consider a number of additional factors when examining the scope of time and geographical limitations. Among these other factors, the court will examine the type of business, the employee’s specialized knowledge, and how long it will take an employer to train the employee’s replacement.

For example, in Amex Distributing Co., Inc. v. Mascari, the court held that a 36-month blanket restriction that prohibited the employee from working with any competitor was unreasonable. The court stated: “When the restraint is for the purpose of protecting customer relationships, its duration is reasonable only if it is no longer than necessary for the employer to put a new man on the job and for the new employee to have a reasonable opportunity to demonstrate his effectiveness.”

In Bryceland v. Northey, the court also refused to enforce a non-compete that included overly broad time and geographical limitations. Not only did the agreement prohibit a disc jockey from providing professional services to any client within a 50-mile radius of Phoenix or any of his other job sites, it did so for two years. Similarly, in Lessner Dental Labs v. Kinney, the court held that a non-compete was unenforceable because it prevented the employee, a dental technician, from working with any competitors within the entire county for two years.

Conversely, in Bed Mart, Inc. v. Kelley, the court held that a non-compete agreement was enforceable. The agreement imposed a six-month, 10-mile restriction on the employee working for any company whose business was comprised of more than 50 percent mattress sales.

Contrasting Bed Mart with case examples where the non-compete agreement was deemed un-enforceable, it is easy to see the differences in how the geographical and time restraints were drafted. Because the non-compete provisions in the Bed Mart agreement were specifically and narrowly tailored to protect the employer – without being unduly burdensome to the employee – the court determined them enforceable.

Conclusion

Often employers attempt to utilize a “one size fits all” non-compete agreement that fails to focus on the unique nature of their business, the specific knowledge and skill set of certain employees, and whether the geographic and time limitations within these boilerplate agreements would be considered reasonable. This is an area where a “one size fits all” approach can be detrimental to an employer’s ability to enforce an agreement and emphasizes the need to specifically draft a non-compete agreement to an employee’s skill set.  

©2015 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

Drafting Your Employee Handbook

The Provisions You Need to Include

handbook-page-001

 

Employee handbooks can be a tremendous resource for both employers and their employees. Carefully written employee manuals get everyone on the same page – literally – by clearly outlining company policy, laying ground rules, identifying important objectives, and establishing an overall culture. In general, people thrive when they know what to expect and what is expected of them.

Furthermore, for business owners looking to guard against employment-related lawsuits, employee handbooks provide businesses with an opportunity to set forth clear, concise policies regarding sick leave, personal days, discipline, benefits, work-life balance, inappropriate behavior, compensation, and other important issues.

 

Getting Started: The Basic Disclaimers

So where to start? In Arizona, and in nearly every other state, your employee handbook should include a disclaimer stating that the handbook is not an employment contract. A business attorney can help you prepare precise language to protect your rights. You should also expressly state that you reserve the right to modify the handbook. Finally, your handbook should include a page, preferably the final page, where the employee will sign, to acknowledge that he or she has read the handbook, understands its contents, and agrees to abide by the guidelines it sets forth.

Employee Rights under State and Federal Law

There are a number of state and federal laws that require employers to inform employees of their legal rights. Many businesses include employee handbook provisions that outline the following state and federal employment laws:

Family Medical Leave Act

The FMLA applies to certain types of employers with 50 or more employees. Businesses that fall under the FMLA must give their workers up to 12 weeks of unpaid leave in a 12-month time period to bond with a new child, care for a sick family member, or deal with the worker’s own health condition. Arizona also provides state family medical leave benefits for state employees; there are no such state-specific laws for private employers.

Equal Opportunity Employer

Many employers include a section indicating that their policies are fully compliant with Title VII and Equal Employment Opportunity Commission (EEOC) regulations.

Workers’ Compensation

Arizona law requires employers to post notices regarding workers’ compensation policies and benefits in conspicuous places. Many employers go one step further by placing this information in their employee handbooks.

Common Employer Policies

Each business is different, but many employers include the following information types of information in their employee handbooks. These items allow both management and the workforce to efficiently handle conflicts, raise questions, and identify solutions that really work.

Appropriate Behavior

This can be a comprehensive section to disclose everything from the company dress code and smoking standards to personal relationships between employees and foul language. Harassment guidelines are often included in this section of the employee handbook as well. Whether harassment takes the form of workplace bullying or inappropriate sexual advances, both forms are distracting and unsettling. Harassment also exposes the employer to significant liability. It is especially important for employees to know to whom in the organization they should report if they are experiencing harassing behavior.

Compensation

Compensation, vacation time, personal days, sick days, health insurance, and other benefits should be very clearly spelled out. Because compensation is something that often varies from employee to employee, consult with an attorney as to whether compensation details should be included within your employee handbook or delivered in separate correspondence.

Computer/Technology Use

In today’s fast-paced business world, many employees use several different forms of technology on an everyday basis. These devices include computers, smartphones, fax machines, tablets, and more. Employers should never assume that employees understand that this equipment is the employer’s property. The employee handbook should make it clear that all communication transmitted on company-owned devices is owned and controlled by the employer.

 Conclusion

In conclusion, a well-crafted employee handbook supports employers and employees as they begin and continue their business relationship. Continuous review and revision of your employee handbook coupled with highlighting the company policies contained within will help create a positive and successful corporate culture for your business.

You are reading the final installment of our series on Employee Theft.
For part one of our series on Employee Theft click here.
To find part two of our series on Employee Theft click here.
Part three of our series on Employee Theft can be found here.

© 2015 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.