Enforceability of Noncompete Agreements Post-Merger

Posted by Molly DiBiancaOn October 9, 2012In: Non-Compete Agreements

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The enforceability of a noncompete agreement can vary greatly by State. When drafting a noncompete agreement or restrictive covenant, a critical decision will be which State's law should apply in an enforcement dispute. Delaware employers have very favorable law on their side, as noncompete agreements are enforced here to a much greater extent than many others. Here's an example.

noncompete agreement

In May, the Ohio Supreme Court considered the enforceability of a non-compete agreement by a successor of the original contracting employer. In other words, can a non-compete agreement be enforced after the original employer is acquired in a sale or merger. In Acordia of Ohio v. Fishel, four employees signed non-compete agreements with their employer. The agreements provided that the employees would not compete with the employer for two years following termination. The agreements did not contain language that would extend the prohibitions to the employer's successors or assigns.

In 2001, the employer merged with Acordia of Ohio, LLC. Following the merger, only Acordia survived. The four employees continued to work for the new entity until August 2005, when, you guessed it, they went to work for a competitor. Within six months of their resignations, they'd managed to recruit 19 customers worth about $1 million to the competitor.

Acordia sued the former employees and their new employer, seeking to enforce the terms of the noncompete. The court denied the motion and dismissed the case. Acordia appeal but the decision was affirmed. Relying on the State's merger statute, the Ohio Supreme Court found that, following the 2001 merger, the new employer could enforce the terms of the agreements--but only under the agreement's original terms.
Technically, the merger had terminated the employees' employment with the original employer because the employer ceased to exist. Thus, their obligations under the noncompete agreement had ended in 2003--two years after the merger. By the time they went to work for the competitor in late 2005, their noncompete period had expired and they were free to compete.

There is an important lesson to be learned from this case for any counsel charged with drafting a non-competition agreement or other restrictive covenant: non-compete agreements that will be construed under Ohio law must expressly provide for the possibility of a merger or acquisition in order to be enforced by a successor employer. That is not the case in every State, though. In Florida, for example, the issue remains unsettled, although a decision from an appellate court in August found that a covenant not to compete could be assigned in DePuy Orthopaedics, Inc. v. Waxman (Fla. 1st DCA Aug. 3, 2012). In Delaware, though, the issue has been decided.

In January 2010, the Delaware Court of Chancery determined that restrictive covenants contained in an employment agreement lacking an assignability clause are enforceable by a successor company that has purchased substantially all of the original employer's assets. In Great American Opportunities, Inc. v. Cherrydale Fundraising, LLC, No. 3718-VCP (Del. Ch. Jan. 29, 2010), Vice Chancellor Parsons explained that noncompete agreements and other restrictive covenants "exist for the benefit of the business and not the individual parties.

Thus, the business, whether as assignee or assignor, should enjoy that benefit by having the power to enforce such restrictive covenants." The court went on to hold that absent specific language prohibiting assignment, noncompete covenants "remain enforceable by an assignee when transferred to the assignee as part of a sale or transfer of business assets regardless of whether the employment contract contains a clause expressly authorizing such assignability, so long as the assignee engages in the same business as the assignor."

Thus, whereas in Ohio, a noncompete agreement does not transfer to a successor entity unless there is specific language that provides for such transfer, in Delaware, the successor entity gets all of the rights of the original employer unless there is specific language in the agreement that prohibits it. Yet another reason to consider drafting noncompete agreements and restrictive covenants to apply Delaware law.

See also Delaware Noncompete Law Blog

The State of the Social-Media Mess in Public Schools

Posted by Molly DiBiancaOn October 7, 2012In: Public Sector, Social Media in the Workplace

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Teachers and social media. If you're in the business of writing news stories about poor judgment, this is the gift that just keeps giving. If, however, you're an educator, a school administrator, or a parent, this is a combination with potentially grave consequences. Here's yet another shocking example of a teacher who seemingly lost all perspective when she posted about her students on her Facebook page.
teachers social media

As reported by the N.Y. Post, here are a sampling of the comments, Patricia Dawson, a "highly-regarded English teacher" posted:

  • she described one of her 11th-grade classes as "suicide-inducing;"
  • she dreaded upcoming presentations by two students--who she named in the post--saying, "I will be quietly imploring anyone to end my life . . . and no one will be there to supply a gun;"
  • she described one of her students as the "WORST be (sic) he's unteachable and the weirdest human being EVER!"
  • she wrote, "I consider all immigrants as potential gun carriers;" and
  • she asked, "What bad can happen when young people invest in high-powered firearms? Nothing. . . . nothing at all."
Charming. Just charming.

As a quick aside, I'll just note that it seems that it's the high-school English teacher who makes the offensive Facebook comments about current students. (See, for example, these two prior posts: Blogging Teacher Returns to Work After Suspension for Posting About Students and N.Y. Teacher's Firing Overturned Despite Facebook Wish that Students Drown). Why is that?

Now, if you thought her comments were shocking, I've got a few more even more shocking facts for you to ponder.

First, the teacher was Facebook friends with several of her students. In my opinion, this is a per se bad idea. Teachers should not be Facebook friends with any student in their school who is not the teacher's child. Period. That's it. No discussion. To me, it demonstrates not only bad judgment on behalf of the teacher to be friends with these students but then to post about other students and think her posts wouldn't make it back to the kids she was talking about.

Second, the teacher also was Facebook friends with the President of the PTA. If the kids didn't report her, didn't she think that the PTA President would?

Third, and most disappointing, even if not the most shocking, this teacher was terminated after her online rant in January 2011. Her tenured status, though, meant she had the ability to appeal the decision, which, you may imagine, she did. The arbitrator who decided her appeal, concluded that the teacher "horribly abused her position of trust" with her "cruel andemeaning" Facebook posts. However he also found that she was a "dedicated teacher" and was "not irredeemable." He ordered her to pay a fine in the amount of $15,000 and take a course on "appropriate boundaries and relationships between teachers and students."

That was last June. The DOE, though, has not yet reinstated the teacher, although she remains on the payroll.

I don't know what the solution is to this problem. Suspending the teacher in this case seems necessary, doesn't it? If you were the parent of one of the students named in her online rant, would you be happy about her return? I wouldn't. I could imagine the disruption that her return would cause--if not an outright riot.

But, at the same time, who benefits by keeping her on the payroll and expending the district's already stretched-thin resources while she sits at home, educating no one? No one. If judges and arbitrators are going to let teachers who publicly exhibit "cruel and demeaning" behavior towards the students they teach return to the classroom, schools need to take a different tactical approach. It seems to me that training teachers before they exercise poor judgment is absolutely critical if schools stand a chance in preventing these stories from continuing to make headlines.

See also
Students, Teachers, and Social Media
No 1st Am. Protection for Teacher's Facebook Posts
Court Denies Reinstatement to Teacher Fired for Facebook Posts
Social-Media Woes for School Districts
More Social-Media Woes for School Districts

Let's Talk About What Your Body Language Is Telling Me

Posted by Molly DiBiancaOn October 4, 2012In: Employee Engagement

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A post on the Harvard Business Review blog, titled, "Your Body Language Speaks For You In Meetings," caught my eye immediately. Several years ago, I brought this very issue to the attention of one of our senior paralegals. The paralegal was a critical player on our team--well respected by everyone and for good reason. During meetings, she had a place at the table equal to the most senior partner present. If she doubted a particular strategy, you could bet that we'd go a different direction.

Being the oddball that I am, I was often the one offering an out-of-the-box idea. I held the paralegal in the highest regard, so it really hurt when she was disapproving or skeptical of my ideas. Finally, I decided to deal with the issue head on. Leaving the conference room after a meeting one day, I asked her why she was always so critical of my ideas.

She looked at me, shocked, "Huh?" I looked back, equally shocked. She really had no idea what I was talking about. I took a deep breath and said, "You never like my ideas. You always look so critical when I offer a suggestion."

It was clear--very clear--that she had no idea that she had been communicating this message and certainly had not intended to do so. We had a quick talk about it and agreed that we'd pay more attention to the signals we were sending at future meetings.

At the next meeting, though, I was disappointed that my idea was met with the same familiar hostility as before. After the meeting, I called her aside and asked her, "What happened to our truce?" Again, she gave me that same shocked look. "I was totally receptive and positive! Didn't you hear my comments?!"

As it turned out, I hadn't. I hadn't heard anything. It's what I'd seen that had me so convinced she was not going to support my idea. I explained that, when I started to speak at the meeting, the paralegal had turned sideways in her chair, slung her arm over the back of it, and looked at me over the top rims of her reading glasses. As soon as she "got into position," I would pretty much shut down.

It didn't take long before we realized that our troubles were a result of the messages she had been sending unintentionally with her body language. So, being two reasonable adults in search of a solution to our miscommunication missteps, we did what anyone would do--we googled it. And here are some of the tips we found:

  • sit facing the table squarely, instead of turning to the side;
  • put both feet flat on the floor; and
  • keep your hands in view and in front of you.

At the next meeting, the paralegal sat down in a chair across the table, looked at me, and, slowly adjusted her hands on the tabletop, squared her shoulders towards me, and smiled a huge grin, telling me--without words--that she was applying the tips we found online. And that conscious effort, followed by the big smile, was all the body language I needed to get the message loud and clear--she wanted to support me and was signaling that she was darn sure going to try.

I can't imagine my job without her support over these past many years. I am eternally thankful that she was so open to trying a different approach, despite not having any reason to, other than being a really good team player.

Fighting Back: Bullies and Obesity

Posted by Molly DiBiancaOn October 3, 2012In: Disabilities (ADA), EEOC Suits & Settlements, Hiring, Jerks at Work, Off-Duty Conduct

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Some people are real jerks. Anyone who deals with the general public for a living knows that this is an indisputable fact. For those who work in sales or service positions know that the theory "the customer is always right" can be a bitter pill to swallow. Every waiter, store clerk, and receptionist has had a moment where they had to swallow very hard to resist firing back at an irate and/or irrational customer who's decided to take out his or her frustrations on whoever happens to be in their line of vision. Most of the time, it is not possible or not wise to fight back.

But, sometimes, it is.

Take, for example, Jennifer Livingston, a TV news anchor in LaCrosse, Wisconsin. A viewer with, apparently, way too much time on his hands, took it upon himself to write Ms. Livingston a note to express his displeasure with her weight. "Obesity is one of the worst choices a person can make and one of the most dangerous habits to maintain," wrote the viewer. "I leave you this note hoping that you'll reconsider your responsibility as a local public personality to present and promote a healthy lifestyle."

I think it's fair to say that Ms. Livingston didn't find the viewer's "concern" all that heartwarming. Heck, it may have even hurt her feelings. But, instead of hiding her pain, she elected to take a different approach and responded to the comments on the air. Her response took the form of an articulate call to arms in which she accused the viewer of being a bully.

I think the story is inspiring for a number of reasons but it also highlights a few different current issues in employment law.

First, there's the continuing discussion surrounding bullies in the workplace or, as I like to call them, "jerks at work." Legislation has been introduced in numerous states over the past five or so years that would, in short, make it unlawful to be a jerk at work. I think there are obvious problems with trying to legislate "jerkiness" but I also recognize the high costs that jerks can have on workforce morale, creativity, and overall productivity. This post at Above the Law provides a recent summary of the various legislative efforts.

Second, there's the as-yet-unresolved question of whether obesity is a disability under the Americans With Disabilities Act (ADA). Historically, courts have been unwilling to include obesity as a protected disability. With this precedent in mind, some employers have refused to hire applicants who are obese and charge higher health-care premiums for overweight employees. But the EEOC has said that the ADA does protect individuals who are morbidly obese. A case filed last year by the EEOC asserting that "severe" obesity was a protected disability under the ADA, recently resulted in a $55,000 settlement for the employee. And a recent decision by the Montana Supreme Court seems to further support that the trend has shifted towards protecting obesity as a disability.

NLRB Upholds Legality of Facebook Firing

Posted by Molly DiBiancaOn October 1, 2012In: Social Media in the Workplace, Union and Labor Issues

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The NLRB issued its decision today in Karl Knauz Motors, Inc. Readers will recall that the employee at Knauz's BMW dealership filed a charge alleging that he had been unlawfully terminated for engaging in NLRA-protected activity when he was fired for comments he'd made on his Facebook page. The employee-salesman first posted critical comments about the dealership's plans for a big sales event. Shortly thereafter, the employee posted pictures of a small vehicle accident involving a customer at the Range Rover dealership next door, which was also owned by Karl Knauz. The employer fired the salesman when a competitor reported the photographs.

An ALJ determined that the employee had engaged in protected concerted activity when he posted about the sales event. He was not engaged in protected activity when he posted the accident pictures because, "It was posted solely by [the employee], apparently as a lark, without any discussion with any other employee of the Respondent and had no connection to any of the employees' terms and conditions of employment."

The Board's decision, dated September 28 and released today, found that the termination did not violate the NLRA because the activity was not concerted or protected. This is a small victory for employers--but a victory, nonetheless. There has been a great deal of activity at the NLRB in the recent weeks and we can expect more in the weeks to come.

A Good Week for California's Pro-Labor Movement

Posted by Molly DiBiancaOn October 1, 2012In: Legislative Update, Social Media in the Workplace, Union and Labor Issues

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Last week was a busy one at the Governor's office, where Governor Jerry Brown signed into law no less than three new laws with a pro-labor, pro-employee theme. The first two laws were a package deal, making California is the first State to enact legislation that prohibits employers and educators from requesting employees' and students' social-networking passwords. Gov. Brown announced that he'd signed the twin bills into law via a Twitter post on Thursday.
Seal of California.png

California is the second State after Delaware to prohibit universities and colleges from requiring students to turn over their passwords to their social-networking accounts. It is the third State, following Maryland and Illinois, to enact similar legislation providing these privacy protections to employees and applicants. And similar legislation is pending in several States. New Jersey's version of the Facebook-privacy law was released by a Senate committee at the end of September.

The day after Gov. Brown signed the bills into law, he signed a third bill, which declared May to be Labor History Month. What, you ask, does this actually mean? Well, it means that school districts in the State will commemorate the month with educational exercises intended to teach students about the role of the labor movement in California and across the country.

The bill extends Labor History Week into a full month and moves the observation from the first week of April to the month of May. According to the Sacramento Bee, many of California's school districts are on spring break the first week of April, and supporters of the bill said the rest of the month is busy for students because they are preparing for statewide tests.

I think it's safe to say that last week was a good week for the pro-labor movement in California.

Litigators Love Depositions. Most Days, Anyway.

Posted by Molly DiBiancaOn September 27, 2012In: Purely Legal

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Litigators love depositions. Well, at least this litigator does. There's something about the challenge of navigating the subtle ebbs and flows of a personality you know only through the written word. But as much as I enjoy them, depositions are exhausting endeavors.

The mental jumping jacks are made all the more exhausting when the deponent is uncooperative or hostile. Of course we never expect the deponent to be particularly helpful but there is a middle ground. Nevertheless, when the plaintiff in an employment-discrimination suit refuses to cooperate, I have to wonder.

Specifically, I have to wonder about her counsel. Is he asleep at the wheel? Good plaintiffs' lawyers know that, at trial, their client is the one with the burden of proof.
Refusal to cooperate at deposition and a sudden "inability to recall" basic facts can be a major weapon in a defense lawyer's arsenal at trial. When a jury hears (or, if videotaped, sees) a plaintiff playing dumb at deposition, they are far less inclined to be sympathetic and much more likely to see her as a manipulating fraud. And that suits me just fine.

So, when I am deposing one of these "charming" individuals, I don't waste my time trying to beat answers out of her. If she doesn't want to testify honestly, so be it. I tend to let her write her own ticket to defeat. And, in jurisdictions like Delaware, where such conduct is sanctionable, I may be inclined to seek reimbursement of my fees. In the Third Circuit, a deponent who is so evasive that she prevents the questioner from eliciting appropriate testimony can be sanctioned by the court. And so can her lawyer if he sits silent, allowing his client to play games with opposing counsel.

So how about this deponent? In the video, below, the famous rapper, Lil' Wayne, is being deposed and, let's just say, he's not exactly playing along. He is the plaintiff, so the burden is his but the questions he is being asked are hardly relevant to the case. Am I horrified by his refusal to cooperate and his apparent inability to recall his criminal history? Frankly, I am not.

Parents, if you have big dreams about your son or daughter taking up the law for a living, I encourage you to watch the video and reconsider. Really, do you want your precious angel sitting across the table from Lil' Wayne and having to deal with that nonsense for a living? It takes a very particular kind of personality to handle, nevertheless feel some modicum of satisfaction from, a day at the office that goes like this.

And, because it's Friday, I'd like to share one more thing before signing off. For the litigators in the audience--both plaintiffs' and defense--I encourage you to read this post from the blog, Abnormal Use. The title of the post says it all, "The Most Unwritten Rule: Depositions Should Start at 10 a.m." If you are one of the lawyers who feel compelled to notice a deposition to begin any earlier than 10 a.m., I hope this post makes you reconsider the idea.

I recently had a case in which a lawyer on the other side took no less than 10 depositions, almost all of them at his office, which was located more than 2 hours from mine. Despite knowing that the witnesses and counsel had to drive such a far distance, he insisted on beginning at 9 or 9:30 a.m. I managed it but still harbor some resentment about it. He will not be on my holiday-card list this year.

YCST Attorneys Present at DELPELRA Conference

Posted by Molly DiBiancaOn September 27, 2012In: Delaware Specific, Locally Speaking, Public Sector, Seminars, Past, YCST

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Attorneys from Young Conaway traveled to Dover today to present at the Annual Training Conference for the Delaware Public Employer Labor Relations Association (DELPELRA).
DELPELRA logo.jpg

Tim Snyder presented on the impact of health care reform on public employers. He also gave an overview of what public employers are doing to address the challenges of funding their pension plans.

Scott Holt provided practical tips on avoiding claims and litigation under the Fair Labor Standards Act (FLSA). Scott addressed misclassification of employees and failure to pay properly for breaks, training time, and travel time.

David Hansen wrapped up the Young Conaway portion of the program by speaking efforts of the IRS to tax employee benefits such payments for uniforms and the like.

Debbie Murray-Sheppard, the Executive Director of the Delaware Public Employment Relations Board (PERB), was the luncheon speaker. She updated the group on the activities of the Board over the past year.

After conclusion of the Conference, DELPELA held its annual meeting. Alan Kujala, Chief Human Resources Officer of Kent County, was elected its new President. Young Conaway's Bill Bowser was reelected as General Counsel.

Students, Teachers, and Social Media

Posted by Molly DiBiancaOn September 26, 2012In: Privacy In the Workplace, Public Sector, Social Media in the Workplace

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Delaware was the first State to legislate the privacy of students' social-media passwords. California's legislature was the first and, so far, the only State to pass a bill that protects students' and employees' social-networking passwords. That bill is awaiting the signature of California's Governor. For more information about the California law, check out this great post at Seyfarth Shaw's Trading Secrets blog in which the authors were nice enough to mention my previous post on the topic. (Even if they did call me by [gasp] my legal name, Margaret. It's not their fault my parents couldn't pick just one name and stick with it.)

But a state statute is not necessarily the only way to protect students' free-speech and privacy rights in their online content. As reported by blawgger extraordinaire,Venkat Balasubrami, and, subsequently, by GigaOm.com, a federal judge in Minnesota recently held that a school violated a 12-year-old student's First Amendment rights when it cooerced her into turning over her Facebook password so school administrators could investigate comments the girl was alleged to have made.

Although schools' access to students' social-media accounts may be the hot topic du jour but it's not the first. For about as long as Facebook has been around, teachers have been getting into trouble for what the post on it. One of the most distasteful types of posts are those in which a teacher criticizes his or her students.

Long-time readers and Philadelphia-area natives may recall the story of Natalie Munroe, an AP English teacher who was suspended after parents and students discovered posts she'd written, mocking and demoralizing the youths in her class.

A story was recently reported in North Carolina, where a high-school teacher was suspended pending an investigation involving simlar allegations. The English teacher is alleged to have posted photos of her students' works, highlighting the grammar gaffes and misspellings and making fun of their mistakes. Although her Facebook posts were not public, someone with access to them (i.e., a "Facebook Friend"), reported the photos to school officials, which prompted the investigation.

Although the stories vary slightly from one to the next, I continue to believe that the key lessons are time tested. For those who in charge who receive a complaint about a comment made online, deal with the problem for what is--no more and no less. Don't overreact and, for heaven's sake, don't make little girls cry in order to get access to their Facebook pages.

And for those who are posting, think before you do so, just like you would, hopefully, think before you speak. For teachers, don't post about a comment online about student that you wouldn't say directly to the student's parent. And, even more basic, don't mock people's weaknesses. Nobody likes a snob and grammar snobs are no exception.

They Like Me! They Really Like Me! . . . But So What?

Posted by Molly DiBiancaOn September 23, 2012In: Social Media in the Workplace

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What is the value of a Facebook Like? A federal court in Virginia recently held that a Like does not have constitutional value, insofar as it is not speech for the purposes of the 1st Amendment. Many commentators disagree with that decision, which, not surprisingly, has since been appealed.

But what about the commercial value of a Facebook Like? Last month, a federal court in Michigan weighed in on this question. The case involved two nail-polish vendors, Lown Cos., LLC, and the unfortunately named Piggy Paint, LLC. Piggy Paint had 19,000 Likes on its Facebook page when it was taken down as a result of a trademark-infringement complaint that Lown filed with Facebook.

Piggy Paint was peeved.

Piggy Paint sued Lown, alleging a claim of tortious interference with business expectancy. The court, however, did not recognize the power of the Like and concluded that there was no immediate way for Piggy Paint to convert its Fans into customers. Particularly, the court noted that the page "did not offer any means of placing orders or doing business." As a result, the court found, Piggy Paint had not shown that it had lost any business and the alleged business expectancy was "too indefinite to form the basis of an actual expectation of business."

So, what say you, dear readers? Do Facebook fans have "real" commercial value? Or is it too difficult to estimate what value, if any, our Likes actually have?

Lown Companies LLC v. Piggy Paint LLC, No. 11-cv-911 (W.D. Mich., Aug. 9, 2012).

See also Your Tattoo Says A Lot About You, Constitutionally Speaking

EEOC Announces Plan for Class Warfare

Posted by Molly DiBiancaOn September 22, 2012In: EEOC Suits & Settlements

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Why should employers care about what the EEOC has on its to-do list for the next four years? Well, you've heard the phrase, "keep your friends close and your enemies closer," right? Kidding, just kidding, people! Geez!

But, seriously. The EEOC is working on a revised draft of its Strategic Enforcement Plan (SEP) for 2012-2016 and employers should pay close attention. The SEP offers employers important insight into the priorities of the EEOC. So don't look a gift horse in a mouth. exercising their rights constitute systemic barriers to the legal system.

Class Warfare is EEOC's Top Priority
Okay, so maybe this is an overly dramatic way to describe the EEOC's top priority. So sue me. As termed by the EEOC, "System Initiative" translates roughly to a continued focus on class litigation intended to eradicate several types of systemic discrimination:

1. Hiring. The SEP identifies class-based hiring discrimination as a main focus, including discriminatory pre-employment tests, background screening, and date-of-birth screening.

2. Protection of "immigrant, migrant, and other vulnerable workers." Particular areas of focus in this regard include disparate pay, job segregation, harassment, trafficking, and discriminatory-language policies.

3. "Emerging Issues" identified in the Draft Plan include:

a. ADA Amendments Act issues

b. LGBT coverage under Title VII sex discrimination provisions

c. Accommodating pregnancy when women have been forced onto unpaid leave after being denied accommodations routinely provided to similarly situated employees.

4. Preserving Access to the Legal System. This is the big one, folks. There are two components to this initiative. Both should get your attention.

a. Prioritization of the investigation of retaliation claims. Not only is retaliation the most commonly asserted claim but it is also the most difficult to defend. Per the SEP, the EEOC believes that retaliation is a barrier to justice because it discourages employees from exercising their rights. (Hard to argue with that, really).

b. "Systemic barriers" to justice. Think, "settlement and severance agreements." The EEOC says that "overly broad waivers" and releases that unfairly discourage employees from exercising their rights constitute systemic barriers to the legal system.

Implementation
The EEOC does not envision the Plan as a one-size-fits-all approach. To the contrary, it will require that each District develop a District Complement Plan to the SEP by March 29, 2013. These localized Plans are to identify how that particular Office will implement the SEP priorities, as well as identify its own local enforcement priorities.

N.J. Facebook Privacy Law Moves Ahead

Posted by Molly DiBiancaOn September 20, 2012In: Social Media in the Workplace

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New Jersey's Facebook-Privacy law was released today by a Senate committee. The bill, like the laws passed in Maryland, Illinois, and California would bar employers from asking employees for information about their social-media accounts. Employers had shown support for the bill except for the provision that creates a private right of action against an employer who violates the law. The laws previously passed do not expressly provide that an employee may bring suit for a violation.

The committee also passed a similar bill that would prohibit colleges from requiring students for their social-networking-site passwords. Delaware was the first and, thus far the only, State to pass a password-privacy law applicable to academic institutions.


Delaware Court of Chancery on Workday Distractions

Posted by Molly DiBiancaOn September 19, 2012In: Privacy In the Workplace

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Delaware's Court of Chancery is renowned as the country's premier venue for business litigation. Law students across the nation are, at this very moment, reading a seminal case in a corporate-law textbook written by the Court of Chancery.

For the uninitiated, there are two critical things to know about the Delaware Court of Chancery. (For a real lesson on the Chancery Court, check out the blog, Delaware Litigation, written by Francis Pileggi and Kevin Brady. Francis tipped me off to the case I'm discussing today.) First, it is a court of equity. At the most basic level, this means that the rulings of the Chancellor and Vice-Chancellors are based on principles of fairness. In other words, they have far-ranging power to award relief. Second, the Court is known for issuing opinions with a literary flare of sorts.

In a 79-page decision issued yesterday, the Court lived up to all of these laudable traits. And the case is, at its roots, an employment-law case, to boot. The decision addresses breach-of-contract claims brought by an employee against his former employer and the employer's counter-claims based on the same contract. The Facts section of the decision starts with this:

Just as its lovely harbors are crowded with their expensive, less than fully utilized vessels, so are southern Connecticut's towns filled with wealthy money managers. This case is about the falling out between two of them.

The falling out in question arose when the employer, an investment manager, discovered that, over the course of about a month, the employee had emailed himself many of the employer's documents, which he planned to use once he started a new (and competing) venture. The Court found the employee liable for this conduct but what really caught my eye were the words of warning contained in a footnote:

A word of caution here. I recognize that the principle set forth above is not one that most of us can claim that we have adhered to with fidelity 100% of the time in our working lives. Section 8.05 of the Restatement (Third) of Agency should not be read in a nonsensical, Stalinistway that allows employers an easy excuse to sue or penalize faithful employees for human behavior that does not diminish the effectiveness of the employer in any way. Phones get used for personal phone calls, work copiers get used to make a few copies of necessary personal documents, computers get used to plan vacations, etc., because employees have lives and families. But so too do employees' own computers, paper, and resources get used for work benefiting their employers.

Fascinating, right?! Of course, the Chancellor is right. What knowledge worker today doesn't use his personal electronic equipment for the benefit of his employer? In fact, I am writing this post from my "personal" iPad, which is to the benefit of my firm.

I think, at its essence, the Court's message is this: Employers should not be encouraged or rewarded for suing their employees for de minimis detours along the path of loyal employment. Readers may recall from a prior post that an employer who brought suit against an employee for the employee's use of Facebook during working time did not fare well.

Seibold v. Camulos Partners LP, C.A. 5176-CS (Del. Ct. Ch. Sept. 17, 2012).
See also Delaware Noncompete Law Blog for more on the Delaware Court of Chancery's rulings that impact employment law.

Legal Ethics Social-Media Lessons for Employers

Posted by Molly DiBiancaOn September 17, 2012In: Purely Legal, Social Media in the Workplace

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Legal-ethics issues in social media is probably my favorite subject. If that makes me an uber dork, so be it. Last week I had the pleasure of speaking on this topic to the Richard K. Herrmann Technology Inn of Court here in Delaware. And, on Friday, I'll be heading to Charlottesville to present on the topic at the Virginia Bar Association's Conference on Labor Relations and Employment Law, which I am looking forward to immensely.

Despite my interest in the subject, I don't often post about legal ethics here because it doesn't directly relate to employment law. Today's post, though, is an exception to that self-imposed rule. And, because you're indulging my side interests, I'll return the favor and tie the lesson of the story back to employment law. There are three recent cases that got my attention.

Lesson 1: Know What Your Subordinates Are Doing On Your Behalf
The first case involves two New Jersey defense lawyers who are charged with violating the rules of ethics. The lawyers' paralegal is alleged to have friended the plaintiff in one of the firm's cases. The allegation arose after the lawyers asked "very specific" questions at the plaintiff's deposition, which indicated that they had somehow had access to the non-public portions of the plaintiff's Facebook profile. The defendant later supplemented its discovery responses with Facebook pages from the plaintiff and the plaintiff's friends.

The plaintiff filed an ethics complaint in which he alleges that a paralegal working for defense counsel friend him to get access to his non-public profile. The lawyers are reported to deny any knowledge of the paralegal's conduct. This does not immunize them from discipline, though. The rules of ethics impute liability for the acts of non-attorney agents to the attorney for whom they work.

One of the reasons that I find this case so interesting is that, in my opinion, it was bound to happen. Although several bar associations around the country (including Philadelphia), have issued advisory opinions that explain that friending a represented person would likely violate the rules of ethics, I still think it is just a matter of time before we see more cases involving similar conduct.

So what's the HR takeaway? Well, here's one: know what your HR staff is doing and how they're doing it. You may be surprised to find how many people in HR (and supervisors generally), conduct online searches of job applicants prior to an interview. Surprise or not--you and your organization will be on the hook for the conduct of your staff. But you won't know until you ask.

See Mary Pat Gallagher's article, When 'friending' is hostile, Daily Report on Law.com

Lesson 2: Be Aware of "Friendly" Conflicts
The second case comes from Florida, where a judge has been disqualified from a case because he was Facebook friends with the prosecutor. Florida has a rule that judges may not be Facebook friends with attorneys who will appear before them due to the potential appearance of impropriety. Whether you agree with the outcome of his case or not, employers--particularly HR professionals and supervisors--should again consider the propriety of being Facebook friends with direct reports. Sometimes it's not just whether there is a conflict; sometimes problems arise just from the perception of a conflict.

See Venkat Balasubramani's post at the Technology & Marketing Law Blog.

Lesson 3: You Can Breach Confidentiality Via Facebook
Our third case also comes from Florida, where a 31-year-old public defender has been terminated as a result of a picture she posted on her personal Facebook page. Specifically, the photo was of her client's leopard-print underwear. She took the picture when a corrections officer was inspecting the garment. Her client's family had brought the underwear and other clothes for him to wear to trial.

The client had requested new counsel on several occasions but was denied. Someone saw the picture and reported it to the judge presiding over the trial. The judge ordered a mistrial and the attorney was immediately filed.

There are multiple lessons to be learned from this story but I'll keep it to just one. People continue to believe that what they post on Facebook "stays on Facebook." This is simply not true. And the sooner we learn this, the better. Consider using this story as a "teaching moment" for your employees.  

See Martha Neil's article at ABA Journal

3d Cir Confirms EEOC's Broad Subpoena Power

Posted by Molly DiBiancaOn September 17, 2012In: EEOC Suits & Settlements

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The EEOC's subpoena power is broad. But just how broad has been the subject of debate in recent years. On September 14, 2012, the Third Circuit Court of Appeals issued an opinion that definitely falls on the "broad powers" end of the spectrum.

The case, EEOC v. Kroger, involves allegedly discriminatory assessment tests used by Kroger as part of its hiring process. The tests were created by a company called Kronos, Inc. The district court ruled that the EEOC could not subpoena materials from Kronos that did not directly relate to the test it had developed for Kroger.

The EEOC appealed the decision and the 3d Circuit overturned it. The 3d Circuit ruled that Kronos had to produce such documents "even if not directly linked to Kroger" because they could "reveal that the assessment had an adverse impact on disabled applicants or they could assist the EEOC in evaluating whether Kroger's use of the test constituted an unlawful employment action."

Two points to note from this case. First, the general dangers associated with assessment tests used for hiring. Employers are on the hook for tests that they do not create. The entity that the employer hires to create valid tests may be a credible, legitimate authority but, at the end of the day, it's not that company's problem when the employer is sued.

Second, this case presents yet another example of the aggressive litigation tactics employed by the EEOC. The Charge that initiated the litigation was filed in June 2007--more than 5 years ago. Yet, here we are, reading an appellate court opinion on discovery issues. (This, by the way, is the second time a discovery decision was appealed to the 3d Cir.). Once the EEOC pulls the litigation trigger, there's virtually no way to get it to back down.

See also:
What Does "Good Faith" Mean for the EEOC?
When the EEOC Goes Too Far
When the EEOC Goes Too Far, Part II