Monthly Archives: March 2013

March Madness Office Pool = Jail?

Most workers don’t think twice about completing their brackets and throwing some money in the pot during the annual March Madness office pool. And they probably shouldn’t. But many employers probably don’t know they could wind up in jail–yes, jail–if they get busted.

pool

Gambling is illegal in almost every state, and a March Madness pool really boils down to nothing more than acting as a cubicle-based bookie. Participating in gambling obviously can get you in trouble, but so can owning the property where illegal gambling occurs. That means if you own your office, you could take the fall for your employees’ illegal office pool.

But while we’re on the topic of gambling, the odds of getting busted? About zero.

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The “Everything About Me” Folder

In a startling decision a few weeks ago, a Colorado federal judge sanctioned the EEOC for failing to turn over a virtual “Everything About Me” folder for every plaintiff participating in a sexual harassment class-action case.

media

The EEOC, which filed suit on behalf of a class of female employees allegedly harassed by a manager, initially resisted the defendant company’s discovery requests for social media, email, blog, and text messaging access. In November of 2012, the court ordered every plaintiff to turn over:

  • Any cell phone used to send or receive test messages from January 1, 2009 to the present
  • All necessary information to access any social media websites used by a claimant during the same time
  • All necessary information to access any email account or blog or similar internet location used for communicating with others or posting pictures during the same time

The judge acknowledged the incredible scope of the request while brushing aside privacy concerns, ruling that the plaintiffs opened themselves up to discovery by participating in the lawsuit and claiming that they were mentally distressed during that time frame. The company wanted the information to see whether that claim was is true. 

In ordering all of the information to be released to a special master, who will review it for relevancy before turning it over to the judge, the court said it was no different than a plaintiff keeping a physical “Everything About Me” file, which would unquestionably have to be turned over in discovery.

Still, the shocking scope ought to make anyone think twice about how their electronic trail could come back to haunt them.

Getting on Board with BYOD

Soaring personal smartphone and tablet use has created a quandary for some human resources departments: when, and under what circumstances, should the company embrace a bring your own device–or BYOD–approach to connectivity.

BYOD

The benefits are obvious. An employee using his or her personal device saves the company money (by not having to provide a phone, laptop, etc.), lets employees choose their own phones, tablets, or laptops, and keeps employees, clients, and business partners in constant communication. With employees often picking up the latest technology on their own, why not use that to your advantage?

But it can’t be all good, all the time. BYOD policies can create some critical weaknesses if not properly managed. For starters, any company information stored on a personal device will have to be segregated and returned if the employee quits or is fired. That means someone will have to snoop through the (now former) employee’s personal phone or tablet to retrieve confidential or proprietary information–or risk the employee keeping it.

Losing control over your employee’s devices could also cause a security headache. If your IT department can’t properly secure the employee’s personal device or its information, you risk a data breach or intrusion into your company’s network.

But with good policies, proactive security, and clear expectations, employers should be able to mitigate most of these risks. Because, let’s face it: it’s happening whether you like it or not.

Think Twice About Your Severance Agreement

moneyIn a probably-common but always-preventable situation, a former Hallmark executive was forced to return her entire $735,000 severance payment after she disclosed Hallmark’s confidential information under a consulting agreement several years after her non-compete expired.

When Hallmark eliminated Janet Murley’s job, VP of Marketing, it offered her a fairly generous severance package: $735,000; health insurance; outplacement services; and tax services. In exchange, Murley agreed to an 18-month non-compete and agreed not to disclose Hallmark’s confidential information.

Fast forward four years. After Murley’s non-compete expired, she got a consulting contract with a Hallmark competitor. Turns out she never actually got around to returning all of Hallmark’s confidential information like she promised; instead, it ended up on her consulting client’s computers. Hallmark, predictably unhappy, sued Murley.

The jury held her responsible and ordered her to repay her entire $735,000 severance payment. The federal Eighth Circuit Court of Appeals upheld the award, finding that it wasn’t “grossly excessive” or “unwarranted by the evidence.” The appeals court also rejected her argument that she was entitled to keep some of the severance because she fulfilled some terms of the agreement, like abiding by the non-compete provision.

A Virginia court would most likely reach the same result, especially if it was incorporated into the severance agreement. Virginia law allows parties to a contract to stipulate “liquidated damages,” or the amount a breaching party has to pay, as long as the exact amount of actual damages is difficult to determine and the agreed amount of liquidated damages is not “grossly in excess of the actual damages.”

So it’s very possible for a severance agreement to require the employee to return the entire payment if they breach. As long as the amount is not grossly excessive compared to the actual damages the breach causes, it will be enforceable.

One Size Does Not Fit All

Employment contracts and non-compete agreements are now standard fare in many professions. They certainly serve a good business purpose, but a misguided or poorly drafted agreement can cause headaches down the line.

In a recent Forbes column, employment lawyer Richard Tuschman raised a great question: Should you try to draft a non-compete agreement enforceable in multiple states? His short answer: You can try, but you may not succeed.

noncompete

State law (as opposed to federal law) governs non-compete agreements. That makes things interesting with businesses operating around the entire country (and world). And, because of the unique public policy concerns about restrictions on employees earning a living, state law varies wildly on this issue.

For example, Virginia will only enforce non-competes that are narrowly tailored to protect a valid business interest. It looks at three key criteria:

  1. The geographic scope of the restriction
  2. The time period of the restriction
  3. The functions the employee is restricted from performing

If the non-compete is too broad, Virginia courts will strike it completely. As keen observers know, Virginia courts typically won’t “blue pencil” the agreement, or rewrite the terms to make the agreement enforceable. 

However, some states will blue pencil non-compete agreements. Some, like California, will only enforce them if they’re in connection with a business sale. Some states have loose rules on enforceability, while others have strict ones.

The obvious solution is to include a provision that a particular state’s law will apply, and that litigation can only take place in that state. But this may be more troublesome than it appears. For example, if a Virginia employee is asked to sign a non-compete governed by Oregon law with all litigation taking place in Oregon, and the employee has never lived in, worked in, or visited Oregon, a Virginia court may be reluctant to enforce that “choice-of-law” clause. Likewise, an Oregon court might not have jurisidiction over the employee to force the employee to defend litigation filed there under the “venue” provision.

It’s probably a wise idea to include a choice-of-law provision and venue provision in any event, especially where there are valid ties to the state whose law you’re trying to enforce. But be aware that problems might pop up when dealing with employees in other states, and things may not be quite as simple as you would like.