Beware of Using “Form” Non-Competition Agreements

The ability to enforce a non-competition clauses often turns on what some unwisely deem “form” contract provisions dealing with “consideration”, “choice of law”, “merger” of prior agreements and “successor and assigns.” To avoid common pitfalls, employers should have existing agreements reviewed for enforcement problems and consult with employment counsel about drafting new ones.

Avoiding Botched Workplace Investigations.

When faced with a complaint of workplace discrimination or other misconduct, employers sometimes wait too long to start an investigation, wrap-up an investigation too early, fail to ensure all staff members are safe pending an investigation, fail to interview all relevant witnesses and/or select the wrong investigator. Management should consult employment counsel to determine how the selection of a particular investigator (general manager or H/R director, H/R staff, in-house counsel outside counsel or another outside investigator) will maximize the company’s interests in preserving its right to assert attorney-client and work product privileges and in promoting confidence (by claimant, witnesses, EEOC or future juror) that the outcome of the investigation is fair and knowledgeable.

Courts Generally Enforce Agreements to Arbitrate Employment Disputes But Not Poorly Drafted Ones.

Employers are increasingly requesting employees to arbitrate all employment disputes as a condition of employment or continued employment. Courts generally enforce such agreements pursuant to the liberal federal policy (under the Federal Arbitration Act) favoring arbitration agreements. In Walthour v. Chipio Windshield Repair LLC. (March 21, 2014), the Eleventh Circuit U.S. Court of Appeals joined other federal courts in holding that employees may even enter into arbitration agreements that waive their right to bring collective actions under the FLSA (federal wage and hour law). However, courts refuse to enforce poorly drafted arbitration clauses where, for example, employees are asked to waive rights without adequate consideration, where an employer retains a unilateral right to modify the agreement without notice and where the agreement purports to restrict some non-waivable substantive right. In Hernandez v. Colonial Grocers, Inc. (October 25, 2013), Florida’s Second District Court of Appeals refused to enforce an arbitration agreement where the arbitration clause was drafted to require the losing party to pay for all attorneys’ fees. The Hernandez court reasoned that the arbitration clause infringed upon the employee’s substantive right (under the FLSA) not to be exposed to paying the employer’s attorney’s fees.

Thinking Ahead: Four Quick Tips to Running a Smarter Business.

A few simple preemptive tricks can ensure that your business runs smoothly even in today’s tough economy: 1) Writing up a corporate governance agreement, such as by-laws, shareholder agreements or operating agreements to clarify responsibilities and reduce the likelihood of litigation between owners; 2) Drafting customer agreements to include reasonable limits on liability for direct damages and limits or waiver of consequential damages; 3) Requiring a signed confidentiality agreement before disclosing confidential information to employees, vendors or potential business partners; and 4) Auditing employees’ job responsibilities and descriptions each year to verify exempt/non-exempt classification and implementing consistent and reliable time-keeping mechanisms to avoid overtime claims.