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Whistleblower and Confidentiality Agreements

April 19,2015–Reprinted from The National Law Review

Last week, the Securities and Exchange Commission (“SEC”) announced its first enforcement action1 against a company for using language in confidentiality agreements that the SEC concluded had the potential to stifle the whistleblower process established under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). Under the Dodd-Frank Act and subsequent SEC rulemaking, the SEC’s whistleblower program provides monetary incentives for individuals who report possible violations of the federal securities laws that result in successful SEC actions against companies with monetary sanctions exceeding $1 million. As a result of the recent SEC action, companies should review confidentiality restrictions in employment and other agreements to assess whether revisions may be advisable to conform with language deemed acceptable by the SEC.

In the action, the SEC targeted Houston-based global technology and engineering firm KBR, Inc., which it claimed violated an SEC whistleblower protection rule (Rule 21F-17 under the Securities Exchange Act of 1934, as amended), which prohibits persons from taking any action to impede whistleblowers from reporting possible securities law violations to the SEC, including enforcing, or threatening to enforce, a confidentiality agreement regarding such communications. KBR used a form confidentiality statement during internal investigations which contained language warning employees that they could face disciplinary action or termination if they discussed the internal investigation with outside parties without first obtaining approval from KBR’s legal department.

Even though the SEC noted that it was not aware of any instances in which (i) a KBR employee was in fact prevented from communicating directly with the SEC about potential securities laws violations or (ii) KBR took any action to enforce the confidentiality agreement’s restrictions, the SEC nonetheless determined that the language impedes employee communications by prohibiting discussing the interviews without pre-clearance from the KBR law department and because of the threat of disciplinary action or termination. Without admitting or denying the SEC’s findings, KBR agreed to amend its confidentiality statements to provide that nothing in the statement prohibits an employee from reporting possible violations of federal law or regulation to the SEC or any governmental agency or entity and to clarify that the employee does not need the prior authorization of KBR’s legal department before making any such disclosures. As part of its settlement with the SEC, KBR also agreed to pay a $130,000 penalty.

In light of the KBR action, companies should consider whether their confidentiality, employment, severance or other types of agreements contain restrictive language that would be objectionable. In the SEC press release announcing the action, SEC representatives warned that the SEC will “vigorously enforce” Rule 21F-17 and that “[o]ther employers should similarly review and amend existing and historical agreements that in word or effect stop their employees from reporting potential violations to the SEC.”


Assoc. Press on Employees & Social Media

April 17, 2015 – Here is an article from AP on Social Media and Employee rights


NEW YORK – Bosses can get mad when staffers vent on social media about their jobs, but they might not be able to get even.

When one of Bert Martinez’ employees posted gripes about her job and the boss on Facebook last year, the publicist consulted his lawyer, who said the staffer couldn’t be fired.

“The first lesson I learned is, employees are allowed to vent,” said Martinez, owner of Bert Martinez Communications in Phoenix. “If they’re saying, ‘Hey, it’s hard working here and I find this environment unpleasant,’ you can’t fire them for that.”

The employee quit a week after Martinez learned about the post.

The government protects workers’ right to say what they want about where they work, even if it’s in a vitriolic and insulting tweet or post. It’s illegal for an employee to be fired for a post about working conditions, whether it’s pay, hours, assignments, difficult supervisors, dress code or any other issue.

So employers shouldn’t try to restrict workers’ freedom of speech or retaliate if there’s a post they don’t like.

It’s an issue that companies of all sizes have to deal with, but it’s often more challenging for smaller companies because they typically don’t have large human resources departments or lawyers on staff to advise them.

Workers who complain about employers on social media can’t be fired if they’re involved in what’s called concerted activity, or joining with fellow staffers to improve working conditions, according to the U.S. National Labor Relations Board, the government agency responsible for upholding workers’ rights.

“The NLRB is effectively taking the position that commentary about working conditions on social media is completely protected,” said Henry Perlowski, an employment law lawyer with Arnall Golden Gregory in Atlanta.

A 2014 NLRB decision shows how broadly the agency views employees’ rights to make such critical posts, Perlowski said. The NLRB said a restaurant illegally fired two workers for taking part in a Facebook discussion of problems in how income tax was withheld from paychecks. The discussion mentioned a meeting about the issue. One employee was fired for a comment that contained an expletive describing one owner, and the other was dismissed for “liking” a post.

Because the posts were related to working conditions, and the employees were discussing concerted activity, or jointly seeking a resolution of their problems, the posts were protected. The NLRB reversed the firings.

Owners also can’t resort to other disciplinary measures, Perlowski said. That rules out suspensions, reprimands, pay cuts and promotion denials.

However, the NLRB will uphold firings based on posts that damage a company, disparage its products or services or reveal trade secrets or financial information, said Paula Lopez, an employment law lawyer with Allyn & Fortuna in New York. But there can be gray area, for example, when a post is critical of a company’s or services but is also related to working conditions.

Posts encouraging insubordination aren’t protected, Lopez said, citing a 2014 case that upheld an employers’ decision not to rehire workers who had posted plans to show up at the job and not do work.

Employees also can be fired for posting information about clients or customers.

If their posts are racist, homophobic, sexist or discriminate against a religion, companies should fire workers rather than be seen as tolerating or condoning the employees’ views.

The NLRB has also said griping or insults by one employee and that have no connection to working conditions are not protected. For example, one that ridicules the way the boss looks, dresses or speaks.

Three steps can help companies address social media-related problems:

Companies should have a written social media policy spelling out what employees can post. It should be specific, with examples of what’s acceptable.
The policy should be reviewer with a lawyer or human resources specialist to be sure it wouldn’t violate federal, state or local laws.
If a staffer has made a negative post about the company, get advice from an employment law attorney or human resources provider before taking disciplinary action.

Silicon Valley Gender Discrmination Lawsuit

First published at, March 2015


Ellen Pao, now serving as the interim CEO of Reddit, is suing her former employer, the venture capital firm Kleiner Perkins Caufield & Byers, of gender discrimination because it failed to promote her during her time there and fired her when she complained in 2012. The ongoing trial, as Mother Jones discovered, is a fountain of hilarious details about life in the upper echelons of the tech world: $300 board games about excelling in business, confusing corporate jargon that sounds ridiculous in a courtroom setting, discussions of the Playboy Mansion on private jets, and debates about the difference between “cocky” and “confident.” At one point, the court reporter had to ask about the spelling of “Klout,” a detail that will likely find its way into the third season of Silicon Valley.

But despite all the goofiness, the question at the heart of the trial is one that will resonate with plenty of women who aren’t vying for offices in the “power corridor” of a VC firm: How do you determine what is and isn’t gender discrimination in a world where you’re competing with men on decidedly subjective terms? Pao is arguing that she didn’t get promoted because a sexist, bro-y environment didn’t make room for women. The defense, however, is arguing that it wasn’t her gender but her inability to meet the firm’s standards on frustratingly vague measures such as “thought leadership.”

Of course, men tend to get judged very differently than women on a lot of those subjective measurements. Nitasha Tiku at the Verge explains how this is playing out in court:

Another question yesterday concerned Schlein’s notes on a potential male hire from 2011 that seemed to imply the candidate’s “cockiness” was an attribute. (Many of Pao’s performance reviews called her arrogant and brash, noting her “sharp elbows,” where similar aggression in partners like Chien was not a cause for concern.) Schlein was asked to explain when cockiness is a good thing. “If you’re cocky and then by the time you’re done talking to somebody and they don’t like you,” it’s the wrong kind of cocky, he said.
The problem is that the line not to cross—when a person’s confidence becomes a turnoff—is very different depending on gender. Similarly, it’s understandable that VC firms want to hire people who fit the mold of “thought leaders.” But unfortunately, that mold is male-shaped.

Pao’s apparently sole defender at the firm, senior partner John Doerr, took the stand Wednesday and testified that he felt that the VC world is not doing enough to recruit and develop women, but admitted that he felt Pao was not a “team player.” One of the interesting tidbits that came out was an audio recording of Doerr talking about the personalities of the people he liked investing in, as reported by Wired:

At one point in the trial, Pao’s attorney played an audio clip of a conversation between Doerr and Mike Moritz of Sequoia Capital, another industry star, recorded during a May 2008 meeting of the National Venture Capital Association. In the clip, Doerr says it was “very clearly male nerds who had no social or sex lives” and who were dropouts of Harvard or Stanford who were likely to succeed as some of the world’s greatest entrepreneurs. “When I see that pattern coming in … it’s very easy to decide to invest,” Doerr said.
Part of Doerr’s attempts to help Pao during this time involved hiring her social and speech coaches to make her more likable. It’s hard not to sense a double standard here, where “male nerds” without the social skills to build “social or sex lives” are doing so well, but women are expected to work hard on their likability. Is it enough for Pao to prove her accusations of gender discrimination in the absence of more concrete performance measurements? On that, we will have to wait and see.

Clear Writing

This is from the March 2015 issue of Inc Magazine:


While I like to think I know a little about business writing, I often fall into a few word traps. For example, “who” and “whom.” I rarely use “whom” when I should. Even when spell check suggests “whom,” I think it sounds pretentious. So I don’t use it.

And I’m sure some people then think, “What a bozo.”

And that’s a problem, because just as one misspelled word can get a résumé tossed onto the “nope” pile, one wrong word can negatively impact your entire message.

Fair or unfair, it happens.

So let’s make sure it doesn’t.

Adverse and averse

Adverse means harmful or unfavorable: “Adverse market conditions caused the IPO to be poorly subscribed.” Averse refers to feelings of dislike or opposition: “I was averse to paying $18 a share for a company that generates no revenue.”

But you can feel free to have an aversion to adverse conditions.

Affect and effect

Verbs first. Affect means to influence: “Impatient investors affected our roll-out date.”Effect means to accomplish something: “The board effected a sweeping policy change.” How you use effect or affect can be tricky. For example, a board can affect changes by influencing them, or can effect changes by implementing them. Use effectif you’re making it happen, and affect if you’re having an impact on something someone else is trying to make happen.

As for nouns, effect is almost always correct: “Once he was fired he was given 20 minutes to gather his personal effects.” Affect refers to an emotional state, so unless you’re a psychologist, you probably should not be using it.

Compliment and complement

Compliment is to say something nice. Complement is to add to, enhance, improve, complete, or bring close to perfection. So, I can compliment your staff and their service, but if you have no current openings you have a full complement of staff. And your new app may complement your website.

For which I may decide to compliment you.

Criteria and criterion

“We made the decision based on one overriding criteria” sounds pretty impressive but is wrong.

Remember: one criterion, two or more criteria, although you could always use “reason” or “factors” and not worry about getting it wrong.

Discreet and discrete

Discreet means careful, cautious, showing good judgment: “We made discreet inquiries to determine whether the founder was interested in selling her company.”

Discrete means individual, separate, or distinct: “We analyzed data from a number of discrete market segments to determine overall pricing levels.” And if you get confused, remember you don’t use discreetion to work through sensitive issues; you exercise discretion.

Elicit and illicit

Elicit means to draw out or coax. Think of elicit as the mildest form of extract or, even worse, extort. So if one lucky survey respondent will win a trip to the Bahamas, the prize is designed to elicit responses.

Illicit means illegal or unlawful. I suppose you could “illicit” a response at gunpoint … but you best not.

Farther and further

Farther involves a physical distance: “Florida is farther from New York than Tennessee.” Further involves a figurative distance: “We can take our business plan no further.” So, as we say in the South, “I don’t trust you any farther than I can throw you.” Or, “I ain’t gonna trust you no further.”

(Seriously. I’ve uttered both of those sentences. More than once.)

Imply and infer

The speaker or writer implies. The listener or reader infers. Imply means to suggest, while infer means to deduce (whether correctly or not). So, I might imply you’re going to receive a raise. You might infer that a pay increase is imminent. (But not eminent, unless the raise will be prominent and distinguished.)

Insure and ensure

This one’s easy. Insure refers to insurance. Ensure means to make sure. So if you promise an order will ship on time, ensure it actually happens. Unless, of course, you plan to arrange for compensation if the package is damaged or lost–then feel free to insure away.

Number and amount

I goof these up all the time. Use number when you can count what you refer to: “Thenumber of subscribers who opted out increased last month.” Amount refers to a quantity of something that can’t be counted: “The amount of alcohol consumed at our last company picnic was staggering.”

Of course it can still be confusing: “I can’t believe the number of beers I drank” is correct, but so is “I can’t believe the amount of beer I drank.” The difference is I can count beers, but beer, especially if I was way too drunk to keep track, is an uncountable total–so amount is the correct usage.

Precede and proceed

Precede means to come before. Proceed means to begin or continue. Where it gets confusing is when an ing comes into play. “The proceeding announcement was brought to you by…” sounds fine, but preceding is correct since the announcement came before.

If it helps, think precedence: Anything that takes precedence is more important and therefore comes first.

Principal and principle

A principle is a fundamental: “We’ve created a culture where we all share certain principles.” Principal means primary or of first importance: “Our startup’s principal is located in NYC.” (Sometimes you’ll also see the plural, principals, used to refer to executives or (relatively) co-equals at the top of a particular food chain.)

Principal can also refer to the most important item in a particular set: “Our principal account makes up 60 percent of our gross revenues.”

Principal can also refer to money, normally a sum that was borrowed, but can be extended to refer to the amount you owe–hence principal and interest.

If you’re referring to laws, rules, guidelines, ethics, etc., use principle. If you’re referring to the CEO or the president (or the individual in charge of the high school), use principal. And now for those dreaded apostrophes.

It’s and its

It’s is the contraction of it is. That means it’s doesn’t own anything. If your dog is neutered (the way we make a dog, however much against his or her will, gender neutral), you don’t say, “It’s collar is blue.” You say, “Its collar is blue.” Here’s an easy test to apply. Whenever you use an apostrophe, un-contract the word to see how it sounds. In this case, turn it’s into it is: “It’s sunny” becomes “It is sunny.” Sounds good to me.

They’re and their

Same with these: They’re is the contraction for they are. Again, the apostrophe doesn’t own anything. We’re going to their house, and I sure hope they’re home.

Who’s and whose

“Whose password hasn’t been changed in six months?” is correct. “Who is (the noncontracted version of who’s) password hasn’t been changed in six months?” sounds silly.

You’re and your

One more. You’re is the contraction of you are. Your means you own it; the apostrophe in you’re doesn’t own anything. For a long time a local nonprofit had a huge sign that said “You’re Community Place.”

Hmm. “You Are Community Place”?

Probably not.

Affordable Care Act and Employees/Contractors


If you work for a living, do you know who your boss is? And if you run a business, do you know who’s on your payroll?

These are simple questions. But you may not have the same answers as the Internal Revenue Service.

The I.R.S. is emphasizing the distinction between employees and self-employed independent contractors this year, tax specialists warn. That makes it important for workers and critical for businesses that use their services to make sure to get the classification right. If you flub the answers, it could be costly.

In a sense, this is a semantic exercise: If someone is doing a certain kind of work for a specific amount of pay, the label you put on it might not seem to matter much. But which is which and who is who helps determine the obligations that each party in the relationship has to the other and to the I.R.S.

The law requires businesses with 50 or more full-time employees to provide them with health insurance that meets certain criteria deemed to make it affordable. Ian Shane, a tax lawyer at the New York firm Golenbock Eiseman Assor Bell & Peskoe, suggested that the desire to avoid the expense of providing coverage and the paperwork involved in demonstrating compliance provides an incentive for small businesses to find a way to classify some workers as contractors.

“If I have 60 employees, maybe I want 11 of them to be self-employed,” he said.

But wishing doesn’t make it so. If the I.R.S. decides that even one of those 11 is an employee, then the business must provide insurance.

The agency, which said in an emailed response to a question that it “regularly addresses worker classification issues as part of its employment tax examination program,” has a form, the SS-8, that workers and companies can use to try to place someone in the right category. Even with that, Mr. Shane said, it’s no easy feat.

“It’s a question of facts and circumstances and weighing all the things” together, he said. “No one or few things are definitive. In some respects it’s not that hard, and on another level it’s terribly hard.”

What it boils down to is that workers who decide how they perform their duties — executing them on their own schedule, at their own premises, with their own equipment and for clients of their own choosing — are more likely to be judged contractors. It also helps if the company that hires them treats other workers more like employees, offering steady work, paying benefits and providing work space, highlighting the contrast with how it treats people it considers contractors.

The I.R.S. is not the only regulatory authority that makes lists or needs to be satisfied. Jack Mozloom, a spokesman for the National Federation of Independent Business, pointed out that some states have their own criteria for classifying workers and that they are often at odds with or more stringent than the I.R.S.’s.

“It’s a state-by-state issue,” he said. “Some states have definitions of ‘independent contractor’ that are not consistent with federal law.”

“There’s a lot of paperwork” for prospective hirers, he said, “and no consistency.”

Connecticut, New Jersey and New York tend to have especially strict requirements, Mr. Mozloom said. They and others, like California, Illinois, Massachusetts, Oregon and Washington, can be difficult places to be self-employed, he said.

Workers are more likely to be deemed employees in such states. And a business that wants to use a contractor from one of them is more likely to be on the hook for payroll taxes and perhaps health coverage, he said, even if the business is elsewhere. After the job, the worker may file an unemployment claim, possibly meaning a higher unemployment tax rate for the business.

“If you’re a licensed contractor in one state, and a potential client in another state must consider you an employee, that can be a problem,” Mr. Mozloom said.

Gary Cuozzo, owner of the ISG Software Group in Wallingford, Conn., found state authorities so determined to reclassify his contractors as employees that he decided to outsource hiring to a third-party staffing agency, even though he estimates that it costs him 20 to 30 percent more than to engage a worker directly. That figure is rising, too, he said, because the agency he uses just raised its rates 2.5 percent to cover the expense of complying with the A.C.A. mandate.

“It’s getting harder to use somebody as a subcontractor,” Mr. Cuozzo said. “Everything has gotten so complicated that I only hire through an agency now. I got fed up dealing with it, and now with the Obamacare stuff, the whole thing has gotten grayer and more difficult.”

The employer mandate makes it more urgent to get the employee-contractor classification right, said Mr. Saviano of Ernst & Young, because a small mistake can have large repercussions. If a company has 49 full-time employees, the employer mandate doesn’t apply. With 50 or more, it applies to everyone. If the I.R.S. finds that enough workers at a company are employees, not contractors, he said, then stiff penalties apply, and they are based on the entire payroll, not just the number of misclassified employees.

The prospect of providing health coverage and other expensive benefits means that companies often prefer to consider workers contractors. For workers, those same factors often make it better to be classified as employees, but not necessarily. In general, someone with higher earnings and big potential tax write-offs — for example, a surgeon who attends many conferences in exotic locations — benefits from contractor status, Mr. Shane said.

If you would rather be considered a contractor by the I.R.S. when a company engages your services, a contract calling you that probably won’t help much, he added. But a clause entitling you to work for other businesses would be useful.

“You need more than one customer,” Mr. Shane said. “A true independent contractor has numerous clients and takes risks. The more risk you take, the more you’re self-employed.” In any case, he said, the I.R.S. is more inclined to penalize the business, not the worker, when the agency disputes a claim that a worker is independent.

That possibility, and the heightened jeopardy that businesses face as the employer mandate takes effect, means that companies must take pains to make sure that workers are given the right status, Mr. Saviano said, and they have to continually confirm that they made the right call and that the designation is still accurate.

“If there are material changes in worker responsibility and how the worker does his job, they need to be flagged,” he said. “Whenever it comes down to facts and circumstances, you need to have the right controls in place. These are difficult issues.”


Reprinted from Legal Tech News

There is no question that the legal technology industry is getting more competitive. As more middle-market service providers get absorbed by larger, cash-rich and venture-capital-infused players, many seasoned legal technology sales professionals will exit from the space.
This has caused vendors to fight more aggressively than in years past for top business development professionals and revenue-generating consultants—which also means more strictly enforcing non-compete agreements. Some service providers are even contesting project manager hires because of non-compete issues. In this fierce climate of non-compete enforcement, coupled with the general lack of understanding of or appreciation for the dreaded non-compete, legal technology professionals should examine their current and future employment obligations and legal constraints.

Here is a non-compete checklist if you are considering 
a change of employment.

1. Did you sign a non-compete, a non-solicitation agreement, or both?
If you are not in sales, often the answer is, “I’m not sure.” Your non-compete agreement is sometimes part of your employment agreement that covers the full gamut of terms.A non-compete should not be confused with a non-solicitation. The distinction is that a non-compete prohibits you from working for a direct competitor, while a non-solicit prohibits you from soliciting clients or employees of your former employer to join you at your new place of employment.

Non-solicits are often buried as a clause within your employment agreement, while non-competes are usually a separate document. This is not always the case, but it is worth noting. It is essential that you read (and highly recommended that you have an attorney read) any employment agreement or document you plan to sign before accepting a position.

2. Do you have a copy of your non-compete?
Shockingly, the answer is “no,” more than 50 percent of the time. When you accept a new position you should have digital and paper copies of your non-compete. Save them. Send a copy to your attorney, your agent or a family member you trust.
The worst situation for any candidate is having an offer in-hand and then being unable to produce a copy of your current non-compete, causing an offer to be rescinded. Candidates often choose to delay making a job move, or decide not to explore opportunities, because they either do not know if they have a non-compete or do not have a copy. More employers are now asking that revenue-generating legal professionals provide a copy of their non-compete at the time they submit a resume as part of their employment consideration.

3. What are the geographic and temporal variables of your non-compete?
All non-competes address two variables: the territory and the length of time in which the non-compete will be in effect after employment ends.
Non-competes are usually effective for one year, some for two years. Some are nationwide, others specific to geographic areas, such as the New York Tri-State area.
Non-competes are governed by state laws, and in most states, non-competes are enforceable. California non-compete clauses are generally illegal.
If you are a project manager or non-revenue-generating employee, and your non-compete is specific to your city or state, moving to another geography is an easy and viable way to evade conflict. It can be a bit trickier if you are a sales professional, because future employers generally want you to work in the geography where you have a network of relationships, and moving a sales pro to a new territory often doesn’t translate to success (and if it does, it can take years to reestablish previous sales success).
Some business development professionals and consultants do “sit on the bench” and then try to re-enter the legal technology industry, but things change quickly in this arena, and often relationships, no matter how personal, are hard to quickly monetize after being out of the game for 12 to 24 months.

4. What are the parameters?
How broad is the scope of the non-compete? Can you work in legal technology sales as long as your future employer doesn’t directly compete with your previous employer? If you sold service and consulting for your former employer, can you sell software and enterprise licensing for your future employer?
It is to the employer’s benefit to keep the parameters as broad as possible, and to the employee’s benefit to narrow the scope. This is an area for sales professionals to carefully 
negotiate in their contracts—and a place where negotiation is often both viable and entertained by the employer.
Carefully considered wording around breadth of the market can help a business development professional change employers down the road and still leverage the same relationships, but not violate the terms of his or her non-compete.

5. What is the climate of non-complete enforcement in your state? 
 With California in a category of its own, it is the responsibility of you, the employee, to research rulings in your state related to non-compete litigation. Public record will point to trends, and there are states that strongly lean toward the employee in non-compete disputes, while others typically favor the employer.

6. Does your current employer have a history of enforcement?
If you did not do this homework when you took your current position, it is never too late. Hopefully, there are people you work with, who you can trust to answer this question. There may also be former employees in your community who can advise you as to the track record of non-compete enforcement by your company. Online research can often point to this too, but nothing is more valuable than insight from people who work for, or have worked for, your employer.

7. Does your future employer have a history of enforcement?
This is when it is invaluable to have a really honest agent, or to be very well connected within your industry’s community. Ask the question and ask around. Certainly, within legal technology, there are organizations that are notorious for enforcing their non-compete clauses. There are also others who maintain a reputation for not enforcing their non-competes.

8. Does violation of your non-compete result in binding arbitration or can it lead to litigation?
This is usually outlined in your employment agreement, and if it is not, it should be! There are several big differences when resolving a non-compete issue through arbitration versus litigation; carefully consider this part of your contract for a “worst-case scenario.”
Key differences include privacy, time, cost and ability to appeal. Arbitrations are private between the parties. Litigation is public record and held in a court of law. Arbitrations usually resolve quickly, but litigation can be drawn out over long periods of time, delaying your ability to gainfully work in your field. Arbitrations can cost attorney fees, but those can be nothing when compared to possible discovery and litigation fees. Arbitrations are usually binding, while litigations offer the opportunity for an appeal.
The question of arbitration versus litigation is often one professionals do not consider thoroughly when starting a new job or negotiating an employment agreement. Remember that both parties are forced into spending money and time to battle a non-compete clause in court, but typically the employer has deeper pockets.

9. Will your future employer indemnify you in the event the non-compete is enforced?You can ask, but few legal technology companies indemnify new hires. When a company indemnifies an employee, it is essentially agreeing to assume the cost and responsibility of defending you if you violate your existing non-compete.

In addition to the potentially large attorney fees, there is always a risk the company will lose the battle, resulting in an inability to employ you.
Some larger organizations, particularly big consultancies and accounting firms, will offer indemnification for wildly successful individuals, but as the gap widens between big and boutique providers, fewer organizations will find a desired return on investment, post indemnification.

10. Can you go to work “in-house” at a law firm or corporation to avoid non-compete issues?
Yes, but few law firms and corporations are hiring ex-sales professionals, no matter how consultative or managerial their experience. It is very challenging to move from a vendor business development role into a law firm business development role. Those lucky enough to make that transition usually have meaningful corporate relationships, a track record of selling into corporations at the highest level and often a willingness and ability to take base salary cuts to facilitate the transition.
For non-revenue-generating talent fearful of their current employers’ enforcing a non-compete if they go to work for competitors, the pathway to law firm or corporate employment makes sense.
However, in 2014 there were significantly fewer roles available in the Am Law 200 than in years past. Partly as a result of the rapid adoption of managed service contracts and partly as a result of the continued commoditization and price compression of legal technology services, operational and consultative staffing is moving to the service providers.
That is where the most jobs will be in 2015 and where most talent currently working at a vendor will have the greatest opportunity for vertical and financial mobility.




This week U is for under utilized – the readily available liability prevention tools that, in our estimation, employers most often neglect to use to their advantage.

  1. The extra step.  Before terminating an employee with a medical issue, that is. As we have written here and here, much FMLA and ADA liability is preventable if you will methodically work through the communications steps that years of case law tells us courts are looking for. The sooner you start, the sooner you can finish. I tell employers:  I know it’s convenient, but taking one more step with the employee will pay off. If you think the employee has had plenty of chances to get you documentation from the doctor or to demonstrate that he/she can do the job, write that down – this is when we would terminate, but we’re not, we are giving you one chance to accomplish X by date Y. Don’t get stuck with an avoidable lawsuit because you wouldn’t take one more step to nail down your file and make it clear you fulfilled your legal obligations.

  1. Job descriptions. Job descriptions define the target of the employee’s job duties that is critical to so many employment law disputes.  In determining whether an employee is exempt under the Fair Labor Standards Act, the job description is Exhibit A in explaining what the employee really does. In the above-mentioned area of FMLA, ADA and other employee health related legal issues, the job description is the guidepost for whether an employee can perform his/her job, and the baseline for what is a reasonable accommodation. In discrimination cases, the job description is the starting for determining who is liable as a supervisor under the U.S. Supreme Court’s Vance v Ball State. The list goes on. A job description signed by the employee within the relatively recent past is too powerful a tool in litigation not to have one.

  1. The gut check. Specifically, the termination gut check phone call to counsel. Every termination involves risk, even those that do not involve risk factors that may be obvious such as the employee having made a past harassment or other legal complaint, or membership in one or more classes protected by discrimination laws.  Indeed, with relatively few exceptions, employment litigation is about terminations. There are unlawful hiring or failure to promote cases, but the vast majority of employment law is about terminations. Is there any event in your business that is as predictably a potential liability event? Certainly major commercial disputes or serious injuries involving the company may involve greater liability, but is there anything else in business where there is a predictable moment, voluntarily initiated by the company, that we know is a potential litigation event? Yet employers often trigger this legal event without talking to a lawyer, and miss issues that could have been avoided. It is a classic example of paying a little now rather than a lot more later.  Protect yourself and the company, make the call. If you are ready, it will be a few minutes. If it is more than a few minutes, you might not have been ready, so it will help get you there.

Companies that are using these three tools are spending less time and money in court and more time focused on their true mission.

Use of temporary staff, employee leasing


The use of temporary staff, employee leasing agreements and other alternative employment arrangements has increased over 40 percent in the last four years, a rise which has not gone unnoticed by the government. Because government agencies, legislatures and courts have responded differently, legal departments should be aware of changes in the law that may affect common contracting arrangements, including the franchisor/franchisee relationship.

The NLRB: McHappy about joint employment

The National Labor Relations Board (NLRB) initiated a not-so-covert mission in 2014 to broaden the definition of “joint employer,” which has manifested itself through the familiar McDonald’s and Browning-Ferris cases. If successful, the NLRB’s efforts will impose liability for Unfair Labor Practice Charges (ULPs) and the duty to bargain on the putative joint employer.

On December 19, 2014, the NLRB followed through with its previously-declared intention to bring administrative complaints against McDonald’s, USA, LLC, the parent company, as a joint employer along with McDonald’s franchisees.

The McDonald’s case is concerning, obviously, because of the relationship between the two entities as a franchisor and franchisee, the very nature of which depends on independent ownership and operation. The NLRB’s move is likely an attempt to encourage settlement. If settlement is unsuccessful, McDonald’s will undoubtedly challenge the NLRB’s new joint employer standard. The decision may ultimately change the way in which legitimate contracting relationships function.

Privately, the NRLB general counsel allegedly stated that it has not decided how to proceed with the McDonald’s cases, and has admitted that significant legal obstacles remain to expanding joint employment liability to encompass franchisors. Further promising is that the NLRB wrote in its Browning-Ferris brief that the NLRB “should continue to exempt franchisors from joint-employer status to the extent their indirect control over employee working conditions is related to their legitimate interest in protecting the quality of their product or brand.”

But other commentary remains concerning. With regards to Browning-Ferris, on May 10, 2014, the NLRB invited public comment on its joint employer standard. It received 18 comments, including from the NLRB and Equal Employment Opportunity Commission (EEOC). Both agencies argued for a more expansive definition of “joint employer,” including the EEOC’s assertion that “staffing firms and their clients generally qualify together as joint employers.”

According to the NLRB’s brief, the rise of contingency and temporary workforces has created an incentive to reduce wages and thwart collective bargaining. Thus, the NLRB general counsel advocated for the replacement of the TLI/Laerco standard with the less-stringent “traditional” standard, which was abandoned several decades ago. If the less-stringent standard is adopted, joint employment would be found when the alleged joint employer is an essential party to bargaining, or has direct or indirect control over the conditions of employment.

This is a significant broadening from TLI/Laerco, which finds joint employment when an employer has direct and immediate control over employees. Under the current standard, companies can tell their contracted workers what to do, as long as they do not tell them how to do it.

Browning-Ferris represents the most realistic pathway for the NLRB to impose greater liability and obligations on companies through joint employment. However, given the appellate process, any changes may take several years and could ultimately be overridden by Congress.

In the meantime, franchisors are well-advised to audit their practices and writte

What Motivates Millennials

Here is an article from Fortune Magazine:

It’s been almost one month since the 2014 Fortune Most Powerful Women Summit, and as I think about the questions and topics that really resonated, I keep returning to a panel I moderated on ‘The New Emerging Workforce.’

The three women on the stage—Mellody Hobson, President of Ariel Investments; Gisele Ruiz, EVP and COO at Wal-Mart North America WMT -0.80% ; and Wendy Kopp, founder of Teach for America—are young women themselves, although Generation Xers rather than millennials. They’re not exactly hobbling around on canes. And yet all three of them agreed on the fact that managing this new generation had turned out to be much more challenging than they had anticipated.

Why? It’s not because millennials aren’t motivated.

“Their sense of purpose and being greater than their job is incredible,” said Ruiz. It’s because Gen-Y has a different way of learning and interacting in the workforce. This is something that leaders must learn to deal with rather than hoping that millennials will “grow out of it,” says Kopp: “They communicate differently, and if we don’t adapt to that, we will lose them.”

Here, then, are three observations from the panel on how to understand this new generation—and ways to help them (and their elders) thrive in the workplace.

Expect impatience

Many of the women in the room laughed in frustrated recognition when Hobson told the story of a young, highly qualified woman who quit Ariel after a short time, unhappy because she hadn’t been personally mentored by Hobson—who happened to be the president of an 80 person firm and who had never been asked to work with the employee at all.

Hobson was upset—she remembered her early experience as being all about paying her dues—but she realized something: “It all goes back to the cell phone,” she says, meaning that since cell phones have been around, young people had access to instant answers (be it from their mom or Google).

Therefore, millennials are surprised and shocked if they don’t get what they want at work immediately. This does not mean, by the way, that employers should drop everything to answer a simple question or promote someone who doesn’t deserve it; what it means is understanding that this generation is accustomed to getting quick answers and quick results, and that leveraging that speed via quick promotions or extra mentoring—only for those who truly deserve it—will help.

Encourage decision-making

Another trait of this new generation, agreed the panelists, was the fact that millennials have an incredible ability to research and gather information, via technology. But there’s another side to that, says Hobson.”Millennials are great at collecting information, but not so great on decisions,” she observes. “We’re in many ways trying to force a point of view.”

Perhaps because of that darned cell phone, it’s easier to ask for answers than it is to stand behind your own opinion. How can employers encourage that confidence? One member of the audience, Alexa von Tobel of LearnVest (a millennial herself), said that she doesn’t allow her employees to ask their supervisors specific questions about work during the regular work day, so that they will be forced to figure things out on their own.

Channel their passion

A paycheck and a steady job is not the sum total of the millennials’ workforce happiness equation. They want to make a difference—and while that may mean impatience, it also means passion. While there may not be time to mentor and assist every single new member of your workforce, to do a better job of discerning key players quickly, so that you have a better sense of who to keep. And if you can define your company’s purpose, a la Teach for America, it will make you a more desirable place to work.


Non Compete Agreement Required by Jimmy John’s Sandwich

This if from SLATE, the online magazine.

Jimmy John’s must think it knows an awful lot about the art of the sandwich, because it’s doing its utmost to keep employees from taking their sandwich-making skills elsewhere. According to a noncompete clause the Huffington Post dug up, Jimmy John’s makes low-wage employees such as sandwich-makers and delivery drivers agree not to work for competing establishments for two years after leaving the company. Noncompetes tend to be used with managers or high-ranking employees with inside information about the business, but it’s not even the strangest part of this situation. The strangest part would be Jimmy John’s definition of a competitor.

According to the noncompete clause, employees must agree that for two years after leaving Jimmy John’s, they will “not have any direct or indirect interest in or perform services for … any business which derives more than ten percent (10%) of its revenue from selling submarine, hero-type, deli-style, pita and/or wrapped or rolled sandwiches and which is located within three (3) miles of either [their current place of employment] or any such other Jimmy John’s Sandwich Shop.” The clause, which has come up because of a lawsuit filed against Jimmy John’s this summer, has drawn criticism from employees for being broad and “oppressive.” Kathleen Chavez, the lawyer representing employees in the case, told HuffPo that the terms of the noncompete would prevent a former Jimmy John’s employee from working in 6,000 square miles in 44 states and Washington, D.C.

Rules on noncompete agreements vary by state, but generally such clauses are considered enforceable only when they are appropriately narrow and designed to protect a legitimate business interest. California, which is particularly in favor of competition and the employee’s right to change jobs, has a blanket rule that noncompetes are unenforceable. Since Jimmy John’s clause is so broad and seems to have little or no vital business justification behind it (what state secrets do those sandwiches contain?), it’s likely to be considered unenforceable pretty much anywhere. That said, an unenforceable clause is still problematic if it’s scaring employees who don’t know any better into thinking they can’t work at another sandwich shop—or another restaurant of any sort with a trade in sandwiches—for the next two years.
Alison Griswold is a Slate staff writer covering business and economics.