Baltimore Business Journal Article on Non-compete Agreements (Subscription Required)

The Baltimore Business Journal recently published a pro-non-compete piece directed at small businesses.  No surprise there:  the BBJ is a business oriented publication.  The reporter, Jack Lambert, called me for the employee perspective on non-competes.  Here is the part of the interview that made it into the article:

When drafting non-compete contracts, employers should consider how great of a burden to put on their employees, said Jim Rubin, a principal of the Rubin Employment law Firm in Rockville. He said some businesses include jury waivers. Those are clauses that dictate where the case can be litigated. They also include requirements that employees pay the company's legal fees if they lose the case."All sorts of provisions are put in there that are really unfair," said Rubin, who represents employees in non-compete contract matters.

I wrote about unfair non-compete contract provisions in my last post.

What to look for (and avoid) in a Maryland Non-Compete Agreement

Employers often use their economic leverage to force one-sided non-compete agreements on employees.  Below is a list of the top 5 unfavorable contract terms I  look for when I review non-compete agreements.

1.    One-sided attorney fee-shifting.  In a normal breach of contract lawsuit, each side pays its own fees.  Employers often get around this rule by including in a non-compete agreement, a clause that states the employee will pay for the employer's attorneys fees if the employer is successful in enforcing the agreement.  

2.   Over-broad restrictions on working.  An Employer  can only enforce non-compete agreement against a narrow class of employees and only when it can state a legally protectable interest.   Employers nevertheless  often define competition so broadly that, if enforced, the employer could not work in an  entire industry (even if the employee is not competing).   

3. Liquidated damages.  It is often very difficult to prove damages when an employee is accused of violating a non-compete agreement.  Employers sometimes attempt do away with the necessity of proving actual damages by stating  that amount of liquidated damages is presumed.  A Maryland Court decision suggests that liquidated damages provision are  invalid in most situations involving non-compete agreements.   

4. Court Selection and Choice of Law.   Parties to a contact are generally allowed to choose the Court that will hear their dispute and the law that applies to those disputes.  Employers often use their leverage to pick the Court and the Law believed to be the most favorable to them.   

5.  Jury-Waivers and Arbitration Clauses.  In non-compete litigation, employers generally prefer to be in front of judges (not juries).  As such, employers often use their leverage to make employees waive their right to a jury or require that all disputes be resolved in arbitration (and not Court).

 Here are a few articles that discuss  ways to combat one-sided contract terms:

What to do if you are threatened with a non-compete lawsuit.

Maryland Non-Competes: Things to Consider Before You Sign One.

Q: Can you leverage your way out a Maryland Non-Compete? A: Maybe.

A Non-compete Success Story.

  

Arbitration of Employment Disputes in Maryland

I am pursuing more and more employment law cases in arbitration right now than I ever have in my career.  Arbitration is an alternative to Court.  In arbitration, the parties "choose" to have their disputes heard by an arbitrator (often a retired Judge or an experienced lawyer), rather than a judge or jury.

I am certain that my personal experience of an uptick in arbitration is common among employment lawyers.  Several Maryland and U.S. Supreme Court decisions allow employers to make their employees "agree" to waive their right to a jury and to pursue class actions as a condition of employment.  Employers generally prefer arbitration because of a belief that it is private, cheaper, and more employer-friendly than the court system.

In my experience, arbitration is  more expensive than court for the employer because the employer often must pay the costs associated with arbitration.   Hence, the employer has to pay its own lawyer and the arbitrator's fee.  Also, arbitration is  not always private.  Also, I have had some good success in arbitration.   Finally, when the employee is the one being sued, employers either forget about an arbitration or regret having made the employee sign an arbitration agreement as a condition of employment.  


  

Terminated for Absenteeism? You May Still Be Entitled to Unemployment Benefits

An employer, of course, can terminate a Maryland employee for being absent too many times (so long as none of the absences are protected by the FMLA, ADA, or Maryland Flexible Leave Act).  But, are you entitled to unemployment benefits if you are terminated for excessive absenteeism?  The answer is:  it depends.  If your absences are not your fault and you timely notified your employer when you would be out, then you are likely entitled to unemployment benefits. 

I just represented an employee who found herself in exactly that position.  She was terminated for being out of work too often.  Each time she was absent she gave her employer proper notice.  It was undisputed that she was out of work for a chronic medical condition.   Over the employer's objections, the employee was awarded benefits. 

A summary in the Maryland Department of Labor's decision digest summarizes the law:

• The claimant was absent from work on an authorized maternity leave. Due to unexpected medical complications, the claimant was not able to return to work as early as anticipated. The claimant kept her employer informed of her medical condition. The employer would not hold the claimant's job until she could return to work after her six-week checkup. Absenteeism due to illness is not misconduct. The claimant was discharged, but not for any misconduct. DuBois v. Redden and Rizk, P.A., 71-BH-90.

Department of Labor Issues A New App to Track Overtime

Q:  What are the three most important rules in employment law?
A:   Document, Document, Document.

The Department of Labor issued an app to document overtime.  The app acts as a time clock. You press a button when you start working, then you press a button when you stop working.  You enter your hourly rate.  The app then calculates your wages and overtime.  You can email a report of your time to help you follow the three most important rules of employment law:  document, document, document. 

Maryland Health Care Worker Whistelblower Protection Act

   Maryland has a special lawthat protects health care workers from retaliation.  The Maryland Health Care Worker Whistleblower Protection Act protects an employee from retaliation if he or she discloses to a supervisor or board an activity that is in violation of a law, rule, or regulation.  

  The health care worker must believe in good faith that the activity poses a substantial and specific danger to public health or safety.  The health care must make his or her report in writing or follow the employer's compliance policy.

   In a recent case, the Maryland Court of Appeals (our highest court) ruled that the Act may protect a health care worker even if he or she only made an "internal" complaint to a supervisor.

Promise in Employee Handbook Can Become Enforceable Contract in Maryland

UPDATE: 11/28/12 -- The Fourth Circuit reversed the decision discussed below and found the disclaimers enforceable.  See my discussion here.

====================================================
     Many employers issue employee handbooks.  The handbooks usually include disclaimers that state that the handbooks do not change the "at will" nature of employment. 

     But, the United States District Court of Maryland recently ruled that an employer's anti-retaliation provision can become the basis for an enforceable contract.    A pharmaceutical representative alleged that her employer terminated her for reporting her supervisor's ethical violations.   The Company's handbook stated:

Retaliation and threats of retaliation against employees who raise concerns, or against individuals who appropriately bring important workplace and business issues to the attention of management, are serious violations of [the Company's] values and standards and will not be tolerated. . . . All directors, officers and employees are strictly prohibited from engaging in retaliation or retribution . . . which is directed against an individual on the basis of or in reaction to that individual making a good faith report to the Company . . . of suspected violations of law, regulation, policy or procedures, or Our Values and Standards.

     Despite several disclaimers, the Court ruled that the above language was sufficiently specific and definite to constitute an enforceable promise.  The Court held: "Given the unambiguous nature of the non-retaliation policy, the disclaimers that [the Company] relies upon are insufficient to defeat [the plaintiff's] reasonable expectation that [the Company] intended to limit its ability to terminate her for retaliatory reasons."

Legal Jujutsu: Compelling Arbitration When Sued For Alleged Breach of a Non-Compete

I have mentioned forced arbitration often on this blog.  That is, when an employer requires its employees to sign an arbitration clause and waive their right to a jury trial as a condition of employment. 

But, what happens when at the end of the relationship, it is the employer that sues the employee in Court for a non-compete violation?  With a bit of legal jujutsu, I have had some success getting the matter dismissed from Court based on a motion to compel and to dismiss using the employer-drafted forced arbitration clause.  Dismissal may or may not be the end of the story as the employer may still pursue the matter in arbitration.

Bill to raise Maryland’s minimum wage faces opposition

A bill pending in the General Assembly proposes to gradually move the Maryland minimum wage to $10 per hour.  This article from the Daily Record notes the substantial opposition to the bill, including from the Maryland Chamber of Commerce.   Given the economic climate, I believe the odds of the bill passing are slim.

Recent Decision - Attorneys Fees Under The Maryland Wage Payment and Collection Law

   Daniel Barufaldi had an employment contract with the Ocean City Chamber of Commerce. He resigned when the chamber refused to pay him incentive-based compensation.


   Barufaldi sued the Chamber for breach of contract and unpaid wages under the Maryland Wage Payment and Collection Law (“MWPCL”), and the Chamber counterclaimed for breach of contract. The jury found that the Chamber had breached the employment contract and violated the MWPCL by failing to pay Barufaldi $60,000 in unpaid wages, and that the Chamber’s failure to pay was not the result of a bona fide dispute. The court, however, did not grant Barufaldi’s motion for attorneys’ fees.


On appeal the Court of Special Appeals vacated and remanded the trial court’s order denying Barufaldi’s motion for attorneys’ fees under the MWPCL. The Court stated that the MWPCL is a fee-shifting statute that requires courts to “liberally” exercise discretion to award attorneys’ fees where there is no bona fide dispute. Because the trial court did not set forth circumstances militating against any award of fees, and, in fact, had not offered any explanation at all of its reasoning in denying the fee request, the court vacated and remanded the issue of attorneys’ fees to the trial court.

Ticket Office Employees v. Washington Redskins

Consult an Attorney if You Have an In-Person Unemployment Hearing

Many lawyers were reluctant to handle unemployment hearings for individuals because the fees were capped by regulation.   But the regulation just changed.  Attorney's can now charge a fee of twice a claimant's weekly benefit amount.  If the case is complex, an attorney can petition for a higher fee.  Attorneys should be willing to take more of these cases.   I know I will.    

You May Be Entitled to Unemployment If You Quit With Good Cause for Health Reasons.

  Maryland's Unemployment law states that you are eligible benefits if you quit with "good cause."  Good cause is not fully defined but may be shown if the reason  you left work is "directly attributable to, arising from or connected with the conditions of the employment or the actions of the employer."

 Resigning because you suffer from a health problem resulting from an on-the-job injury may constitute good cause.  For example, in the attached decision (identifying information redacted), a Hearing Officer found my client quit with good cause for health reasons.  She suffered from a mold allergy.  When the office flooded, she began suffering symptoms. After being told the office would not be renovated for six months, she quit.  As stated, the Hearing Officer  found my client quit for justifiable reasons directly attributable to work.

You May Not Be Within the Class of Employees That Can Be Covered by a Non-Compete Agreement.

  Maryland Employers often require employees to sign non-compete agreements as a condition of employment.  But just because you signed a non-compete agreement does not mean that it is enforceable as to you.  Only a narrow class of employee may lawfully be covered by such an agreement. 

  The case, Ecology Services, Inc. v. Clym Environmental Services, LLC, illustrates the point.  There, the Maryland Court of Special Appeal refused to enforce a non-compete agreement applied to “Radioactive Waste Specialists” and “Radioactive Waste Technicians.”  The Employer bringing the action could not prove that the employees possessed (a) any truly unique skills or (b) exploited any specialized personal contact at their new job. Truly unique skills are those that would make it difficult to find a substitute employee with the same skills.  Specialized personal contacts are generally limited to proprietary sales opportunities.

  In sum, an employer can only enforce non-compete agreement against a narrow class of employees and only when it can state a legally protectable interest. 

   See this post and contact an attorney if you are threatened with enforcement of a non-compete in Maryland.

Triple Damages When The Employer Disputes Only Part of the Wages Claimed

I recently tried a small Maryland Wage Payment and Collection Law case in the District Court of Maryland.  The employer conceded that it owed some -- but not all -- of the wages we were seeking.  The Court did not award the disputed amount;  but tripled the undisputed amount. The Court relied on this passage from my trial brief on the issue: 

An employer may be liable for treble damages on only a portion of the amount claimed.  In Medex, for example, the Court noted that the employer’s withholding of one part of the employee’s claimed wages “might itself be evidence of a lack of good faith” Id at 43.  Likewise in, Baltimore Harbor Charters, Ltd. v. Ayd, 365 Md. 366, 397, 780 A.2d 303 (2001), the Court noted that the “bona fide dispute” provision of § 3-507.2 contains no language which would permit an employer to withhold amounts it concedes are owed to employee. According to the Court:  “where an employer alleges the existence of a bona fide dispute as to the total amount of wages owed to an employee . . . yet concedes that a certain amount of wages are due. . . the employer acts at his or her peril in failing to pay the conceded amount.”  Id. The penalty provision in § 3-507.2 thus applies to any portion of the amount claimed to be owed or paid late that is not subject to a good faith dispute.

The Court's award of triple damages is important.  It allows my client to seek to collect his attorney's fees from the employer that withheld his wages.

Contact Me

James Edward Rubin
The Rubin Employment Law Firm, P.C.
600 Jefferson Plaza, Suite 204
Rockville, Maryland 20852
Phone (301) 760-7914
jrubin@rubinemploymentlaw.com