Gruntled Employees

Help wanted. Apply in July.

The economic recovery is not going to be led by the President or by Congress. The recovery will be led by employers. By entrepreneurs who take the risks needed to innovate and grow and prosper. Right now, too many people are complaining about the banks and the tight credit market and the roller-coaster stock market. Too many employers have thrown in the towel, and have laid off half a million workers since Election Day in a desperate attempt to cut costs.

Employers, like almost everyone else, have focused too much on how to weather the recession and not enough on how to manage the recovery. Because the recovery will come. How are you going to get back to being an employer of choice when you laid off thousands of workers just months before?

It's time for employers to take a stand. Here's how to start:

Run a help-wanted ad. Not just a small classified ad in minuscule agate type. Instead, take out a display ad in your local paper — but not in the help-wanted section. Instead, choose Metro. Or Sports. Or even the weather page. (You should be able to negotiate a good price. The economy, you know.)

Put your company logo in it, large and in color. And write this:

HELP WANTED

We need motivated, professional workers to help our company grow in the upcoming economic recovery. Please apply in July, sending your résumé and cover letter to the address below. You can spend part of the next three months researching our company and making your submission perfect and unique. We can't wait to meet you!

Then watch as your company becomes one of the leaders of the recovery. People will talk. You might even find a need to hire sooner.

Economic crisis? Meet the cure: COBRA premiums

If your company was one of those that laid off a combined half million employees in the past six months, you’ve already sent out a bunch of COBRA notices. Thanks to the Obama Administration and Congress, now you have to do it again.

Last week, President Obama signed into law the American Recovery and Reinvestment Act of 2009, commonly called the Stimulus Act. The new law weighed in at 407 pages and roughly $800 billion. Hidden in the thicket of “shovel-ready” projects is a provision that dramatically changes employers’ COBRA responsibilities.

COBRA continuation coverage applies to workers at companies employing 20 or more employees. When an eligible worker loses health-insurance benefits after leaving a job, COBRA provides the employee the opportunity to receive the same benefits for up to 18 months. Until now, the employee was solely responsible for the premiums.

But under the Stimulus Act, employers now have to pay 65% of the worker’s premiums for nine months. The federal government will then reimburse the employer by allowing it to take a credit on payroll taxes. In effect, though, the employers are lending this money to the federal government to help finance the economic recovery. Because in the lull between the recent Lilly Ledbetter Fair Pay Act and the upcoming, ironically named Employee Free Choice Act, it must have seemed like a good idea to pile on employers some more.

(The stock market seems to disagree, with the S&P 500 down 13% since the Inauguration and more than 20% since New Year's Day.)

The new COBRA subsidy does not cover every employee equally. The law phases out the subsidy for so-called “high-income individuals” — people making more than $125,000 a year (or $250,000 a year for married joint filers) — in a complicated scheme involving taxable premium reductions. And while the subsidy applies to workers who are “involuntarily terminated,” the Act does not define that term. The Conference Committee report suggested that people fired for gross misconduct would not be eligible.

What’s particularly tricky is that the Act reaches back in time to cover employees laid off since September 1, 2008 (and goes forward through December 31, 2009). That means that employers who sent out COBRA notices to laid-off employees over the past six months now have to contact them to give the workers another chance to elect COBRA coverage. A new and improved COBRA notice form is expected from the Department of Labor by March 17. What’s not clear is how to treat employees who got their COBRA coverage paid for as part of a severance agreement. Like the recovery process itself, this issue is a work in progress.

What you can do

• Read the text of the Stimulus Act of 2009 (but not while driving or operating heavy machinery)
• Immediately reexamine COBRA eligibility over past six months
• Talk to your employment counsel about how to handle employees already laid off
• Contemplate the seeming prescience in this quote from the end of the 1986 Stallone classic, Cobra:
  

         DETECTIVE MONTE
I personally would have looked for a more subtle solution, but that's not your style.
    (offers his hand)
No hard feelings.

         COBRETTI (after punching Monte)
No hard feelings.

How to lose a wage-and-hour case

In our last post, we talked about eight ways for an employer to lose a noncompete case. Today, we cover something much simpler: how to lose a wage-and-hour lawsuit. It's really quite easy to do:

Just screw up an employee's pay.

That's all! No fussing, no mussing. You see, unlike in most any other kind of employee lawsuit, your employment counsel has no lawyer tricks to pull to defeat a wage claim. Either you paid the correct wages or you didn't.

In a disability-discrimination case, I can make technical, legalistic arguments about whether the employee is really disabled, whether he was otherwise qualified to do the job, whether a particular accomodation was reasonable, and so on. In a sexual-harassment case, I can argue that the sexual conduct wasn't egregious enough to alter the employee's working conditions, or that the conduct wasn't unwelcome (typical lawyer double negative), or that it wasn't even sexual conduct at all. Even in an overtime case, I have a shot. The federal Fair Labor Standards Act has so many exemptions and exceptions to exemptions and so forth that you can sometimes dodge that bullet.

But in a straight wage case, if the right wages weren't paid, it's "Goodnight, Irene." You're on the hook for the lost wages, and probably the employee's attorney's fees. In Massachusetts, you're looking at automatic triple damages. (See "Massachusetts: Closed for business.")

States take the payment of wages so seriously that they've created criminal penalties in addition to civil remedies (again, raise your hand, Massachusetts). The message is clear: don't mess with wages. Pay what you owe, pay it on time — especially around termination — and keep careful track of it. Otherwise, you're likely to pay a lot more.

Eight ways to lose a noncompete case

You might think that with the economy in the tank, employers would be less worried about enforcing noncompete agreements and more worried about merely staying afloat. Not so. In fact, as the active workforce shrinks — unemployment jumped up to 7.6% today, and 600,000 jobs vaporized since New Year's Day (Reuters story here) — the battle for talent has actually become fiercer. To be sure, the number of reported decisions dropped off a bit in the latter half of 2008 (see chart). But anecdotal evidence suggests that employers' appetites for protecting their stuff and their peeps are still strong.

Over the past 11 years at Shepherd Law Group, we've worked on hundreds of these matters for employers on both sides — the former (enforcing) employers and the new (hiring) employers. We've seen a lot of different ways to lose noncompete cases, if you're the former (enforcing) employer. Here are eight:

1. Put your faith in the language of the noncompete agreement. I can't tell you how many times I've had lawyers for former employers tell me that they were going to win "because he signed the agreement." The court doesn't care what the agreement says if it's not absolutely necessary to protect the company's interests.
2. Try to enforce against any old employee. If the employee is not in a position to give the new employer an unfair advantage by taking confidential information or customer relationships, you can forget about enforcing it.
3. Make sure the noncompete is broadly drafted. Too many lawyers think that drafting an agreement is about trying to think up every metaphysical possibility and then drafting around it. They also think that it's OK to draft broadly if you include a provision that "allows" the court to scale back the scope of the agreement. That's mighty kind of you, but the court doesn't care about those provisions (often mistakenly called "blue pencil" clauses). More often than not, a court will toss the whole agreement if it decides it's too broad. And in some states, the court will automatically 86 the noncompete if it's even a little too broad.
4. Focus on geography, duration, and scope. Most lawyers remember from law school that you need this particular trifecta to enforce a noncompete, and they think the analysis ends there. While it is true that noncompetes that are overbroad in these categories will fail, that's only a table stake. What's more important is the necessity of enforcing the agreement to protect secrets or relationships.
5. Wait a while to file. The key to winning a preliminary injunction (which is the usual goal in a noncompete lawsuit) is to convince the judge that without it, your company will suffer immediate, irreparable harm. Waiting around to file makes that argument less persuasive. On the other hand ...
6. Ask for the injunction before you've developed enough evidence. Sometimes you can win based solely on the affidavits you supply, which you got from your internal investigation. But if your evidence isn't strong enough, it's better to take some expedited discovery (depositions, documents, computer and email records) before you ask for the injunction. You usually only get one shot at the prize.
7. Don't worry about which state to file in. I don't mean state of mind; I mean jurisdiction. Sometimes which state you file in can make a crucial difference in whether the agreement will be enforced. In California, as most lawyers know, you haven't got a prayer, while in Florida, noncompetes are presumptively enforceable.
8. Focus on the law instead of on the story. This is the most important lesson. Lawyers often fall in love with their legal arguments. But noncompete cases are equity cases, not law cases. To be sure, that distinction means less than it did a hundred years ago. But if you have a brilliant, clever, technical legal argument and an unsympathetic story, you are way more likely to lose.

Bottom line: If your client's wearing the white hat, and your agreement is narrowly drafted, and your secrets or customer relationships are in imminent peril, then you've got a fighting chance of winning. Otherwise, wave goodbye to the former employee and get back to work.

The pink-slip blues

Great piece in today's New York Times discussing the pain of layoffs from the other side of the table. In "Handing Out the Pink Slips Can Hurt, Too," Matt Cooper, an executive at a recruitment-outsourcing firm called Accolo, describes his experience in letting people go. The article is well written and sincere. Matt writes:

It was gut-wrenching knowing that a bomb was about to go off. I had hired and trained many of these people. We wanted to be as humane as we could in letting them go.

I don't think anyone expects people to feel sorry for an employer who has to do the laying off; obviously, it's much harder on the laid-off employees. But it's worth remembering that most of the time, the people doing the terminations have taken it personally, too, and are doing it as a last resort.

Managers and employers: the more you can convey this to the people you are firing, the less likely they will be to sue you.

Another important lesson from the piece:

We offered as much severance as we could, and the other executives and I told the remaining employees that we didn’t want to close the door on those who lost their jobs. We encouraged them to reach out to their ex-colleagues and keep in touch. Then we all got on LinkedIn and wrote endorsements for those who were laid off.

It cost nothing to write those LinkedIn references, except a little bit of time and thought. But I'll bet that those employees appreciated it.

Well done, Matt.