Monday, September 5, 2016
I always think it's interesting to see how courts judge the reasonableness of non-competition provisions. In this recent case out of the Eastern District of New York, Grillea v. United Natural Foods, Inc., 16-CV-3505 (SJF)(SIL) (behind paywall), a judge declined to preliminarily enjoin the employer from enforcing the former employee's non-compete and blocking him from accepting his new position, finding that the former employee had not shown a likelihood of success that the non-compete wasn't enforceable.
The plaintiff and former employee was one of the top executives at the defendant, United Natural Foods. He had signed a non-competition agreement that prohibited him from working anywhere in the United States for one year for any of United's direct competitors. After a few years, United terminated the plaintiff's employment. There was a lot of negotiation about when the termination would take place, which stock options were going to vest, which benefits would keep accruing, how the plaintiff would be categorized, etc., but for purposes of this blog entry, eventually the termination became effective and the plaintiff left United's employ.
Plaintiff received a job offer from a division of another company called Threshold. Plaintiff spoke to people at United about the job offer. They expressed concern that it would violate his non-compete. Plaintiff said he disagreed because he would be dealing with manufacturing, which was not what his responsibilities had been at United. Plaintiff put people at United down as references and Threshold called and spoke to them. They claimed they informed Threshold they thought what plaintiff was doing was a conflict of interest.
This dispute followed, with plaintiff seeking a preliminary injunction that United not enforce the non-compete so that plaintiff can accept his new position. The court, however, denied plaintiff's motion. The court found that the one-year time period of the non-compete was reasonable and also that the fact that it had no geographic limitation was reasonable because United is a nationwide company (the geographic limitation thing was important to plaintiff's argument because he was switching coasts for the new job).
What I found most interesting about this case was that the judge emphasized several times that United had stated that the non-compete only prevented plaintiff from working for twenty-nine companies (of which Threshold was one). That was clearly a detail that was compelling to the court.
Wednesday, August 3, 2016
Yesterday, Stacey noted how employers should be careful not to be too greedy when dealing with employees. Another example of the backlash – judicial or legislative – that may be the result if employers overstep what ought to be reasonable limits in interactions with their employees is a new law in Massachusetts that prohibits employers from asking job candidates about their salary history as part of the screening process or during an interview.
Why indeed should they be able to do so?! In a free market, freedoms cut both ways: just as an employee can, of course, not be sure to get any particular job at any particular salary, the employer also cannot be sure to be able to hire any particular employee! There is no reason why employers should enjoy financial insight about the employee when very often, employees don’t know about the salaries at the early stages of the job negotiation process. Both parties should be able to come to the negotiation table on as equal terms as possible, especially in this job market where employers already often enjoy significant bargaining advantages.
Massachusetts also requires Commonwealth employers to pay men and women equally for comparable work.
Tuesday, August 2, 2016
One of the things I caution my students about is the danger of being greedy in a covenant not to compete. If you are in a jurisdiction that enforces such covenants, you still must be aware that courts frequently subject them to close examination. It might be true that in many cases, the employee subject to the over-restrictive covenant might simply accept it without challenging it, but a recent case out of the Fourth Circuit, RLM Communications, Inc. v. Tuschen, No. 14-2351 (you can listen to the case's oral argument here), serves as a reminder that a court can knock a covenant not to compete out of a contract and leave no protection at all in its place.
Tuschen was an employee of RLM who had the following non-compete in her employment contract:
While I, the Employee, am employed by Employer, and for 1 years/months afterward, I will not directly or indirectly participate in a business that is similar to a business now or later operated by Employer in the same geographical area. This includes participating in my own business or as a co-owner, director, officer, consultant, independent contractor, employee, or agent of another business.
Tuschen eventually resigned from RLM and went to work for a competitor, eScience, and RLM alleged that Tuschen had thereby breached her non-compete.
The Fourth Circuit, however, found that the non-compete was overbroad and therefore unenforceable. First it noted that it prohibited direct and indirect participation, which the court found inherently problematic, because it theoretically prevented Tuschen from, say, acting as eScience's realtor, landscaper, or caterer. Nor was the only problem with the covenant its use of the word "indirectly," which RLM argued could just be struck from the clause, leaving the rest of the clause enforceable and in place. The breadth of prohibition on Tuschen's actions, including to businesses that might be operated by RLM in the future, wasn't justified by RLM's business concerns. The non-compete's focus on the identity of the new employer, rather than on Tuschen's behavior in the new employment, was misplaced: RLM should have been more concerned about the risk that Tuschen would use secret RLM knowledge detrimentally, rather than concerned about who she was working for (directly or indirectly).
An interesting case, with some interesting things to say about non-competes (and also trade secret misappropriation). When you read the case, it becomes clear that the court thought Tuschen was in many ways a good employee for RLM who was not engaging in sketchy behavior. In fact, in the court's characterization, one of the things RLM complains about was that Tuschen took steps to make the transition within RLM for her replacement easier and more streamlined without seeking permission first. This whole case stands as a warning not to be overly aggressive with enforcement in situations where a court will find it inappropriate.
Thursday, June 30, 2016
In Walker v. Trailer Transit, Judge Easterbrook finds that in addition to “recover costs,” the word “reimburse” could just as easily mean to broadly “compensate” (at a profit) or “pay” even given a seemingly contradictory context.
In the case, one thousand truck drivers filed a class action lawsuit against their “gig” employer, Trailer Transit. The drivers contracted to earn 71% of Trailer Transit’s contracts with its end clients. Trailer Transit owned the trucks; the drivers drove them. Among other things, the contract between the drivers and Trailer Transit stated that
[t]he parties mutually agree that [Trailer Transit] shall pay to [Driver] … a sum equal to seventy one percent (71%) of the gross revenues derived from use of the equipment leased herein (less any insurance related surcharge and all items intended to reimburse [Trailer Transit] for special services, such as permits, escort service and other special administrative costs including, but not limited to, Item 889).
The drivers (perhaps inartfully) claimed that Trailer Transit cheated them out of earnings by labeling income “special services” whereby Trailer Transit could claim it was simply getting “reimbursed” and thus deduct certain amounts from the equation before compensating its drivers. Trailer Transit claimed that the drivers were only entitled to 71% of whatever was listed as the “gross charges” for the driving services, end of story.
How would you interpret the provision in question?
The most obvious and reasonable reading of the contract seems to me to be as follows: If, for example, Trailer Transit enters into a contract with an end client for $1,000 plus $100 for also arranging for special services in the form of, for example, an escort vehicle (e.g. a “Wide Load” car), its drivers would earn $710, Trailer transit $290 in profits ($1,000 – 71% to the drivers), but bill the end client $1,100.
But what if, hypothetically speaking, the company was to seek to maximize its profits out of the total sum of $1,100 to be billed to the end client? It could then, for example, label $600 as “special services” to be “reimbursed” to it, thus reducing the amount to be paid to the drivers to $355 (71% of ($1,100-600)). That would increase its profits from the above $290 to $645 (($500-355) plus $500 (with the escort service at $100). Do you think that the contract was meant to be interpreted that way? Judge Easterbook (yes, of “bubble wrap fame”) does. Among other things, he found that
[d]rivers are entitled to 71% of the gross charge for “use of the equipment” (that is, the Drivers’ rigs), but the contract does not provide for a share of Trailer Transit’s net profit on any other part of the bill. It would be possible to write such a contract, but the parties didn’t … [T]he Drivers do not invoke any principle of  law that turns “71% of gross on X and nothing on Y” into “71% of gross on X plus 71% of net on Y.”
Judge Easterbook also makes the unpersuasive and, in my opionion, ill-thought out example that if
Trailer Transit paid someone $1,000 to accompany an over-wide shipment and display a “WIDE LOAD” banner, and billed the shipper $1,250, then the Driver would be entitled to $887.50 for that escort service—and Trailer Transit would lose $637.50 ($1,250 less $1,000 less $887.50 equals $637.50).
This is unpersuasive as Trailer Transit would presumably not be as large and profitable as it is if it were so incompetent as to systematically incur the losses that Judge Easterbrook concocts here. Further, in his example, if the charge of $1,000 truly was for a cost of that amount, Trailer Transit would, per its own contract and intent, get to deduct that cost in full first. Nothing in the case indicates otherwise.
The meaning seems to hinge on two things: the meaning of “reimburse” and whether or not this was an example of the company taking opportunistic advantage of its contractual commitments, which the drivers had, for some reason, not argued (Easterbrook recognizes that such an argument might have changed the outcome of the case – note to our students: always consider that). As regards the meaning of “reimburse, Judge Easterbook argues
True enough, one standard meaning of “reimburse” is to recover costs. Someone who submits a voucher for expenses incurred on a business trip seeks reimbursement of actual outlays rather than a profit. But this is not the only possible meaning of “reimburse.” The word also is used to mean “compensate” or “pay.” If the contract had said “reimburse the expense of special services,” that would limit the word’s meaning to recovery of actual costs. But those italicized words aren’t in the contract.
No, but that intent seems to be clear here. Contracts are usually interpreted in accordance with both the plain meaning of the contract and the intent of the parties (not after-the-fact intent of one party).
What do you think the word “reimburse” means here? The word is defined by various sources as follows (my emphasis):
Black’s Law Dictionary:
- to pay someone an amount of money equal to an amount that person has spent;
- to pay someone back;
- to make restoration or payment of an equivalent to an amount that person has spent
- to make repayment to for expense or loss incurred;
- to pay back; refund; repay.
- pay someone back for some expense incurred;
- reimburse or compensate (someone) as for a loss
Third Circuit Court of Appeals:
"To pay back, to make restoration, to repay that expended; to indemnify, or make whole." United States v. Konrad, 730 F.3d 343, 353 ( 3d Cir. 2013).
To me, all these sources indicate that the word means what we probably all think it means: money back for an outlay. But apparently, that is not the case in the Seventh Circuit.
Tuesday, June 7, 2016
This One Again: Handwritten Contracts Really Are Binding (but Mediation Transcripts Are Highly Recommended)
The Seventh Circuit just reconfirmed the fact that handwritten contracts are enforceable as long as they contain all the material terms of the contract.
In the relevant case,Martina Beverly brought suit against her former employer, Abbott Laboratories, for discrimination and retaliation against her because of her German nationality (not a lot of anti-German discrimination going on in this country these days, one might think, but that was nonetheless the allegation) as well as on the basis of her disabilities. The case went to mediation. A day before the mediation took place, Abbott’s attorney sent Beverly’s attorney a “template settlement agreement in order to avoid any surprises in the event that [the parties] are able to resolve the matter.” That document also stated that Beverly had twenty one days to review it and seven days to revoke any possible acceptance.
During the fourteen-hour mediation session the next day, both parties were represented by counsel. At the end of the session, both parties and their counsel signed a very brief handwritten agreement that, at bottom, stated that Abbott would pay the cost of mediation and “$200,000+” with Beverly demanding $210,000. The parties were probably and understandably tired after such a long session, but still: a quarter million-dollar settlement, and no one had the energy or took the time to type up one measly paragraph?...
Next day, Abbott emailed a typed agreement to Beverly’s specifying the amounts to be paid ($46,000 to Beverly and a relatively whopping $164,000 to her attorneys!). The emailed response from Beverly’s attorneys: “Oh happy days!.. You are a gem.”
Soon after that, Beverly – perhaps for good reason – got cold feet and sought to rescind from the deal, arguing that additional terms were needed for a contract to have been formed, that the twenty one days mentioned in the pre-meeting template (which was never used in its original form) were applicable to her settlement offer, and that a “more formal future writing” was anticipated.
The appellate court struck down each of these arguments. First, additional terms such as any future cooperation between the parties and Beverly’s future employment with the company were nonessential details. The language in the original template pertaining to a cool-down period was never actually used. The fact that parties anticipate a more formal writing does not nullify an otherwise binding agreement. The court found the happy exclamation by Beverly’s attorney dispositive of the parties’ intent to enter into a contract when they did (one might also say it was simply an indication of the attorneys’ happiness with a large payment, not their clients’ mood).
Perhaps most importantly, the court pointed out that “[i]t bears mentioning that a transcript (or some other recording) of the private mediation session here may have provided important clarity regarding the parties’ beliefs and intentions relating to the handwritten agreement and the draft proposal. We encourage future litigants to record any communications that directly relate to final settlement agreements.”
Sound advice in days of, apparently, little or no secretarial assistance even when relatively large sums of money are at stake. An assistant could have typed up the agreement in less than one minute. So could an attorney. In the end, though, the handwriting argument did not prevail, but having something in writing or at least an audio recording would have precluded even more costly lawyering.
Wednesday, May 18, 2016
The Department of Labor is finalizing a rule that will extend overtime pay to 4.2 million more Americans currently not eligible for such pay under federal law. This is expected to increase wages for workers by $12 billion over the next ten years and thus contribute to the relatively stagnant wages experienced by the majority of American workers in spite of six years of continual job growth and, now, solid profits by many companies.
The earnings situation did not use to be so poor for so many people. In fact, in 1975, 62% of full-time workers qualified for overtime pay. Today, only a measly 7% do.
As Henry Ford and others knew a long time ago: more money to more people will boost the economy for everyone, including businesses.
Read more about the ruling here
Thursday, May 12, 2016
If you and I worked in an industry with highly sensitive information (assuming that we do not), it might be one thing if we thought we could email confidential information to our private email accounts and copy such information to a memory stick without finding out. But if a C-level employee at a high-tech company does so, does such conduct not rise to an entirely different level of at least naivety, if not deliberate contractual and employment misconduct?
A court will soon have to answer that question. Louis Attanasio, former head of global sales for an IBM cloud computing unit has been sued by IBM for breach of a contractual confidentiality clause, misappropriation of trade secrets, and violation of a non-compete agreement when he left – information in hand – to work for direct competitor Informatica.
In 2016, Attanasio allegedly started sending confidential information to his private email account, including draft settlement agreements between other IBM employees who had left to work for competitors. Before leaving IBM, Attanasio was asked to return a laptop to the company, which claims that he cpied files to a USB storage device.
Once again, the extent of the traceability of our electronic actions at work has become apparent. I continually remind my students of this to help them avoid “traps” such as the above or, frankly, simply to remind them that they should not spend much, if any, time on their computers not working (most seem to use their own electronic devices anyway these days, but still… and doing so is also very visual in an office setting.). Employers frequently complain about the work ethics of new college graduates, so it might be worthwhile to remind our students of what seems obvious to us.
Thursday, April 28, 2016
In spite of most jurisdictions reading a duty of good faith and fair dealing into all contracts, a Fifth Circuit Court of Appeals has held that it is unlikely that the Texas Supreme Court would find such a duty to exist in Texas. Wow. Additionally, the court found that no fiduciary relationship between a university student and his/her university faculty and other representatives.
Section 205 of the Restatement (Second) of Contracts states that “[e]very contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement.” See also Farnsworth, “Good Faith Performance and Commercial Reasonableness under the Uniform Commercial Code,” 30 U.Chi.L.Rev. 666, 670 (1963).
The seminal case in this area is Market Street Associates v. Frey, 941 F.2d 599 (7th Cir. 1991). In that case, Judge Posner held that in spite of the somewhat “moralistic overtones of good faith,” not every contract signatory is expected to be his “brother’s keeper.” Nonetheless, “the essentials of the modern doctrine [are] well established in nineteenth-century cases.” “This duty is … halfway between a fiduciary duty (the duty of utmost good faith) and the duty merely to refrain from active fraud. Despite its moralistic overtones it is no more the injection of moral principles into contract law than the fiduciary concept itself is.” “The office of the doctrine of good faith is to forbid the kinds of opportunistic behavior that a mutually dependent, cooperative relationship might enable in the absence of rule. “
In the new Texas case involving a student at SMU who got fired from his part-time job as a Community Adviser for misconduct toward students and faculty, the circuit court held that “Texas law does not impose a generalized duty of good faith and fair dealing and, in fact, rejects it” in all circumstances apart from when 1) a formal fiduciary relationships exists or 2) a “special or confidential relationship” exists. Examples of the former are attorney-clients, trustee-beneficiary, and principal-agents. In Texas, the latter apparently only includes the relationship between an insurer and an insured. That’s it! Texas courts have, found this panel, refused to impose the duty on, for example, employer-employees (not too surprising), lender-borrowers, medical provider-patients (double wow!), mortgagor-mortgagees, and franchisor-franchisees. The court in the described case also said that an “ordinary student-professor relationship is no different;” in other words, there is no fiduciary or even “confidential” or “special” relationship between students and faculty in Texas.
The case does not show how the student’s allegation that a duty of good faith existed between SMU and the student would really have helped the student on the merits. SMU seemed to have a very good case for firing the student from his job. Nonetheless, it is surprising that the court would so categorically reject that such a duty even exists apart from in traditional fiduciary relationships. While it may make sense that “a purely unilateral, subjective” sense of trust in one’s contractual counterpart and that the other party will have one’s interests at heart is not enough to create a fiduciary relationship, there is a vast difference between that and reading out the duty of good faith and fair dealings from most contracts law in general in Texas. Of course, as contracts law is state law, it is true that it is the Texas courts who must change this line of thinking, but doing so seems to be highly warranted given how courts in other parts of the nation rule on the issue.
The case discussed is Hux v. Southern Methodist University, 2016 WL 1621720 (no free online copy available yet).
Friday, April 22, 2016
To determine when the statute of limitations has run in relation to benefits contracts, the classification of the contract as “entire” or “divisible” may turn out to be crucial. If the contract is entire, the statute may start running on, for example, a certain date when the employer made a single contractually binding promise to provide health care for its employees, typically once a year. If the contracts is divisible, the contract may extend further into the future and run from, for example, ongoing times when the employee makes monthly premium payments under the plan.
The Eleventh Circuit Court of Appeals notes that in Georgia, a contract is entire if “the whole quantity, service, or thing, all as a whole, is of the essence of the contract,  if it appears that the contract was to take the whole or none,” and if the contract “involves a single sum certain.” In contrast, a divisible contract is one that involves “successive performances” and is “for an indefinite total amount which is payable in installments over an uncertain period.” (See Wood v. Unified Government of Athens – Clarke County, Ga. 2016 WL 1376443. ).
In the dispute before the court, the panel found that although the employer had made a single contractual promise for retirement healthcare benefits, the contract was divisible because the employer could only perform its promise by successive performances throughout the uncertain span of each retiree’s life. This was furthermore the case because of the unpredictable fluctuations in each retiree’s healthcare costs, the contract requiring the payment of many successive payments, and because the employees had no immediate claim for the entirety of the contract if the contract were entire. Thus, the statute of limitations ran separately as to each premium payment when it became due.
Tuesday, March 8, 2016
Outsourcing work to locations where employees earn even less than many in the United States do has already become commonplace. Now comes the corporate idea of “taskifying” work to people eager to obtain some work, even if just in bits and pieces. “Crowdwork,” as it is known, lets companies use online platforms such as Amazon Mechanical Turk or www.fiverr.com to find people willing to do routine tasks such as drafting standardized reports, filing forms, coordinating events and debugging websites, but also much more complex ones such as designing logos, ghostwriting, etc. Many of today’s work tasks can be broken up into bits and farmed out online, and many employers are already doing so. Could this also come to encompass routine lawyerly work? Quite possibly so. Researchers at Oxford Univesity’s Martin Programme estimate that nearly 30% of jobs in the U.S. could be organized in a crowdwork format within just twenty years.
In this context where few regulations or laws yet govern the contracts, workers would no longer be either “employees” or “contractors,” (which has already proved to be troublesome enough for companies such as Uber), but rather “users” or “customers” of the websites that enable, well, workers and companies (“providers”) to find each other. These transactions would not be governed by employment contracts, but by online “user agreements” and “terms of service” that currently resemble software licenses more than employment contracts. There are few, if any, legal obligations towards employees in the current legal landscape that also offers employees very few means for obtaining and enforcing something so basic pay for the work performed.
Employers today require a flexible and eager workforce that is constantly on the ready and that can maybe even work 24 hours a day. Crowdworkers provide just such availability and demand very low salaries because the name of the game seems to be to compete on prices. The problem is that workers, to have a decent life, need the opposite: stability, higher salaries than what is often currently the case, retirement, salary, and medical benefits. Do these come with crowdwork tasks? Sadly, no.
What could go wrong? Consider this case: Mr. Khan, an Indian man living in India, was eager to make some money. He decided to try Amazon’s Mechanical Turk. On good days, he would make $40 in ten hours; more than 100 times what his neighbors made as farmers. He even outsourced some of his own work to a team that he supervised. This must have violated Amazon’s Participation Agreement as all of a sudden, Mr. Khan received the message that his account was closed and “could not be reopened.”Amazingly, Mr. Khan was also notified that “[a]ny funds that were remaining on the account are forfeited, and we will not be able to provide any additional insight or action.” Talk about lopsided contracts! Using a “Contact Us” link, Mr. Khan was eventually able to get through to Amazon, which simply referred him to a contractual clause stating that Amazon had the “right to terminate or suspend any Payment Account … for any reason in our sole discretion.”
With these types of ad-hoc online agreements, people who should arguably at least have been classified contractors if not, as in some current cases, employees. Of course, this only pertains to U.S. law, but it is important to note that not all jobs are “taskified” to foreign workers. Thus, employees risk being “stiffed” twice: once for losing their jobs to cheaper folks willing to be crowdworkers and, if they chose to work under such contracts and don’t do exactly as the “provider” requires in their apparent almost exclusive discretion, not being paid and not having any effective means of enforcing their contracts. An undisputedly troublesome development both in this nation and beyond.
How could at least the issue with medical and other employee benefits be solved? It might via universal payment systems such as those typical in EU nations. There, when employees change jobs, their vacation time, medical and other benefits travel remain in a centrally administered pool (whether government administered or privately so with tough regulations in place), they do not become discontinued with the employment only to have to be restarted under other plans as typical in this country. This system could potentially be transferred to the crowdwork arena. A percentage of each job (sometimes even called “gigs”) could be centra lly administered in a more employee-centric version than the still American employer-centric solutions. Such systems are, of course, largely seen here in the U.S. as “socialist” and thus somehow inherently negative.
As if the employment situation for workers around the world is not already bad enough, add this new development, called “a tsunami of change for anyone whose routine work can be broken into bits and farmed out online.” Our students’ future work tasks may, at least in the beginning of their careers, constitute just such work. This is a worrying development as workers in our industry and in this country in general are not seeing improved working conditions in general. Crowdworking could add to that slippery slope.
Wednesday, February 24, 2016
We've looked at arbitration provisions and unconscionability before. In this recent case out of California, Yeotis v. Warner Pacific Insurance Services Inc., No. B245770, the agreement in question was found to be unconscionable in places, but that didn't doom the arbitration provision contained within it.
There was an element of procedural unconscionability to the contract. The court concluded that the contract was an adhesion contract, because the plaintiff was required to sign it in order to keep her job. There was, therefore, some procedural unconscionability attached to the formation of the contract. Additionally, there was some substantive unconscionability in the contract's provisions that gave the court pause. The wording of the contract required the plaintiff to pay fees in arbitration that she wouldn't have had to pay in a court of law. The defendant tried to argue that that was only the impression given and that the plaintiff would never have had to pay those fees in reality, but the court was concerned that the plaintiff would assume, under the contract's language, that she would be responsible for the fees and therefore might hesitate to pursue her remedy against the employer.
So the court directed the costs provision to be severed from the contract, but it found that the rest of the contract was enforceable. The procedural unconscionability was slight, it thought, and did not permeate the whole contract. The plaintiff's allegation that she had never been provided with the relevant arbitration rules prior to signing the contract was unpersuasive to the court as a more serious procedural unconscionability problem because the court thought she could have found the rules herself very easily and there was no contention otherwise. As for the rest of the arbitration procedures as explained in the contract, the court found that they were not substantively unconscionable and so could be enforced.
Wednesday, February 17, 2016
It's not a secret that some colleges and universities out there are really struggling. At Lake Superior State University in Michigan, where enrollment has been declining, two professors were recently denied tenure, as Josh Logue reported for InsideHigherEd. As required by the faculty association's agreement with the university, the denials set forth the reason tenure had been denied, and the reason given was the need for the university to reduce staffing in the face of the declining enrollment. The professors took issue with this reason for denial, however, because the agreement contained the following clause:
Recommendations for tenure shall be based on:
a) Careful review of the Tenure Application File [letters of support, CV, and evaluations].
b) Consideration of the faculty member’s collegiality in their relation to faculty, students, staff, and administration.
The professors are saying that that doesn't allow for denial of tenure based on another consideration, such as financial.
It's unclear whether there was a communication with the candidates beforehand that institutional need might impact the tenure decision. The contract doesn't seem to ever mention financial considerations impacting the faculty, or institutional need, or indeed any kind of catch-all, at first glance. It does, however, provide for an appeal of a tenure decision, so I'm curious if the denied candidates will take advantage of this, and what the eventual outcome will be.
Friday, January 29, 2016
The class action lawsuit against Uber for allegedly misclassifying its drivers as “independent contractors” instead of regular “employees” is growing in scope and importance. (O’Connor v. Uber Technologies Inc., 13-cv-03826, Northern District of California). It now covers more than 100,000 drivers. If Uber loses, the case could mean the end of the so far highly lucrative business ride share model that is currently valued at a whopping $60 b worldwide. http://www.bloomberg.com/news/articles/2015-12-18/uber-faulted-by-judge-for-confusing-drivers-with-new-contract
A recent contractual twist developed as follows: Judge Chen had previously found certain contractual language between Uber and its drivers to be unconscionable and unenforceable. Uber claims it tried to fix those issues in a new set of contracts prohibiting its drivers from “participating in or recovering relief under any current or future class action lawsuits against the company.” (Link behind a sign-in request). The drivers were, instead, required to resolve potential conflicts via arbitration. The new contract did, however, purport to give drivers 30 days to opt out of the arbitration provision.
Judge Edward Chen stated about this contractual language that “it is likely, frankly, to engender confusion.” The potential for confusion stems from the fact that numerous drivers have, obviously, already joined the class action lawsuit just as many still may want to do so. Hundreds of drivers are said to have called the plaintiffs’ lawyer, Shannon Liss-Riordan, to find out whether they have to opt out of the new contract to join the lawsuit. Ms. Liss-Riordan called the updated contract an attempt to “trick her clients into relinquishing their rights to participate in the class action.”
Uber, however, claimed that it was just trying to fix previous problematic contractual language and that it would “not apply the new arbitration provisions to any drivers covered by the class action.” The contractual language, though, does not say so.
Whether this is an example of deliberate strong-arming or intimidating the drivers into not joining the lawsuit or simply unusually poor contract drafting may never be known. Judge Chen did, however, order Uber to stop communicating with drivers covered by the class action suit and barred the company from imposing the new contract on those drivers.
The saga continues with trial set for June 30.
Meanwhile, Lyft settled a very similar lawsuit by its drivers in the amount of $12 million. Under that settlement, Lyft will still be able to classify its drivers “independent contractors.”
Saturday, January 23, 2016
This relatively new and unknown funding idea is being tested by Purdue University in cooperation with financial services company Verno Education. The loans are called “Income-share Agreements” or “ISAs.” Investors lend money to students in return for a certain percentage of the student’s future income for a set number of years. A few companies and NGOs in the United States are offering contracts on a limited, pilot basis, although the idea itself is not new: Economist Milton Friedman introduced the idea in the 1950s.
Purdue President Mitch Daniels has touted the idea, claiming that the loans “shift the risk of career shortcomings from student to investor: if the graduate earns less than expected, it is the investors who are disappointed; if the student decides to go off … to Nepal instead of working, the loss is entirely on the funding providers….” Voila, truly “debt-free-college” according to Daniels.
Not so fast. First, most college students of course end up finding a job. They will thus have to repay something. That something could easily be very expensive. For example, if a student borrowed $10,000 via a contract to repay 5% of her income for five years after graduation and ends up getting a $60,000 job, she or he will have to pay back $15,000 without compounded interest.
Student protections are currently poor. For example, there is no clarity as to whether the Fair Credit Reporting Act would apply. Further regulations of this area are necessary. Meanwhile, students will have to individually bargain these types of contracts very carefully.
Thursday, January 21, 2016
On Thursday, the U.S. Circuit Court of Appeals for the D.C. Circuit heard arguments about whether a clothing company illegally fired three retail store employees for their Facebook posts criticizing the employer. The case involves the as-of-yet little developed area of how labor law applies to social media usage as well as other complex issues of contracts and employment law. The case is Design Technology Group v. NLRB, Case Number 20-CA-035511. The case also demonstrates the issue of poor workplace conditions and how little employees can do under contracts law or other bodies of law against this, which I have blogged about before (most recently here). I am not an employment law expert. I simply find this case very interesting from the point of view of how social media law is developing in relation to what is, after all, also an employment contract.
In the case, three employees repeatedly brought various safety concerns to the attention of the store manager. Among other things, the employees felt that the area of San Francisco where the store was located was relatively unsafe at certain times of the evening and that, perhaps, store hours could thus be changed to alleviate this problem. Homeless people would also gather in numbers outside the store to watch a burlesque video that the store played on a big TV screen right inside a window, thus potentially also attracting various (other) unsavory characters.
Allegedly, the store manager did not respond to these safety concerns and treated the employees in an immature and unprofessional way. The three employees discussed the events not at the water cooler, which is so yesteryear, but on Facebook. These posts included messages such as
- “It’s pretty obvious that my manager is as immature as a person can be and she proved that this evening even more so. I’m am unbelieveably [sic] stressed out and I can’t believe NO ONE is doing anything about it! The way she treats us in NOT okay but no one cares because everytime [sic] we try to solve conflicts NOTHING GETS DONE!!... “
- “800 miles away yet she’s still continues to make our lives miserable. phenomenal!”
- “hey dudes it’s totally cool, tomorrow I’m bringing a California Worker’s Rights book to work. My mom works for a law firm that specializes in labor laws and BOY will you be surprised by all the crap that’s going on that’s in violation 8) see you tomorrow!”
One of the employees did bring the California worker’s rights book—which covered issues such as benefits, discrimination, the right to organize, safety, health, and sanitation—to work and put it in the break room where other employees looked through it, noticing that they were entitled to water and sufficient heat.
This same employee also (naïvely) sent resumes from the company computer in spite of company rules allowing only sporadic computer access (the store manager had allegedly set a bad example by using the store computer for personal purposes herself). The company discovered this as well as the Facebook posts, and fired the three employees.
The company argues that the workers commented on Facebook only in order to create a pretext for filing a claim with the NLRB. The smoking gun, according to the company, is the following exchange of (select, but most salient) Facebook postings:
- “OMG the most AMAZING thing just happened!!!! J”
- “What … did they fire that one mean bitch for you?”
- “Nooooo they fired me and my assistant manager because “it just wasn’t working out” we both laughed and said see yaaah and hugged each other while giggling ….Muhahahahaha!!! “So they’ve fallen into my crutches [sic].”
The use of the expression “Muhahaha” is, according to the company, the smoking gun indicating the employee’s desire to get fired. It does indeed seem to indicate _some_ reveling in the turn of events, but arguably not a desire to be fired. The “top definition” of the phrase on the user-created online “Urban Dictionary” is, today, “supost [sic] to be an evil laugh when being typed in a game.” Case briefs list it as “An evil laugh. A laugh one does when they are about to do something evil. Such as when a villain has a plot to take over the world, he does this laugh right before it goes into effect. Also a noise made by people who have just gotten away with an evil deed or crime….” The “evil laughter” entry on Wikipedia describes the phrase Muhahaha as being “commonly used on internet Blogs, Bulletin board systems, and games. There, [it is] generally used when some form of victory is attained, or to indicate superiority over someone else.”
The company appeals a ruling from the National Labor Relations Board (“NRLB”) finding the terminations unlawful because the employees’ discussions of working conditions were protected concerted activities under the National Labor Relations Act. The company claims that the comments were not legally protected because they were part of a scheme to manufacture an unfair labor practice claim.
It will be interesting to see how the Court of Appeals will address the social media aspect of this case. One the one hand, it does seem exceptionally naïve to expect to be able post anything in writing on the internet – Facebook, no less – without it potentially being seen by one’s current or future employer. I’m sorry, but in 2016, that should not come as a surprise to anyone (note that the company also used email monitoring software to discover whether its employees applied for jobs with competitors, which at least one of the employees here did). Note to employees who may not have a home computer or internet access: use a library computer.
On the other hand: does it really matter what employees post to their “friends” about their jobs, absent torts or other clear violations of the law (not alleged here)? Isn’t that to be expected today just as employees previously and still also talk in person about their jobs? Isn’t the only difference in this case that the posts are in writing and thus traceable whereas “old-fashioned” gossip was not? If employees merely state the truths, as seem to have been the case in this instance perhaps apart from the last “Muhahaha” comment, isn’t it overreaching by the employer to actually _fire_ the employees if they, of course, otherwise provided good services? Even if the employees are exaggerating, boasting, or outright lying, should employers be able to fire employees merely because of private comments on Facebook posted to one’s online “friends”?
An alternative idea might be to consider whether the employees were actually on to something that (gasp!) could help improve a poor work situation for the better.
The National Federation of Independent Business’ Small Business Legal enter has filed an amicus brief in support of the company, alleging that the NLRB decision “allow[s] employees regardless of their motive or actual misconduct to become termination-proof simply by making comments relating to their employment online.”
That’s hardly what the employees are arguing here. They do, however, argue a right to discuss their employment situation online without a snooping employer terminating them just for doing so. In this case, the employees had, noticeably, tried to improve highly important workplace issues in a fruitful way. The situation did, however, escalate. In and of itself, however, the “fallen into my clutches” comment, although of admittedly debatable intent, does not seem to indicate that the employees were attempting to manufacture an unfair labor practice claim. The employees seemed to have been primarily concerned with safety issues and working conditions, but were fired in retaliation for their critical online arguments. That, to me, seems like a fair argument.
Stay tuned for the outcome of this case!
Wednesday, December 30, 2015
Here's one for all the professors out there: Smith v. Board of Supervisors for the University of Louisiana System, Civil Action Case No. 13-5505 Section: "G" (3), out of the Eastern District of Louisiana.
Steven Smith was a tenured professor at the University of New Orleans ("UNO"). Smith alleged a series of disagreements / misunderstandings that eventually led to Smith being committed to teaching the spring 2012 semester at both UNO and a Brazilian university, the Federal University of Bahia ("UFBA"). Smith attempted to resolve the conflict by pushing his start date at UFBA to the last two weeks of his semester at UNO. He had his students at UNO use the final two weeks to work on final projects, which would be submitted to him electronically while he was in Brazil at UFBA. Smith alleged that there was further miscommunication between him and UNO administration about Smith's schedule and whether or not it was acceptable. As a result, Smith stated that he was threatened numerous times with termination. Eventually, he was encouraged to resign and did so.
Smith sued asserting several causes of action, including breach of contract. The Board responded by arguing that Smith and the Board never entered into a contract at all.
Smith first pointed to the faculty handbook and UNO bylaws as the contract between himself and the Board. However, the faculty handbook explicitly stated that it "should not be construed as a formal contractual agreement between the University and its faculty." The court therefore found that the handbook did not constitute a contract.
That was not the end of Smith's contract claims, however, and that's where the tenure issue comes in. Smith argued that his tenure provided him with "a contractual right to continued employment." To support his argument, Smith pointed to the definition of "tenure" in Black's Law Dictionary as well as a number of statements made to Smith when he was granted tenure. The Board made no argument in opposition, leading the court to conclude that, "[a]lthough there was no specific written tenure contract, the parties appear to agree that Smith's achieving tenure meant that he was no longer an at-will employee." Accordingly, the court found that tenure was a contract between Smith and the Board. Whether or not this contract had been breached was a genuine issue of material fact precluding summary judgment.
Thursday, December 10, 2015
Will the legal hiring and general business situation never change for the better? Maybe, but commentators still think that future change on the legal market will come from structural and innovative, rather than cyclical, change. For example, in addition to relatively simple steps such as hiring outside staffing agencies and sharing office centers, some firms are launching their own subsidiaries providing legally related services such as contract, data and cyber security management along with ediscovery.
Until recently, law firms offered these and other services. As outside service providers have proved to be able to provide certain key services more efficiently and cost effectively than traditional law firms, the latter have lost business that they are now desperately trying to recoup.
Imitation is still the most sincere form of flattery. It is not only on the market for legal services that copycats abound; this has also proved to be the case with, for example, many shared economy service websites such as Uber, Lyft, Airbnb, VRBO and others. As soon as one company idea and website turns out to be successful, others just like it seem to shoot up within weeks or months. However, instead of simply trying to do what others are already doing and doing well, it would be nice if companies – law firms among them – would try to think about how they could do things better instead of just trying to, as often seems the case, (re)gain business by taking market shares from others. Exactly how law firms should do so is, of course, the million-dollar question, but it seems clear that innovation is prized both within and beyond the legal field. That will benefit our students if jobs are created by actual law firms rather than by service providers not hiring people with JDs.
Tuesday, December 8, 2015
A few days ago, I blogged here on an attempt by some university professors in California to unionize and to obtain better pay and working conditions in general.
In China, university reform is also underway, but, at least in part, with a much more troublesome intent and potentially dire effects for the nation and the world.
The Guardian reports that China’s education minister has vowed to “drive smart alecks, dissenters and thieves” from the country’s university classrooms. This is part of a wider anti-corruption campaign launched by President Xi three years ago.
The alleged misconduct ranges from action that seems reasonable (firing university leaders for filing fake expense reports and taking bribes from students) across the pitiful and almost laughable (punishing senior university officials for engaging in illicit acts of “hedonism” by, for example, driving luxury cars) to the outright shocking and extremely troublesome, seen with Western eyes. For example, several university chiefs have been toppled for “flouting Communist party rules.” Attempts are made to ban books that attempt to spread “Western values.” The education minister has also called for “greater political screening of academics before they are hired” and is worried that “enemy forces” are attempting to “infiltrate university campuses” in order to “turn young minds against the party.”
Liberal academics claim that the discussion and study of sensitive topics has generally become increasingly difficult under the leadership of President Xi.
All this is indeed very troublesome indeed. However, before we roll our eyes too much at these serious Chinese events, let us just remember that the United States academic world is far from perfect either. Recall, for example, the recent defunding of various law school and other university clinics on East Coast campuses for, at bottom, being too liberal and assisting the lower class in obtaining better pay and working conditions. A former senior faculty colleague personally told me once that one of my papers on (are you ready?) climate change was almost “too political” in Orange County, California. The article discussed mainstream factual aspects, including business and investment issues, of climate change that are now, just a few years later, being discussed in Paris by all media, including conservative outlets. Recently, numerous attempts at diversifying college campuses across the nation have shed light on potential elitism and racism in American universities. Nope, we are far from perfect ourselves. But when an entire nation deliberately and officially seeks to censor learning processes, there is indeed cause for alarm.
Last year, I had the great honor, joy and privilege of teaching international environmental law at a prime Chinese university. I brought up such “sensitive” topics as public participation in government law- and decision-making, climate change, and trade in endangered species. I was videotaped doing so (this is normal practice in China). I was also not invited back this past summer. Maybe my teaching is simply no good. Maybe more senior and “famous” lecturers were chosen. I cannot blame the university for doing so at all. I know that I have a lot with which I can contribute to any educational institution, but I also bow to and honor the many experienced, learned and very well published colleagues on the “market” these days. However, hate to think that I was, perhaps, censored away. I don’t think that is the case. If it was, then I am nonetheless happy to have at least contributed with a few provocative, Western thoughts. Perhaps I was just too much of a smart aleck...
Saturday, December 5, 2015
Five thousand part-time and non-tenure track professors working for the University of Southern California, a private university employing a total of 6,600 faculty, are petitioning the National Labor Relations Board to become unionized. If the petition is granted, the faculty will get a chance to vote on the issue with contract negotiations to follow soon thereafter.
Those of the faculty who support the move say that it could lead to better working conditions, more job stability and higher pay. Currently, part-time faculty teaching courses for USC earn an average of about $5,000 per course. Such faculty often have to piece together jobs teaching classes for several universities earning them the name “freeway flyers.” Parents are often getting upset that students are being taught by part-time adjuncts. Of course, the stress and uncertainty of not having a stable teaching job in one location may indeed affect the quality of the instruction provided by adjuncts and other non-tenured professors.
Nonetheless, USC Provost Michael Quick and other university representatives have warned the potentially unionizing faculty that their move may lead to “less collegiality on campus” because unions, in their opinion, rest on “an adversarial model.”
Come again? So, some university folks may resent the fact that their low-paid, low-security, but hardworking colleagues for seeking out better working conditions for themselves and thus eventually the university students? That in itself sounds highly uncollegial and should be rethought. Perhaps some university faculty and leaders ought to consider assisting their colleagues in moving towards better working conditions and pay, as the trend is around the nation in both academia and beyond, not trying to retaining status quo. Unions have a sound role to play in this respect. Even without unions, many of us enjoy good working conditions and pay. However, many faculty may not individually be able to obtain such conditions. Unions have demonstrated their ability to assist workers in this respect. “Adversarial” is not the right word for that. It’s called bargaining power and leverage. It is what you make it.
As if this wasn’t insulting enough to the faculty, the university provost also encouraged the faculty to “read anything an organizer asks to you sign as you would read a legal document.” Duh! As one faculty said: “I almost feel like they’re insulting my intelligence.” Apparently, the intelligence of the faculty is recognized in some contexts (teaching), but not in others (reaching out for help to improve one’s working conditions).
By way of comparison: part-time and untenured faculty at both the University of California and California State University have long been represented by unions. That has not led to any reports of “less collegiality” or any other of the parade of horribles-scenarios so often invoked when it comes to employee versus employer bargains assisted by unions.
Tuesday, December 1, 2015
In cases where workers have quit their jobs because of intolerable workplace bullying and thus wish to assert illegal discrimination, the United States Supreme Court seems inclined to start the statute of limitations “clock” when the employee resigns rather than when the last discriminatory action takes place. Private sector workers typically have 180 days to report job discrimination to the Equal Employment Opportunity Commission (“EEOC”) whereas public sector employees must do so within 45 days.
The case is Green v. Brennan, No. 14-613. In it, a postal worker claims that he was passed over for a promotion because he is black. When he complained to his employer, the United States Postal Service, he was allegedly forced to choose between retirement or a lower-paying job 300 miles away. He resigned and filed suit for constructive discharge, but missed the EEOC deadline. The trial and appellate courts disagreed as to when the statute of limitations should start to run, which would have made a difference in the case.
As the law currently stands, employees only enjoy legal protection against discrimination based on a relatively narrow range of underlying issues such as age, gender, national origin, race, religion or disability under, most relevantly, Title VII of the Civil Rights Act of 1964. But luckily, times are changing. Although employees in this country enjoy notoriously few of the rights and work norms that are taken for granted in so many other parts of the industrialized world, some states are doing something to change this situation, at long last. In California, for example, AB 2053 now requires California employers with 50 or more employees to include training in the prevention of “abusive conduct” to already existing requirements regarding sexual harassment.
“Abusive conduct” is that which a “reasonable person would find hostile, offensive, and unrelated to an employer’s legitimate business interests.” “It may include repeated infliction of verbal abuse … that a reasonable person would find threatening, intimidating, or humiliating, or the gratuitous sabotage or undermining of a person’s work performance.” The conduct must be undertaken with malice. In other words, AB 2053 targets a wide range of workplace bullying that is not linked to “traditional” discrimination. Such conduct is surprisingly common and accepted by management to a surprisingly great extent in more places than you might think and in places that may or may not surprise you, including our very own field, legal academia.
Unfortunately, AB 2053 does not yet have sufficient legal “teeth” as defining “malice” and the bullying targeted by the law is difficult. Thus, in spite of the extent of the problem and its many recognized and severe consequences on both employers’ productivity and success levels as well as, of course, the employees’ varied interests, if an employee thinks she or he has an issue with his or her employer, the “resolution is likely [to come from] human resources, and not the courts.”
What happens if a human resources department is disinterested in or for other reasons - corporate acceptance of workplace bullying, perhaps - unwilling to assist the employee? Perhaps not much, as the situation stands. But just as the Civil Rights movement started some place and built up at least some protections against some types of discrimination, modern notions of what constitutes workplace discrimination and its negative effects are, luckily, spreading. In spite of the usual initial criticism, AB2053 is a very good start. Undoubtedly, the common law will be able to shed further light on what modernly constitutes acceptable workplace behavior and what does not. That way, the law can get the required legal “teeth.” In the meantime, it is a sad observation about the modern American workplace that so many managers effectively tolerate or even undertake workplace harassment and that so few counterbalancing institutions in place in other cultures exist here, for instance trade unions. In contracts law, it’s all about the bargaining power. Most American workers have too little in today’s workplace.