Tuesday, December 24, 2013
Since I am getting ready to teach Business Associations for the first time in three years, it is nice to have a case that reviews basic agency principles:
On November 25, 2013, a panel of the Seventh Circuit issued a per curiam decision in NECA-IBEW Rockford Local Union 364 Health and Welfare Fund v. A & A Drug Co. and upheld a district court's grant of defendant's motion to compel arbitration. Plaintiff (the Fund) provides health benefits to a Rockford union of electrical workers (Local 364). In 2002, it negotiated an agreement (the Local Agreement) with Sav-Rx, a provider of prescription drug benefits. In 2003, Sav-Rx also negotiated a different agreement (the National Agreement) with the International Brotherhood of Electrical Workers, with which Local 364 is affiliated. The National Agreement offers locals reduced charges, but it, unlike the Local Agreement, contains an arbitration clause.
While the Fund's trustees never voted on the matter, the Fund accepted Sav-Rx services provided under the National Agreement between 2003 and 2011. The process by which this occurred is unclear. The Fund never actually signed the Local Agreement, but Sav-Rx began providing services under the agreement as of January 1, 2003. After the National Agreement was announced at at a meeting attended by the Chair of the Fund's Board of Trustees, the Chair requested that Sav-Rx reduce its rates to comport with those of the National Agreement. Sav-Rx did so effective April 1, 2003. Sav-Rx included Local 364 in its annual audits under the National Agreement, and the Fund's administrative manager communicated with Sav-Rx about these annual audits.
The Fund is now suing Sav-Rx for charges not authorized under either the Local or the National Agreements. Sav-Rx moved to compel arbitration pursuant to the National Agreement. The Fund claimed that it had never signed the National Agreement and should not be bound to its terms. The district court found that the Fund had knowingly accepted benefits under that Agreement and had thereby ratified it, thus acceeding to its arbitration clause. The Seventh Circuit affirmed.
The Seventh Circuit noted that the Fund is bound to the National Agreement if the Fund or an agent with actual, implied, or apparent authority, assented to it, or if the Fund ratified it. As the Fund's Trustees had never voted on the National Agreement, the Fund was not bound under actual authority. Nor did the Chair of the Board of Trustees possess implied authority to bind the Fund to the National Agreement, which did not relate to ordinary day-to-day affairs but was an "extraordinary," "once-in-a-decade transaction" that also caused the Fund to forego an important right -- access to the courts. Sav-Rx could not establish that the Chair of the Board of Trustees had apparent authority to bind the Fund to the National Agreement. The Board had never held out the Chair as having such authority and Sav-Rx in fact knew that only the Board itself could bind the Fund.
Nevertheless, the Fund is bound by the National Agreement because it ratified that agreement through its conduct. By imputation or direct knowledge, the Trustees knew of both the National and the Local Agreements and of their differences. They also knew that the Fund was receiving discounted prices. The Seventh Circuit concluded that "knowing that the Fund received the benefits of the National Agreement and never repudiating those benefits, the trustees ratified the National Agreement."
Tuesday, November 26, 2013
Monday, October 7, 2013
After one year of negotiations and one cancelled Gala, Carnegie Hall and its stagehands' union were able to come to an agreement last Friday, October 4th. According to The New York Times, both sides have declared victory. The union will play a role in Carnegie Hall's new $230 million educational facility, but it will not be the same role that it plays in the Hall itself.
Under the new deal, people can move things without calling in union help unless they are heavy. When asked how heavy something has to be before a stagehand must be called, Carnegie Hall's executive director explained “Heavy enough that a person says, ‘I need some help from the union person.’" Now that's a clear standard.
Thursday, October 3, 2013
We don't get to use our Labor Contracts category very often on this blog, so a story in today's New York Times was welcome news, even if it isn't very happy news. According to the Times, stage hands at Carnegie Hall (right) have gone on strike to protest a decision by Carnegie Hall that the stagehands union will not participate in a new educational wing to be 0pened next year.
The strike seems to have caught Carnegie Hall off-guard, as it forced the cancellation of this year's opening gala event, which was the feature the Philadelphia Orchestra, Joshua Bell and other liminaries of the classical music world. The Philadelphia Orchestra, by the way, decided to play for free at its usual home, the Verizon Center, which despite its crass, corporate name, is an absolutely spectacular concert venue. Last year's opening gala raised $2.7 million for the Hall.
The problem, of course, is that the stagehands are expensive. The Times claims that their average compensation comes out to $400,000 a year, but that can't be right -- nobody can live in New York City on only $400,000 a year. In any case, Carnegie Hall claims that it can rely on far cheaper union workers in its educational wing, because, e.g., moving pianos around for educational purposes is completely different from moving pianos around for theatrical purposes.
Carnegie employs only five full-time stagehands, but each of them earned more last year than the Hall's finance director. This same union shut down Broadway for over two weeks in 2007. Nobody is predicting how long it will be before one hears nothing in Carnegie Hall louder than a pin drop.
Thursday, August 15, 2013
The WSJ had an interesting article about the effects of noncompete agreements on entrepreneurship. The article quotes contracts prof Alan Hyde of Rutgers University School of Law who notes that while non-competes benefit employers, jurisdictions that enforce them have "slower growth, fewer start-ups, fewer patents and the loss of brains to jurisdictions that don't enforce" them. In California, these non-competes are generally not enforceable unless they are in conjunction with the sale of a business or partnership. Confidentiality agreements, on the other hand, are enforceable. That's why it's puzzling that those who favor noncompetes argue that they are necessary to protect valuable trade secrets. Since most employees have to sign confidentiality agreements anyway as part of their employment - and would likely be prevented from using company trade secrets under state law even if they didn't - it seems that noncompetes are providing a different function which is to make sure that employees, well, don't compete. It's not surprise then that non-competes would have an adverse effect on innovation and entrepreneurship. Most would-be entrepreneurs don't relish the thought of an expensive lawsuit with a former employer. The article states that employers are less likely to bring trade secret misappropriation claims than they are non-compete ones because they are more costly. I think their "costliness" is why confidentiality agreements are a more desirable mechanism for protecting trade secrets than non-competes. Many believe that one of the reasons Silicon Valley exists in California - and not Florida, for example - is because non-competes are not enforceable. I think this is definitely one factor (other reasons include the awesome computer science and engineering departments at UC Berkeley and Stanford, immigration, proximity to the Pacific Rim, the less formal cultural environment in California generally, and a type of historical path dependence).
Wednesday, May 22, 2013
Papers from the American Bar Foundation - The Labor Law Group Conference on The Proposed Restatement of Employment Law
The Proposed Restatement of Employment Law at Midpoint
The Restatement's Supersized Duty of Loyalty Pension
Contingent Loyalty and Restricted Exit: Commentary on the Restatement of Employment Law
Catherine Fisk & Adam Barry
An Excursion Through Strange Terrain: Chapter 6 (Defamation) And 7 (Privacy and Autonomy)
Matthew W. Finkin
What Should The Proposed Restatement of Employment Law Say About Remedies?
Remedies Doctrines in Employment Law: Ready to be Restated, or in Need of Remedial Remedies?
Papers from the Associations of the American Law Schools 2012 Annual Meeting Section of Labor Relations and Employment Law
Introduction: Guaranteeing the Rights of Public Employees
Ann C. McGinley & Kenneth G. Dau-Schmidt
Five Dead in Ohio: Ohio Citizens Overwhelmingly Support Public Employee Collective Bargaining (61 Percent to 39 Percent) in a November 2011 State Referendum Blocking the Implementation of Senate Bill 5
Jeffrey H. Keefe
"Before Wisconsin and Ohio": The Quiet Success of Card-Check Organizing in the Public Sector
Timothy D. Chandler & Rafael Gely
Monday, August 27, 2012
In July, 2009, DiPonio Construction Company, Inc. (DiPonio) terminated its collective bargaining agreement (CBA) with the International Union of Bricklayers and Allied Craftworkers Local 9’s (the Union). The Union brought a claim for unfair labor practices (ULP) before the National Labor Relations Board (NLRB) alleging that DiPonio was required by the National Labor Relations Act (NLRA) to bargain for a new CBA. Five days before the NLRB filed a ULP complaint against DiPonio, DiPonio sought a declaratory judgment from the district court stating that it had properly terminated the CBA. When the NLRB moved to dismiss DiPonio’s claim for lack of subject matter jurisdiction, DiPonio amended its complaint to include a breach of contract claim and filed a motion to stay the NLRB proceedings. The timing of the contract claim made it seem motivated by a desire to create jurisdiction in federal court over a dispute over which the NLRB would otherwise have exclusive jurisdiction.
The district court granted the NLRB’s motion to dismiss and imposed sanctions against DiPonio under Rule 11 of the Federal Rules of Civil Procedure. DiPonio appealed to the Sixth Circuit and the Union sought further sanctions. Last month, in DiPonio Constrcution Company, Inc. v. Interaitonal Union of Bricklayers and Allied Craftworkers Local 9, the Sixth Circuit affirmed the district court’s ruling in its entirety, while refusing to impose further sanctions. The Sixth Circuit found that the question at issue was primarily one of representation rather than of contractual interpretation, and thus that resolution of the dispute in a federal court was inappropriate.
The NLRB has exclusive jurisdiction over controversies concerning sections 7 or 8 of the NLRA, but federal courts have concurrent jurisdiction with the NLRB over contracts interpretation issues. However, where the matter is primarily one of representation instead of contractual interpretation, courts defer to the NLRB.
The nature of DiPonio’s bargaining obligations depends on whether the parties entered into the CBA pursuant to § 8(f) or § 9(a) of the NLRA. Section 9(a) requires employers to “bargain with a union that has been designated by a majority of the employees in a unit for the purposes of collective bargaining with the employer,” while section 8(f) “allows unions and employers in the construction industry to enter into CBA’s without requiring the union to establish that it has the support of a majority of the employees in the unit covered by the CBA.” In short, if the CBA is a § 8 contract, DiPonio has no duty to negotiate for a new CBA, but if it is a § 9(a) contract, it does.
In a 2006 decision, the Sixth Circuit found that a dispute will be treated as “primarily representational” (1) “where the NLRB has already exercised jurisdiction over a matter and is either considering it or has already decided the matter,” or (2) “where the issue is an ‘initial decision’ in the representation area.” Here, the question of whether the contract was entered into pursuant to § 8(f) or § 9(a) was already before the NLRB (the Union’s ULP Complaint). Thus, the matter was deemed primarily representational, and the Sixth Circuit handed the case over to the NLRB.
The Sixth Circuit upheld the Rule 11 sanctions that the district court imposed because DiPonio’s breach of contract claim was without merit and was filed in order to delay the NLRB proceedings.[JT and Christina Phillips]
Monday, August 20, 2012
As reported in Saturday's New York Times, 780 members of the International Association of Machinists ended their fifteen-week strike when, against the recommendation of union leaders, the workers voted to ratify a six-year contract that contained almost all of the concessions that Caterpillar demanded.
The contract that the Caterpillare offered included a six-year wage freeze for workers hired before May 2005, a move that Caterpillar justified by claiming that its senior workers were being paid above market levels. At the time Caterpillar made this pooposal, it was reporting record profits.
The workers were losing a war of attrition. 105 workers had alredy crossed the picket line and returned to work and no concessions were in sight. In addition to the pay freeze, the workers agreed to a pension freeze for the same group of senior workers and an increase in employee contributions for health care. They were able to get Caterpillar to increases the "ratification bonus" form $1000 to $3100. Caterpillar also agreed to a single 3% increase for workers hired after 2005 at the end of this year. Finally, workers won a concession on the reasignment of workers, regardless of seniority. Caterpillar wanted to be able to assign workers to new jobs indefinitely, regardless of seniority. Under the new agreement, they may do so for a maximum of 90 days. k
The senior workers subject to the pay freeze earn, on the average, $26/hour, which comes out to about $50,000/year gross, plus overtime. Caterpillar reported profits of $4.9 billion last year and expects earnings to be stronger still in 2012. Its chief executive, Douglas R. Oberhelman, increased by 60 percent in 2011 to $16.9 million. That means his raise was about $8000 per striking worker.
Saturday, August 18, 2012
Last week, a federal judge denied AMR Corporation's request to abandon collective bargaining agreements with its pilots' union. AMR Corp. is the parent company of American Airlines. AMR is undergoing bankruptcy and the motion was part of its reorganization efforts. You can read more here.
Monday, August 6, 2012
Sometimes, as this article froom Bloomberg Businessweek points out, it pays not to work. John Krenicki, a former executive of GE, will be paid $89,000 a month until 2022 to keep him from working for a competitor for three years. That doesn't mean,(as my misleading first sentence indicates), that he can't work for anyone, In fact, according to a WSJ article (that I won't link to because you hit a subscriber paywall), Mr. Krenicki is going to take a job as a partner at a private equity firm. As the Bloomberg article notes, the three year non-compete is three times as long as the average because Krenicki is, apparently, worth it.
Wednesday, June 20, 2012
I'm a little late with this post but I'm going to open up a political can of worms here on the blog and talk about pension reform. In California, two cities (including my hometown, San Diego) have voted to approve changes to their city's pension plans. The San Jose measure seems to make changes to plans for retired workers. I can understand how changes to plans for new employees might be legal, but I'm not sure how changes to existing plans and vested benefits can be considered legal. The contract law issues boggle the mind. Not surprisingly, the proposed changes to the San Jose plan are being legally challenged. It's going to get messy....
Monday, June 4, 2012
Council 31 of the American Federation of State, County and Municipal Employees, AFL-CIO (the Union) represents 40,000 employees in the state of Illinois. It agreed to certain cost-saving measures, including deferred wage increases, in order to help Illinois address significant budget pressures. When Illinois did not emerge from its financial woes, it instituted a wage freeze, repudiating the earlier deal.
The Union brought suit, citing inter alia the Contracts Clause, and seeking an injunction forcing the state to pay the wage increases as they came due. Illinois brought a motion to dismiss, which the District Court granted. In Council 31 v. Quinn, the Seventh Circuit affirmed.
The case is procedurally complex, especially since the parties proceeded with arbitration, in which the Union prevailed in part, and that ruling is subject to an on-going appeal in the state courts. Meanwhile, the 7th Circuit addressed only constitutional claims brought pursuant to the Contracts Cluase and the Equal Protection Clause against Illinois Governor Quinn and from the State's Department of Central Management Services Director Malcolm Weems, both in their offiical capacities.
Although the Union characterized its claims as seeking only injunctive and declaratory relief, the true aim was to get the state to make expenditures from its treasury. As such, not withstanding Ex parte Young, the Eleventh Amendment barred the Union's Contracts Clause claims against the defendants.
Even if there were no Eleventh Amendment bar to the suit, the Court also found that the Union could not state a claim under the Contracts Clause because it alleged only an ordinary breach of contract, which is insufficient to constitute an "impairment" of contractual relations for the purposes of the Contracts Clause. The reasons why this is so have to do with the state's defenses to the Union's claims in the arbitration proceedings and the state court appeals thereof. The basic argument is that appropriate legislative appropriations were a condition precedent to its duties to pay the wage increases. If that argument succeeds, there was no contractual impairment. If it fails, there is no need for a federal court injunction because the Union will have prevailed.
The Court dismissed the Union's Equal Protection claim because the challenged state rules withstand rational basis scrutiny.
Wednesday, April 25, 2012
Clickwrap Isn’t Just for Consumers… Employee's Pattern-or-Practice Claim Does Not Trump Class Action Waiver
Bretta Karp sued her employer, CIGNA Healthcare, in the U.S. District Court of Massachusetts, alleging systematic gender discrimination. She purported to bring the suit as a class action. CIGNA moved to compel arbitration and argued that a class action and class-wide arbitration was waived under the company’s Dispute Resolution Policy.
In 1997, when Karp began her job with CIGNA she signed an acknowledgment of receipt of the dispute resolution policy in the Employee Handbook. At that time, the policy did not mention class actions or arbitrations. In 2005, CIGNA sent a company-wide e-mail informing employees that the Handbook had been updated to reflect changes in the policy. The e-mail contained a link to the Handbook and instructed employees to complete an electronic receipt indicating that they had received the Handbook. The e-mail indicated that failure to fill out the receipt could impact the employee’s future employment with the company. After two follow up emails reminding Karp to acknowledge receipt of the policy changes, she clicked “yes” on the Employee Handbook acknowledgment. The acknowledgment mentioned mandatory arbitration but did not mention the class arbitration waiver. In fact, the Employee Handbook referenced the dispute resolution policy and stated that full details were contained on CIGNA’s website; on the website, the dispute resolution policy specifically waived class-wide arbitration.
The parties did not dispute that Karp knowingly agreed to arbitrate her claims of gender discrimination. They disagreed, however, about whether Karp was entitled to bring a class-based pattern-or-practice claim. Karp argued that she did not agree to the class arbitration waiver. In an interesting contortion, the court held that CIGNA did not agree to permit class arbitration and could not be compelled to proceed on a class-wide basis. Here’s the reasoning (some citations omitted; emphasis in original):
The Court can only compel class arbitration if there is a “contractual basis for concluding that [the parties] agreed to do so.” Stolt-Nielsen, 130 S. Ct. at 1775 (emphasis in original)… The Supreme Court has recently emphasized that “the ‘changes brought about by the shift from bilateral arbitration to class-action arbitration’ are ‘fundamental,’” and thus non- consensual, “manufactured” class arbitration “is inconsistent with the FAA.” AT&T Mobility, 131 S. Ct. at 1750 (quoting Stolt-Nielsen, 130 S. Ct. at 1776).
Class arbitration is thus permissible only if both parties agree. Put another way, a party cannot be compelled to arbitrate class claims unless something in the contract indicates, at least implicitly, that it agreed to permit class arbitration. See Stolt-Nielsen, 130 S. Ct. at 1776; Jock v. Sterling Jewelers Inc., 646 F.3d 113, 124 (2d Cir. 2011) (“Stolt-Nielsen does not foreclose the possibility that parties may reach an ‘implicit’—rather than ‘express’—agreement to authorize class-action arbitration.”).
Here, the Handbook is silent on the issue of class arbitration. However, it states: “[b]y accepting employment . . . you have agreed to arbitrate serious employment-related disagreements between you and the Company . . . using the Company’s Employment Dispute Arbitration Policy and Employment Dispute Arbitration Rules and Procedures.” The company policy and procedures unambiguously provide that “[n]o class-wide arbitrations are allowed under the CIGNA Companies’ Employment Dispute Arbitration Policy or the Rules and Procedures,” and that “[e]ach party seeking resolution of its, his or her claims pursuant to an agreement to arbitrate under these Rules and Procedures must proceed individually. There shall be no class or representative actions permitted.”
Plaintiff disputes whether, under the circumstances, she agreed to the bar on class arbitration, or agreed to waive her class arbitration rights. There is certainly some question whether defendant’s policies and procedures can be enforced against plaintiff simply because she agreed to the terms of the Handbook. But there is no doubt that defendant did not agree to permit class arbitration. Indeed, its policies and procedures state clearly that class arbitration is not permitted. Accordingly, defendant cannot be compelled to submit to class arbitration. See AT&T Mobility, 131 S. Ct. at 1750 (stating that class arbitration must be consensual).
The court did state in a footnote that Karp may not have been provided with sufficient notice of the waiver because the Handbook incorporated the policies which were posted on the company’s website. The court also held that, by agreeing to arbitration, Karp could not litigate her claims in court as a class action.
Karp argued that her pattern-or-practice claim could not be vindicated in a bilateral arbitration because (1) case precedent required it to be brought as a class action and (2) as a practical matter, discovery would be too limited in arbitration. Plus, she could not obtain injunctive relief. The court essentially said that the pattern-or-practice claim is “unusual” with a “peculiar genesis” and was only a method of proof, not a claim in itself. The court broke from precedent requiring a pattern-or-practice to be established in a class action and held that Karp's substantive rights could still be vindicated in bilateral arbitration.
Karp v. Cigna, Case 4:11-cv-10361-FDS (D. Mass. April 18, 2012) (Saylor, J).
[Meredith R. Miller]
Thursday, February 9, 2012
We have not gotten much use out of our "Labor Contracts" category on this blog, but we've got a big story to report today, about a union really is flexing its muscles. Today's New York Times, reports that the Israeli labor union, the Histadrut, which represents hundreds of thousands of public sector workers, has called a general strike.that started yesterday and has shut down everything from government offices and the stock exchange to hospitals and even the Ben-Gurion national airport.
Ahh, general strikes! Those were the days. The very words are like a madeleine conjuring up images of Rosa Luxemburg and Karl Liebknecht rousing the forces of the Social Democratic and Independent Social Democratic Parties in post-WW I Berlin (see announcement at left). Meanwhile, closer to home, Mitch Daniels has signed legislation making Indiana a "right-to-work" state.
According to the Times, the central issue in the dispute is the government's increasing use of contract workers, whose pay is considerably less than that of Histadrut members. However, as reported here in Ha'aretz, talks are expected to conclude as early today to reach a deal that will end the general strike. The government has apparently agreed to re-classify some of the contract workers as government employees, thus entitling them to higher salaries and benefits. However, that change in status will effect only a few thousand out of approximately 300,000 contract workers.
Monday, January 9, 2012
Continuing our series of posts on Professor Richard Craswell's first-year contracts course in song. Previous installments have included Professor Craswell takes on Frigaliment, Lumley, and Wood v. Lady Duff Gordon. Today, we present this little ditty about Alaska Packers v. Domenico, a case we have posted about previously here and here. Professor Craswell's summar is provided below:
In 1902, some inexperienced sailors (many of them Italian immigrants) signed a contract to work the gill nets in Pyramid Harbor, Alaska, for the Alaskan Packer's Association, a cartel made up of most of Alaska's canneries. The sailors' pay was to be determined partly by the size of their catch, at a rate of 2¢ per fish. When they arrived in Alaska, however, some of the sailors complained that the nets were inadequate and threatened to strike. They returned to work only when the cannery promised them higher wages -- a promise the cannery later refused to keep.
The Goetz & Scott article referred to in the song is Charles J. Goetz & Robert E. Scott, "Principles of Relational Contracts," 67 Va. L. Rev. 1089 (1981). For the history of this case in particular, and of the Alaska canning business generally, see Deborah L. Threedy, "A Fish Story: Alaska Packer's Association v Domenico," 2000 Utah L. Rev. 185 (2000). There is also a well-made video ("Sockeye and the Age of Sail -- The Story of the Alaska Packer's Association") that can be found here:
Thursday, December 15, 2011
In Jim Walter Resources Inc. v. United Mine Workers of America, plaintiff Jim Walter Resources (Jim Walter) alleged that the defendant Union had conducted a work stoppage in violation of the parties' collective bargaining agreement (the Agreement). The District Court had dismissed Jim Walter's claim, holding that the dispute was subject to arbitration under the terms of the Agreement. The Eleventh Circuit reversed and remanded the claim of back to the District Court for trial.
The Agreement permitted the Union to designate "memorial periods" for legitimate purposes not exceeding a total of ten days during the term of the Agreement. The Union did so on October 14, 2008 and again on October 28, 2008. The Union justified the memorial days based on the workers' desire to attend local hearings of the Department of Labor, Mine Safety and Health Administration. Jim Walter countered that the justification was pretextual, and that the memorial days constituted improper work stoppages as a protest in connection with disputes at one of the mines. Jim Walter sued and sought damages.
The Union argued that the Agreement provided a "settlement of disputes" mechanism designed to avoid resort to the courts. Jim Walter countered that the contract did not "contemplate or provide for . . . the arbitration of any claim or grievance asserted by the employer." Drawing on caselaw from the old 5th Circuit, which included the states now comprising the 11th Circuit and is therefore binding on the 11th Circuit, the Court adopted the rule that an employer is not bound to arbitrate a claim for damages flowing from an alleged breach of a collective bargaining agreement where “the contractual grievance machinery is wholly employee oriented." The Court noted similar rules adopted in the 1st, 3rd, 7th and 9th Circuits, while conceding that decisions from the 2nd, 3rd and 4th Circuits are arguably to the contrary. The District Court had relied on the 2nd Circuit's decision in ITT World Communications, Inc. v. Communications Workers of America, 422 F.2d 77 (2d Cir. 1970), but the Supreme Court subsequently called that decision into question in Rock Company v. International Brotherhood of Teamsters, U.S., 130 S. Ct. 2847, 2859, n. 8 (2010).
Here, the Court ruled that the grievance procedure at issue was "wholly employee oriented" and thus did not apply to Jim Walter's claim.
Wednesday, December 7, 2011
We have shown Sotheby’s the love before on this blog. Perhaps it was the financial difficulties attendant to Sotheby’s onerous SEC obligations that has led the corporation to try to save in other areas. Regardless of the cause, Sotheby’s and its unionized employees have been engaged in a protracted labor dispute. According to the New York Times, art handlers for Sothebys have been locked out since August.
Members of the union decided to up the pressure on the corporation recently by confronting a member of Sotheby’s board, Diana L. Taylor, a/k/a New York City Mayor Michael Bloomberg’s girlfriend. The result was not pretty. According to the New York Times, Ms. Taylor told Sotheby's president and chief executive that if acceded to any of the union's demands, "I will resign from the board."
Here’s the video.
Thursday, September 29, 2011
Today's New York Times reports that the United Automobile Workers (UAW) union has reached a four-year contract agreement with General Motors (GM). This is shockingly good news in a time of general economic contraction when much is being blamed on the power of unions and their long-term contracts.
GM (whose corporate headquarters is pictured) is willing to put $215 million into increased labor costs in the next three years, but that will represent only a 1 percent increase in its labor costs over that period, according to the Times. The Times also reports that the contract calls for the creation of 6,400 new jobs, the transfer of some work from Mexico to the United States and an increase in entry-level pay.
The deal also includes incentives for workers to accept early retirement. GM expects ten percent of its skilled-trade employees to take the $75,000 being offered and estimates that it will save itself $30 million if they do.
One onion in the ointment is that the company plans to offset much of the costs associated with new bonuses and wage hikes by eliminating a program that provided free legal services for employees. An additional wrinkle, at some plans, the Times reports, fewer than 40% of those eligible bothered to vote.
Apparently the UAW is also close to a deal with Ford.
Tuesday, September 20, 2011
The WSJ reports an unusual situation created by a non-compete agreement. Johnson & Johnson is apparently preventing a former senior executive, Michael Mahoney, from joining its rival, Boston Scientific, Corp., as its chief executive. Because of a non-compete that Mahoney signed with Johnson & Johnson, Boston Scientific has to wait an entire year before Mahoney can become CEO. During his waiting period, Mahoney will be president but can't work with those businesses that compete with Johnson & Johnson. As the article notes, this situation is markedly different from the one faced by Mark Hurd when he left Hewlett Packard for Oracle. The issue with Hurd was framed as one involving trade secrets, because non-competes are typically unenforceable as such in California. Johnson & Johnson is based in New Jersey, and while the article doesn't expressly state the governing law in the contract between J & J and Mahoney, it was probably New Jersey (or a state other than California....)
Wednesday, August 31, 2011
Judge Margaret Chan (New York County Supreme Court) recently invalidated a non-compete in an employment contract as unduly restrictive. [Ed. side note: Is "Eyes of the World," a Grateful Dead song title, really a good name for a personal grooming business?] Anyway, the facts:
Defendant Boci ("Boci") was an employee of plaintiffs Eyes of the World, Inc. D/B/A Shobha and Shobha, Inc. (collectively "Shobha") performing hair removal services at plaintiffs' business locations from 2006 to 2009. On February 15, 2009, defendant Boci voluntarily resigned her position with Shobha and began working for NYC Waxing, LLC. Plaintiffs settled their claim against NYC Waxing, LLC, which is no longer a party to this action.
Boci's employment agreement with Shobha, dated March 24, 2006, stated in part:
For a period of one (1) year following termination of your employment for any reason, you agree not to provide Salon Services in New York City to any client of Eyes of the World, Inc. or Shobha, Inc. for whom you provided services during the last twelve (12) months of your employment with Eyes of the World, Inc.
Plaintiffs seek to enforce this restrictive covenant in the employment agreement and seek damages. Plaintiffs allege that Boci performed services on former Shobha clients at her new place of employment. In fact, plaintiffs assert Boci performed services for eighty six (86) former plaintiffs' clients at her new employer within one (1) year of her termination.
The court invalidated the restrictive covenant in its entirety. The court waxed poetic:
"In order to be enforceable, an anticompetitive covenant ancillary to an employment agreement must be reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the public, and not unreasonably burdensome to the employee" (Crown IT Servs., Inc. v. Koval-Olsen, 11 AD3d 263 [App Div, 1st Dept 2004] citing BDO Seidman v. Hirshberg, 93 NY2d 382 [Ct App 1999]). Restrictive covenants are generally frowned upon by courts due to public policy considerations that seek to prevent restrictions on a person's livelihood (see Kanan, Corbin, Schupak & Aronow, Inc. v. FD International, Ltd., 8 Misc3d 412 [Sup Ct, NY Cty 2005] citing Purchasing Associates, Inc. v. Weitz, 13 NY2d 267, 271 [Ct App, 1963]). It has been held that "[s]ince there are 'powerful considerations of public policy which militate against sanctioning the loss of a [person's] livelihood' restrictive covenants which tend to prevent an employee from pursuing a similar vocation after termination of employment are disfavored by the law" (Columbia Ribbon & Carbon Mfg. Co. v. A-1-A Corp., 42 NY2d 496, 499 [Ct App 1977]). Consequently these covenants, "will be enforced only if reasonably limited temporally and geographically and then only to the extent necessary to protect the employer from unfair competition which stems from the employee's use or disclosure of trade secrets or confidential customer lists", or if the employee's services are unique or extraordinary (id. at 499; Reed, Roberts Assoc. v. Strauman, 40 NY2d 303, 307-308 [Ct App 1976]).
Plaintiffs attempted to establish that the services provided by Boci are unique and extraordinary, however, there is nothing to support such a contention. Boci did not have access to trade secrets, client lists, or proprietary information (see Columbia Ribbon & Carbon Mfg. Co., Inc. v. A-1-A Corp., 42 NY2d 496 [Ct App 1977]; Reed, Roberts Assoc. v. Strauman, 40 NY2d 303; Maltby v. Harlow Meyer Savage, Inc., 223 AD2d 516 [App Div, 1st Dept 1996]; Michael G. Kessler & Associates, Ltd. v. White, 28 AD3d 724 [App Div, 2nd Dept 2006]).
The covenant at bar is unreasonable in its limitation, burdensome to the employee, and not necessary to protect the employer's legitimate interests. The Appellate Division First Department in Investor Access Corp. v. Doremus & Co., Inc., 186 AD2d 401, did not enforce a restrictive covenant of one (1) year that prevented the employee, a public relations account executive, from soliciting or servicing any current or former client of the plaintiff employer. The court held that the restrictive covenant did not protect the legitimate interests of the employer because the defendant did not provide unique or extraordinary services to his employer, and had not misappropriated any trade secrets or confidential information. The court went on to find that clients' decisions to follow the defendant were based upon the clients' needs and the employee's outstanding ability in the field (id. at 404).
Similarly here, when considering all the prongs necessary to enforce such an agreement, the employers' legitimate interests do not mandate such a restrictive covenant (see BDO Seidman v. Hirshberg, 93 NY2d 382 [restrictive covenant will not be enforced in the absence of circumstances evincing a need for the protection of the former employer]). As discussed above, despite Boci's training, her job and skills used for that job are not legally considered unique or extraordinary. Likewise to the situation in Investor Access Corp. v. Doremus & Co., Inc., it appears that clients opted to follow Boci based on their needs and her ability. Shobha's restrictive covenant is overly broad and unenforceable.
Eyes of the World v. Boci, CV 46549/09, NYLJ 1202512541125, at *1 (Sup., NY, Decided August 19, 2011).
[Meredith R. Miller]