DON'T BE TEMPTED BY SOCIAL NETWORKING SITES

Leaving your job in six months to start a new business? Want to plan ahead, right?
YES - but don't want to publish ahead.

Don't create a new profile on Squiddo

Don't change your job on LinkedIn

Don't update your status on Facebook to "Excited about my new job!"

Don't put it in your Christmas letter

Don't tell your friend at New Years party

If you are trying to figure out old work / new work/ employment contract issues - please don't blow it all by a slip of the tongue and/or web update. Lastly, don't "Friend" your non-compete lawyer or link up on Linked in. Folks will wonder why you are now linked to an attorney that specializes in defending breach of contract cases!

Plan ahead, and try to keep it a secret!

WHAT TO DO WHEN ASKED TO SIGN A NON COMPETE

I know that folks are changing jobs. A New Job means, maybe, you have been asked to sign a non-compete.

If this is your first experience with this beast - beware. This is how we recommend you approach it:

1. Ask if you can take it home to look over it before you sign.
2. Have an attorney review the agreement (usually can have it reviewed for less than $200)
3. Ask questions - "why this State?" "Why Arbitration?" "Why 50 miles and 4 years?" Chances are, the employer did not write this agreement, and maybe if you ask questions about the details, he or she will find the details are not needed.
4. Suggest changes: Don't want to agree to litigate in South Dakota when you live in Maryland? Suggest a change or modification.

YES- whether the agreement can be enforced is often a legal issue as to whether it is unreasonable, but that takes months of litigation to resolve.

If you can be involved in drafting the agreement, it is much more likely the terms are something you can live with.

And sadly yes, In Virginia, if you refuse to sign, they can refuse to hire you. I know it doesn't seem fair, but that's the law!

MORE COMPANIES SUING EX-EMPLOYEES

This report comes from an online magazine called, "Workforce Management," a publication geared toward management concerns. The jest of the story is that employers are being more aggressive about suing former employees regarding noncompete agreements. Read the article on lawsuits over noncompetes for yourself.

My Take: Employees need to be ready to not only defend themselves over attempts to enforce unfair and illegal noncompete agreements....they should get on the offensive and, where appropriate, consider counter claims against their former employer for interfering with their ability to earn a living and support their family.

EMPLOYEE COUNTERSUITS

Many of our clients ask us to represent their interests in defending a breach of contract/noncompete agreement filed by their former employer. Our first step is to learn everything we can about the client's former employer and our client's job responsibilities with his former and current employer. We also talk about getting offensive!

Former employees should vigorously defend themselves against unfair and unenforceable noncompete and nonsolicitation agreements but they may also pursue their own claim against their former employer. How does this situation arise? Lets say the former employer sends a letter to the ex-employee's current employer and warns them about the noncompete agreement and threatens to sue the ex-employee and the her/his new employer for breaching the noncompete. The typical result is the former employee gets terminated by the new employer.

What remedy is available to the employee? How about a suit for:

1. Intentional Interference With Prospective Contract; or

2. Intentional Interference With Prospective Business or Economic Advantage.

Both of these claims are recognized under Virginia law. Consult with your attorney to determine whether either of these remedies are available to you.

NONCOMPETES CAN REALLY TIE YOU DOWN

This is the title of a great article on msnbc.com. The article is written by Eve Tahmincioglu.

The conclusion: Even though you may be desperate to keep your job or find a new one, think long and hard before signing a noncompete agreement.

I can't write it any better than has been done by Ms. Tahmincioglu.

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STARTING YOUR OWN BUSINESS DURING A RECESSION (and beating your Non-compete!)

Unless you take the Thoreau approach, you have probably noticed the United States economy is either in or headed toward a recession.

Amazingly, some folks say this is a great time to start your own business. Now while I fear many will do this because they are being laid off, there are important business decisions to be made, and many legal issues.

QUESTION:
(1) If I am fired, is the non-compete in my contract, still enforceable?
(2) If I take a severance and they offer a non-compete, do I have to sign it?
(3) How can I make sure the employer won't sue if I start my own business?

An employment contract, even a non-compete, is simply a contract. It is binding (usually) if you agreed to it. So we must analyze the above questions in light of Virginia Contract law.

(1) If you are fired, is the non-compete enforceable?
Look at the language in the contract. Many state if employee leaves voluntarily, he agrees to a non-compete. GET YOUR CONTRACT OUT - send it to our office, and we explain what the terms mean under Virginia law.

(2) If you take a severance package and they offer a non compete, do you have to sign? It depends. If the bargain for exchange is - money, in exchange for signing a contract, you may not get the money if you refuse.

(3) How can you make sure your employer won't sue? The only way to do that is to draft and agree to a second contract. You can buy out your non-compete, but unless there is a written agreement that it is no longer valid, your employer has up to 5 years to sue under Virginia law.

As my Mom always said - an ounce of precaution is worth a pound of cure.

BROKER MIGRATION AND NONCOMPETES: CHAPTER II

Yesterday we talked about broker migration and the application of the Protocol for Broker Recruiting. Today, I will address how the courts have looked at this issue when faced with litigation between an ex-employer/brokerage company and the ex-employee/broker.

Litigation associated with broker migration usually arises in one of two situations:
(1) A signatory firm sues a former employee who joined another signatory firm.
(2) A signatory firm sues a former employee who joined a non-signatory firm.

A court's application of the Protocol in the first category should be anticipated because that situation falls within the Protocol's scope. In these cases, if the broker followed the Protocol, there should be no liability.

In the second situation, one would anticipate the Protocol would be irrelevant since both firm are not parties to the agreement. However, some courts have relied on the Protocol in cases where only the complaining firm is a signatory. For example, in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Brennan(Ohio Feb. 23, 2007) , three former employees of Merrill Lynch resigned from that firm to join Bear Stearns & Co. Merrill Lynch is a signatory to the Protocol. Bear Stearns is not. Merrill Lynch sued the former employees, claiming that they breached various employment agreements by taking client contact information with them to Bear Stearns and then soliciting the clients they serviced while at Merrill Lynch.

The U.S. District Court for the District of Ohio ruled against Merrill Lynch. While the Court acknowledged that it previously found arguments of irreparable harm persuasive, the emergence of the Protocol in the securities industry convinced the court that "such arguments no longer merit such weight." The court did not consider it important that Bear Stearns had not signed the Protocol, but it did find it significant that Merrill Lynch had signed the Protocol. The Court held that by doing so, Merrill Lynch had effectively conceded that the transfer of client lists to a new firm, whether or not that new firm had signed the Protocol, did not give rise to irreparable harm.

My take: Courts will be faced with increasing litigation between departing brokers and their previous employers...and I'm pulling for the brokers every step of the way!

BROKER MIGRATION AND NONCOMPETES

Stock brokerage companies have long sought to impose restrictions on their financial advisors to prevent them from resigning to join competing firms, taking client lists, and then soliciting the clients they had serviced while at the prior firm. Typically, the firms did this by requiring their employees to sign restrictive covenant agreements containing confidentiality and non-solicitation provisions.

With the downturn in the U.S. economy, it is a a sure bet that legal disputes will increase between departing brokers/financial advisors and their previous employer. This blog will address these issue in two parts. First, I will discuss today the "Protocol" agreement. Tomorrow, I will discuss the effect of the Protocol agreement in court litigation.

The major players, Citigroup Global Markets, Inc. (Smith Barney), Merrill Lynch, Pierce Fenner & Smith Inc. and UBS Financial Services, Inc. entered into the Protocol for Broker Recruiting ("Protocol") in 2004. Under the Protocol, when a financial advisor leaves one signatory firm to join another signatory firm, the new employer and the departing broker will have no liability to the former firm for transferring certain client information to the new firm, or for soliciting certain clients that the departing broker serviced at the prior firm, if the departing broker follows the terms of the Protocol. Over the past few years, dozens of other financial services firms have joined the Protocol.

The Protocol permits departing brokers to take with them to their new firm only certain information: specifically, the "client name, address, phone number, email address, and account title of the clients that they serviced while at the firm." The Protocol further provides that departing brokers must submit a written resignation to local branch management and include a copy of the client information they are taking with them, as well as the account numbers for the clients serviced by the departing broker. Under the express terms of the Protocol, brokers who comply with the Protocol are then "free to solicit customers that they serviced while at their former firms, but only after they have joined their new firms."

EVEN BIG GUNS HAVE EMPLOYMENT CONTRACTS

In yesterday's online Washington Post was an interesting article about Apple 's iPod Chief who recently left Apple. The article by Robert Andrews, published on macoNews.net discusses Tony Fadell, SVP of Apple's iPod division departure from Apple.

"He is leaving for personal reasons and will be replaced this month by IBM microprocessor technology development VP Mark Papermaster, a source told WSJ.com. In response, IBM is now suing Papermaster under his non-compete contract clause, to prevent him from divulging secrets about its microchips, News.com says."

Wow - I am guessing the cost to defend that non-compete could be pretty hefty. Hopefully, Apple will help pay the bill!