LITIGATION OVER NONCOMPETES IS ON THE RISE

I just ran across an article in a Dun & Bradstreet publication entitled, All Business. The article speaks to the increase in lawsuits over the legality and enforceability of noncompete agreements.

As you would expect, the article is written mostly from the employer's viewpoint. However, our experience is that courts in Virginia are becoming less and less willing to enforce noncompete and nonsolicitation agreements which unfairly prohibit an individual from earning a living.

GET YOUR FREE FORM NONCOMPETE AGREEMENT

That's right...its free! Can't complain about that can you?

I hope all of our clients' employers get their noncompete and nonsolicitation agreements from web sites which offer form agreements at no cost. Sure would make our job easier. Every state has different laws which govern the enforceability and legality of noncompete and nonsolicitation agreements.

I don't know where to begin to describe how many different ways Virginia law would find these form agreements to be unenforceable.

MASSACHUSETTS CONSIDERS BANNING NONCOMPETES

I've said here many times....noncompete employment contracts are bad the American economy and stifle innovation. Kudos to the Commonwealth of Massachusetts whose legislature is considering passing a law which would eliminate noncompete provisions in employee contracts.

My Question: When will the Virginia General Assembly see the light?

NORFOLK VIRGINIA COURT RULES IN FAVOR OF EMPLOYEE

This noncompete decision comes to us fresh off the presses, WorkFlow Solutions v. Mike Lewis, decided by the Norfolk Circuit Court on December 12, 2008.

In short, the court ruled that before an employee can be held to the requirements of a noncompete, the employee MUST HAVE signed and specific noncompete agreement. The fact the employee had signed a previous noncompete agreement, which had expired, and even though he had agreed to sign a similar agreement but had yet to do so, did not automatically allow the employer to sue the employee for breach of the noncompete.

Noncompetes are bad for business and bad for our economy. Read this Virginia court decision on noncompetes here.

EVEN IF YOU JUST NEED TO GET IT OFF YOUR CHEST

I know this happens frequently because friends and family have asked me this question.

"I am leaving my job and feel I should let all the employees know what really happened."

OK - I understand the psycological desire and emotional need to "get things off yoru chest," or "set the record straight."

While you think a kind goodbye email to old colleagues is harmless, it may not be. What if you allege wrongdoing or unujst treatment in the email? What if you infer someone has been acting improperly thus provoking your exit.

THESE STATEMENT COULD BE DEFAMATION. If they appear to be statements of facts (and not just opinion) you could find yourself defending a defemantion case in Virginia Courts.

Will you win? Maybe, but who wants to spend time and money on attorneys fees to find out. Please, remember, anything you say or write, could come back to haunt you!

WATCH OUT FOR CONTRACTUAL RESTRICTIONS WITH THAT NEW JOB

Many employers are cutting their work force in response to the realities of the U.S. economy. Smart employees, aware of the economic problems facing their employers, are looking for better jobs in more secure industries and segments of the economy. In both situations, the employee looking for that new job better determine if she/he signed an enforceable noncompete or nonsolicitation agreement with the employer they are leaving and whether the "new employer" will require a similar contractual restriction.

This point was well illustrated in the September 24 Massachusetts federal court decision of Bio-Imaging Technologies, Inc. v. Thomas Marchant. The court ruled in favor of Bio-Imaging, preventing Marchant from violating the terms of his "restrictive covenants" by being employed with competitor M2S, Inc.Bio-Imaging provides laboratory services for clinical trials, helping companies collect data on the safety and effectiveness of their drugs and medical devices before seeking regulatory approval.

Read the Nashua Telegraph newspaper's analysis of this important court decision.

ORAL CHANGES TO A WRITTEN CONTRACT

TRUE OR FALSE

You have a written employment agreement that says you will be paid $75,000 a year, in monthly payments. In December, your boss says, "sorry, apparently we have been in a recession since last December, I can only pay you $60,000 a year starting now."

You don't respond - don't agree, and his proposal is not put in writing.

TRUE OR FALSE - the Boss can unilaterally change your contract?
TRUE OR FALSE - if you agree, you can orally modify a written contract?
TRUE OR FALSE - if you disagree, the original contract still stands.

a. FALSE. In order to change a contract, you must have a meeting of the minds. One party cannot change a contract unilaterally, that is essentially a breach.

b. MAYBE. Virginia law has a list of contracts that cannot be modified orally. Check out Va Code section 11-2. For example, contract to sell real estate cannot be changed upon oral agreement, must be in writing. So while you may be able to agree to a change orally, you may not... "When an oral modification is made to a contract, the new contract departs from the terms of the original contract only in terms of the contract that are different from the first. Both the written and the oral contract must be examined to determine the bargain reached."

c. TRUE. If you don't agree to a modification, the contract still stands...

Please make sure you are very clear about your employment contracts. Why bother writing and signing one if the changes aren't taken seriously?

COURT RULES AGAINST INSURANCE EXEC IN NONSOLICITATION DISPUTE

A lawsuit involving a top Hawaii executive who resigned from an insurance company and took former clients and employees with him to a rival firm has business people talking about loyalty, relationships and professional obligations.

The case is Marsh USA Inc. and Marsh & McLennan Companies v. Chad W. Karasaki. Chad Karasaki, left Marsh's Honolulu office in mid-March to become CEO of competitor, Aon Risk Service in Honolulu. The following month, Aon announced it hired four new employees, all vice presidents and senior vice presidents from Marsh's Hawaii office. Marsh sued Karasaki, a 22-year employee, for violating a nonsolicitation agreement.

Nonsolicitation agreements can prevent departing employees from taking fellow workers to a new job or is sometimes used as a form of noncompete and prohibit the departing employee from "soliciting" his previous employers' clients and customers.

In this case, Marsh was awarded a preliminary injunction against Karasaki that barred him from either soliciting or working on behalf of Marsh clients or potential Marsh clients, and from recruiting Marsh employees.

My Take: Negotiate these agreements on the "front-end" before you take that new job!

PHYSICIAN NONCOMPETE NOT ENFORCED

This report comes to us from Iowa, the Iowa Court of Appeals to be exact. The decision in The University of Iowa v. Dr. Thomas Warren, does have some relevance to Virginia as the court applied the same rationale typically utilized by Virginia courts in determining the validity of non-compete agreements.

Dr. Thomas Warren was employed as an assistant professor with the College of Medicine at the University of Iowa. He was primarily engaged in research, but saw patients one day each week at Cancer Care of Iowa City. He signed a non-compete agreement which prohibited him from practicing medicine within two years or fifty miles after he left the University.

Dr. Warren came to realize he was not going to achieve tenure and resigned his position with the University. He then became employed with Iowa Blood and Cancer Care, P.L.C., in Cedar Rapids. The University filed an action against Dr. Warren seeking an injunction to prohibit him from practicing medicine in violation of the non-compete agreement. The trial court denied the University's request for an injunction and the appellate court agreed.

The Iowa Court of Appeals ruled the University has not met its burden to show the restriction was reasonably necessary for the protection of the University's business. Dr. Warren had limited contact with patients while at the University and did not attempt to solicit the patients of Cancer Care. Further, the court held the University had not shown it suffered or will suffer a loss of business due to the practice of medicine by Dr. Warren. Finally, the appellate court found that public policy prevented the enforcement of the noncompete agreement.

Kudos for Iowa...and, for the most part, the same principles of law apply in Virginia!