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Friday, August 17, 2018

Employer Weapons to Protect Trade Secrets

AHS Staffing, LLC (AHS), located in Texas, matches nurses and other healthcare professionals on temporary and permanent bases with hospitals, healthcare groups, occupational healthcare clinics, individual practitioners, psychiatric facilities, government institutions, and managed care entities through contract management groups. The healthcare staffing industry in their Texas market is highly competitive.

In order to ensure its competitive advantage, AHS compiled confidential and proprietary information including: customers, clients, healthcare providers, contacts, prospects, compensation     plans, employee benefits, confidential  market  studies, pricing  studies,  business plans and strategies, non-public financial statements, methods of bidding, bids to customers, profit margins, unique software programs, databases developed by AHS, manuals, candidate performance, compensation and skill sets; all which it classified as “Confidential Information.”

AHS claimed in its Texas-filed federal lawsuit that its former employees maliciously changed the information for Candidates in the Database in order to hurt AHS’s business, then left AHS with a sizable amount of Confidential Information to work for its direct competitor.  AHS then contended that they had been using its trade secrets and confidential business information to compete with AHS in breach of their contractual and common law duties to AHS.

On July 9, 2018, AHS filed suit against the departing employees asserting claims for: (1) violation of the federal computer fraud and abuse act; (2) harmful access by computer; (3) breach of contract; (4) misappropriation of trade secrets under the Texas Uniform Trade Secrets Act; (5) tortious interference; (6) breach of fiduciary duty; and (7) civil conspiracy. The Court held a hearing on AHS’s motions for preliminary injunction and ruled in favor of AHS’s request and granted the injunction on August 15, 2018.

Common Sense Counsel: The Computer Fraud and Abuse Act (CFAA), which provides a private right of action where a party knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value. The Defend Trade Secrets Act (DTSA), which provides a federal cause of action to the owner of a trade secret that is misappropriated and is related to a product or service used in (or intended for use in) interstate commerce, are significant weapons to combat employee trade secret theft. For an employer to use these weapons, be prepared to quickly take these steps now: 1) update all non-disclosure agreements, confidentiality agreements, employment agreements, consulting agreements, and independent contractor agreements to include new DTSA non-disclosure provisions to include the required notice signed by all employees; 2) documents containing trade secrets should be labeled as confidential, their distribution should be limited, they should be maintained in secure areas, and individuals who are privy to such secrets should be trained on the nature of that information and how to safeguard it; 3) access to computer files containing such information should be restricted and tracked; 4) those with access should be trained on the files’ confidentiality; and 5) because trade secrets litigation needs to move quickly and often involves violations of non-competition or non-solicitation agreements, be prepared to bring  such claims in tandem. Having legally sound documents gives the wronged employer a double-edged sword.

Tommy Eden is a partner working out of the Constangy, Brooks, Smith & Prophete, LLP offices in Opelika, AL and can be contacted at teden@constangy.com or 334-246-2901. Click here to access the full case.

Saturday, August 11, 2018

Arbitration Agreement Trims Nearly 3000 Wage Claims Against Chipotle


Arbitration Agreement Trims Nearly 3000 Wage Claims Against Chipotle
By Tommy Eden

As background, the United States Supreme Court’s recent ruling in Epic Systems Corporation v. Lewis resolved the question of whether employees and employers should be allowed to agree that any disputes between them will be resolved through one-on-one arbitration.” Epic Sys., 138 S. Ct. 1612, 1619 (May 21, 2018). The Court concluded that they should be permitted to do so and rejected the position that mandatory individualized arbitrations violate the National Labor Relations Act (“NLRA”) and are therefore unenforceable under the Federal Arbitration Act (“FAA”).”

In one of the very first lower court cases to be decided under this new standard, almost Chipotle 3000 workers sought to opt into a Fair Labor Standards Act (FLSA) collective action. The mandatory employee arbitration agreement signed by all Chipotle Mexican Grill employees prohibited class and collective action claims. Chipotle contended that the Arbitration Agreement serves a commercial purpose because it provides predictability in handling litigation matters and reduces dispute resolution costs. These benefits do not come at the expense of the employees, Chipotle maintained, because the Agreement provides that employees cannot be required to pay any cost of the arbitration that they would not be required to pay if the matter was heard in court. Further, Chipotle maintained that its decision to permit only individual claims is commercially reasonable because it allows all parties to realize the benefits of bilateral arbitration’s informality and many businesses have selected this route and the Supreme Court has ruled it lawful.

On August 6, a Colorado federal judge trimmed 2,814 opt-in Chipotle Mexican Grill workers from a collective action accusing the company of not paying hourly employees for off-the-clock work, pre and post-shift work they were required to perform, since they had signed the arbitration agreements that barred them from pursuing claims collectively.

Text Box: 3Common Sense Counsel: The Epic Systems case is truly a gift to employers who wish to engage in employment claims related risk reduction. Such a program increases the prospects that concerns will be resolved before they ripen into actual EEOC Charges, DOL Investigations, Lawsuits - you name your worst employment nightmare. In light of the emerging Supreme Court case law favoring alternatives to court litigation, consider options for designing an employee dispute resolution program and the potential business advantages - not the least of which is not having to spend a sunny day locked in a windowless room with a plaintiff’s attorney with an attitude. Plaintiff’s attorneys hate these programs for obvious reasons. The best programs have the following components: 1) an internal complaint process with a promise of no retaliation; 2) a toll free hot line for multiple location employers; 3) handbook provisions giving employees at least two channels to make their complaint and fair investigation process; 4) well drafted and broadly worded arbitration provision, covering class and collective claims, that will pass court scrutiny; 5) training for all employees on the process; 6) private arbitration panel of former local judges, or AAA Arbitration, and mostly importantly; 7) a Human Resource professional with a listening ear and risk reduction mindset.

Tommy Eden is a partner working out of the Constangy, Brooks, Smith & Prophete, LLP offices in Opelika, AL and can be contacted at teden@constangy.com or 334-246-2901. Blog at www.alabamaatwork.com with link to case.



Friday, August 3, 2018

Citrus Workers Lose Independent Contractor Case


Between 2007 and 2009, a group of Mexican nationals were hired by Ruiz Harvesting to work as manual laborers picking fruit at Consolidated Citrus’ Florida groves. The workers received clearance to work in the United States through the federal government’s H-2A visa program, which allows employers to hire foreign agricultural workers on a temporary basis. Under the program, employers must submit to the Department of Labor (DOL) an application commonly referred to as a “clearance order” detailing the terms and conditions of their prospective worker’s employment. By federal regulation, the clearance order becomes the employee’s work contract by default if the employer does not draw up a separate contract for them.
Although Consolidated Citrus hired some of its laborers directly, it also engaged Ruiz Harvesting as an independent contractor who recruited the workers, submitted clearance orders to the DOL on their behalves, and ultimately hired them to work in the Consolidated Citrus groves. 


As for Consolidated Citrus, it had no role in deciding how much Ruiz Harvesting’s workers would be paid. Rather, Consolidated Citrus simply paid Ruiz Harvesting for its total fruit production, then Ruiz Harvesting determined the payments to its workers. But, because Consolidated Citrus required all workers to be hired through the H-2A program, Ruiz Harvesting had to comply with a number of federal regulations which governed the minimum pay its workers would receive. Ruiz Harvesting chose to pay its workers on a “piece-rate” basis, meaning a fixed rate for every container of fruit they picked; although federal regulations still required each worker to receive a minimum amount each pay period. So, if a worker’s piece-rate earnings fell below the federally-mandated minimum, Ruiz Harvesting still had to pay that minimum amount.

In 2010, the workers brought suit claiming violations of the Fair Labor Standards Act (FLSA) and breach of contract. The workers asserted that Ruiz forced them to pay the company illegal kickbacks that impermissibly reduced the workers’ take-home pay. Specifically, the workers claimed that whenever a worker’s piece-rate earnings fell below the federal minimum, Ruiz Harvesting paid the worker in full but then demanded repayment of the portion it had supplemented. To extract the cash kickback payments, the workers claimed in their lawsuit, Ruiz Harvesting officials often threatened the workers with deportation.

Based on the theory that Consolidated Citrus and Ruiz Harvesting were “joint employers” under the law, the workers also named Consolidated Citrus as a defendant in their lawsuit, contending that the company was equally liable for Ruiz Harvesting’s kickback scheme. Plaintiffs eventually settled with both Ruiz Harvesting and Ruiz and then they proceeded to trial against only Consolidated Citrus. The district court issued findings of fact and conclusions of law following a six-day bench trial finding that Consolidated Citrus was a joint employer for purposes of both the breach-of-contract and FLSA claims.

On Thursday, the 11th Circuit Court of Appeals, while still holding that Consolidated Citrus was a joint employer under the FLSA “economic dependencies test,” reversed the holding that Consolidated Citrus was a joint employer under the breach-of-contact action because it lacked the “right of control” over the workers.

Common Sense Counsel: Next time you are trying to decide how to properly classify someone, as an employee or an independent contractor, understand that the right to control the means and manner of performance is a key factor-with about 20 other factors. Complete the Alabama DOL 5-part checklist at www.alabamaatwork.com to help you decide.  Also, get an FLSA confidential audit to see if your pay practices are legal.

Click Here to access the AL DOL 5-part Checklist.

Tommy Eden is a partner working out of the Constangy, Brooks, Smith & Prophete, LLP offices in Opelika, AL and can be contacted at teden@constangy.com or 334-246-2901.