Where is That Non-Compete Agreement that the Former Vice President Signed?

In a surprising number of cases, we’ve come across a situation where an employment agreement with original signatures, or some other important document, has gone missing. While a copy will sometimes suffice, a recent New York case highlights the importance of having an effective system for maintaining critical employment-related documents.

In Dreyfuss v. eTelecare Global Solutions-US Inc., 08-5903-CV, plaintiff James Dreyfuss filed suit in federal court against his prior employer, eTelecare Global Solutions-US Inc. (“eTelecare”), alleging that it owed him unpaid commissions. eTelecare filed a motion to compel arbitration on the basis of an arbitration agreement the plaintiff signed as a condition of his employment. But, all eTelecare had been able to find and produce for the Court was an agreement containing two of the three or more pages of the original agreement. The first page contained a broad arbitration clause which expressly covered any claims relating to the plaintiff’s employment or the termination of his employment. The agreement also stated that “[e]xcept as otherwise provided,” the parties would not initiate any lawsuit or administrative claim related to any claims covered by the agreement. However, because eTelecare couldn’t produce the entire second page of the agreement, the trial court held that it did not demonstrate that the parties had an agreement to arbitrate, and denied its motion to compel arbitration.

On appeal, eTelecare argued that the first and last pages of the arbitration agreement, by themselves, demonstrated that the parties agreed that the plaintiff’s claims for unpaid commissions should be submitted to arbitration, and that the missing pages contained only non-essential terms to that agreement. The Second Circuit disagreed, reasoning that eTelecare without being able to produce the entire agreement, eTelecare could not show that it and its employee had a meeting of the minds concerning arbitration. Therefore, it ruled, there was no binding arbitration agreement, and eTelecare’s motion to compel arbitration was properly denied.

The Second Circuit’s decision in Dreyfuss is contained in a Summary Order which does not constitute binding precedent. Nonetheless, the case illustrates what can go wrong when an employer cannot produce the original, or at least a complete copy, of an employment agreement. It serves as an important reminder that employers and employees must ensure that copies of important agreements and other documents are safely secured. HR should make sure that it receives complete originals of employment agreements and other necessary employment documents upon commencement of employment. Those documents should then be maintained securely, under lock and key in a secure file cabinet to which only a few designated individuals have access.

written by Greg and David

Labor Secretary Solis: DOL is Back in the Enforcement Business

From the time she was confirmed as Secretary of Labor, Hilda Solis has stressed that the Department of Labor (“DOL”) will reverse the trend set by the previous administration and focus on enforcing workplace laws and regulations. By the end of March 2009, less than two months after Solis was confirmed as Secretary, she announced that the DOL’s Wage and Hour Division (“WHD”) was in the process of hiring 150 new investigators to its field offices. In addition, she announced, the DOL would be hiring 100 investigators to ensure that contractors awarded funds under the American Recovery and Reinvestment Act would be in compliance with applicable workplace laws.

In May, Secretary Solis publicized her budget request for FY 2010, allocating $1.7 billion for worker protection programs, a 10 percent increase over the prior year’s budget. Under this budget, the DOL plans to hire an additional 670 investigators, including an additional 160 investigators for the Occupational Health and Safety Administration (“OSHA”) and 200 new WHD investigators. Reiterating this commitment in recent remarks made to the AFL-CIO Constitutional Convention, Secretary Solis promised that the DOL “is once again back in the enforcement business.” This pronouncement signals enforcement across virtually all of DOL’s divisions, including the Office of Federal Contract Compliance Programs, Office of Workers’ Compensation Programs, Office of Labor-Management Standards, Pension Benefit Guaranty Corporation, Employment Standards Administration, Women’s Bureau, OSHA, and WHD.

What does this mean? Businesses should expect more (and more comprehensive) audits, involving all aspects of the workplace. While it used to be a safe assumption for any business that the chances of it being hit with a DOL were remote, that is no longer a safe assumption. Many businesses will be identified for audit. Now is the time to “clean house,” taking reasonable steps to ensure compliance by conducting a self-audit, fixing any problems that are uncovered. Those steps will go a long way towards minimizing the disruption (and potential penalties) associated with increased enforcement.

Written by Martha

Disagreeing with the 7th Circuit, the 9th Circuit Rules that an Employee Who Emailed Company Documents to a Personal Email Account Did Not Violate the Computer Fraud and Abuse Act

The Ninth Circuit’s opinion in LVRC Holdings LLC, v. Brekka et al. calls into question the utility of the Computer Fraud and Abuse Act (CFAA) for employers seeking to redress employee theft or misuse of company information. In LVRC Holdings, the Ninth Circuit affirmed a district court opinion finding that Christopher Brekka, a former employee of LVRC, did not violate the CFAA when he emailed company documents to his and his wife’s personal email account during his employment with LVRC.

LVRC operates a residential treatment center for addicted persons in Nevada and hired Brekka to oversee internet marketing programs and interact with LRVC’s internet provider, LOAD, Inc. While at LVRC, Brekka requested and received an administrative user name and password to access LRVC and LOAD websites. Near the end of his employment with LVRC, Brekka emailed multiple LVRC documents to his and his wife’s personal email account, including the company’s financial statement, marketing budget, admissions report for patients, and names of past and current patients. Brekka then left LVRC, which later discovered that someone using Brekka’s user name was accessing company websites.

LVRC brought suit in district court alleging that Brekka violated the CFAA, 18 U.S.C. § 1030, by accessing LVRC’s computer “without authorization” during and after his employment with LVRC. However, the Ninth Circuit concluded that an “employer gives an employee ‘authorization’ to access a company computer when the employer gives the employee permission to use it.” Here, the Court held, Brekka did not act “without authorization” because LVRC had given Brekka permission to use the computer during his employment. Importantly, the Court rejected LVRC’s argument relying on the Seventh Circuit decision in International Airport Centers, LLC v. Citrin, that an employee’s authorized use ends when he violates his duty of loyalty to the employer. In International Airport Centers, the Seventh Circuit, relying heavily on general principles of agency law, held that an employee’s breach of his duty of loyalty terminated any right he otherwise had to authorized access of his employer’s laptop. It concluded, therefore, that the employee’s deletion of data from the employer’s computer - - after the employee had already breached his duty of loyalty by deciding to, and taking steps in furtherance of, competing with his employer - - constituted unauthorized access of the employer’s computers in violation of the CFAA.

While the Ninth Circuit’s LVRC Holdings decision seemingly rejects reliance on general agency principles, it does expressly note that LVRC had neither an employment agreement with the employee, nor any policies or guidelines which expressly prohibited an employee from sending company documents to his personal email account. While it is not clear that the Ninth Circuit would have reached a different result had LVRC had such an employment agreement or policies, it is clear that the absence of an agreement and/or policies can be fatal to an employer’s CFAA claim, at least in the Ninth Circuit. This case serves as yet another reminder, then, that every employer is well served by having in place good computer and business systems policies which make clear the limits of each employee’s rights with respect to authorized access to and use of the employer’s systems.
The LVRC Holdings decision can be found at:
http://www.ca9.uscourts.gov/opinions/view_subpage.php?pk_id=0000009960

written by David and Crystal

Second Circuit rules that an Employer may be liable under the ADEA for the actions of an Independent Contractor Hiring on the Employer’s Behalf

The recent decision of the United States Court of Appeals for the Second Circuit in Halpert v. Manhattan Apartments, Inc. illustrates yet another risk for employers who engage independent contractors to work for them and provides a reminder that an employer may be liable for the discriminatory conduct of independent contractors. In Halpert, an applicant who was refused a job at Manhattan Apartments, Inc. (MAI), sued MAI alleging discrimination under the Age Discrimination in Employment Act of 1967 (the “ADEA”). The applicant, Mr. Halpert, alleged that the person who interviewed him, a Mr. Brooks, declined to offer Halpert the position showing apartments to potential renters because “they were looking for someone younger.”

Although it was apparently uncontested that Brooks was an independent contractor of MAI, not an employee, the Court stated that the prohibition against age discrimination “applies regardless of whether an employer uses its employees to interview applicants for open positions, or whether it uses intermediaries, such as independent contractors, to fill that role.” The Court also stated that “[i]f a company gives an individual authority to interview job applicants and make hiring decisions on the company’s behalf, then the company may be held liable if that individual improperly discriminates against applicants on the basis of age.” The Court said that common law agency principles should be applied to determine whether or not an independent contractor was acting within the scope of his agency when making hiring decisions for the employer. The Court held, therefore, that the district court’s grant of summary judgment for MAI was inappropriate and remanded the case to the district court to determine whether MAI’s degree of control over the interview and hiring process rendered Brooks MAI’s agent, exposing MAI to liability for Brooks’s discriminatory conduct. The decision can be found at http://bit.ly/GJYPf

The moral of the story: when it comes to discrimination and other employment law claims, employers may be liable for the actions of their independent contractors. This should be taken into account when considering and structuring an independent contractor relationship. And, of course, employers would be wise to ensure that an independent contractor engaged in recruiting, hiring, or supervising employees for the employer is well trained and attentive to following the law.

WRITTEN BY DAVID AND GREG