Non-Compete

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: Can an employer restrict or prohibit an employee from competing with the employer once the employee’s employment has ended?

Employees, under Florida law, are limited in their ability to compete with their employer while employed by the employer because employees owe their employer a duty of loyalty. However, this duty of loyalty generally ends when an employee’s employment ends, and, upon ending, the employee could potentially compete against their former employer. Accordingly, employers should consider whether it is in their best interest to restrict or even prohibit an employee from competing once their employment ends.

Generally, there are two main types of restrictions employers place on employees to limit their ability to compete. The first is a non-compete restriction, which limits the employee’s ability to participate and compete in the same business of the employer. The second is a non-solicit restriction, which limits the employee’s ability to solicit the employer’s customers, potential customers, employees, and other business relationships. Both restrictions are generally set forth as restrictive covenants in a written agreement between the employer and employee.

Florida’s public policy disfavors restrictive covenants that limit competition or solicitation, so employers must carefully draft such restrictive covenants in order to comply with Florida law. Florida law provides that a restrictive covenant must be in writing and signed by the employee against whom it will be enforced. Further, a restrictive covenant must protect an employer’s legitimate business interest that justifies enforcement of the restrictive covenant. For example, an employee may have access to or obtain knowledge of an employer’s trade secrets or customer lists that are not available to the public. The employer has a legitimate business interest in protecting such information, and such interest may justify the employer restricting its employees’ ability to compete with employer.

Lastly, any restrictive covenant must be reasonable in terms of geographic scope, line of business, and time. Generally, a restrictive covenant should limit the employee’s ability to compete in the geographic region that the employer operates in and where the employee is employed or works. Additionally, a restrictive covenant should limit the employee’s ability to compete in businesses actively engaged in by the employer. Finally, the length of time the employee is prevented from competing must be “reasonable.” A reasonable time period, as determined under Florida law, varies depending on the role of the employee and the legitimate business interest the employer is trying to protect.

As such, while an employer is able to restrict or even prohibit competition or solicitation from its former employees, any such restrictions must be reasonable and must comply with all of the requirements of Florida law.

 

Specific Performance and Indentured Servitude

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: What happens when I prepay for work but do not receive the service requested?

A: Sitcoms often portray characters who eat at a restaurant and fail to pay, and they are forced to wash dishes or else have the police called on them. The theory is that you have stolen the items you ate. But what if you are paid for services and you fail to provide those services? Is keeping the money considered stealing? Today is the anniversary of the death of Charles Hughes, former Chief Justice of the United States Supreme Court and author of a 1911 decision that overturned an Alabama law making it a crime for a contractor not to perform services after receiving pay. In short, the Court determined that the money received and repayable constitutes a mere debt, and you cannot be jailed for your debts.

In our legal system, when you sue for breach of contract, you have the option to sue for your losses or to sue for “specific performance”, which is a court order requiring your opponent to perform his obligations under the contract. The type of obligations that can be ordered performed are typically limited to payments, signing of documents, handing over of property, or other perfunctory actions. The court can also order that an action not be taken. Courts have very limited authority and very limited desire, however, to force someone to perform anything more than the simple task of a signature or payment, because doing so could amount to the equivalent of indentured servitude. If the breach of contract was for failure to perform a service, your typical remedy is for repayment of what you paid or, perhaps, for the value of the services that you expected to receive.

While the law would say that imposing criminal liability for failure to perform or compelling performance through court order or physical abuse or threats is improper, it is nonetheless the case that we have certain criminal laws in place that will impose a punishment when property is obtained by fraudulent misrepresentations (“false pretenses”). These crimes typically apply to monetary or property transactions not involving services performed, and their application must be balanced with considerations of involuntary servitude. Interestingly, the Thirteenth Amendment of the United States Constitution, prohibiting slavery, includes an exception to allow involuntary servitude after conviction of a crime (“penal labor”).

 

The September 10th edition of “The Law” will cover guardian advocacy and protecting a developmentally disabled child as he reaches adulthood.

Questions can be submitted online to thelaw@clarkcampbell-law.com.

Off The Clock Time

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: My employees complain that they should be paid for traveling to job sites, computer startup time, and other time when they are not actually doing work. Are they right?

A: With ongoing minimum wage discussions and a proposal to double the overtime eligibility threshold (thus increasing the number of workers who would be entitled to overtime pay, regardless of being classified as “salaried”), more employers are getting concerned about tracking hours accurately. You typically do not need to pay employees the moment they leave their house, but failing to pay them for downtime during their continuous workday can inadvertently create a basis to be sued for unpaid wages, minimum wage violations, or overtime violations.

The general rule is that employees should be paid from the time they start their first work activity until they finish their last work activity, with work activities including those steps other than normal commuting that are primarily for the benefit of the employer. Waiting, walking, and traveling between job sites in between the first and last work activity are part of the continuous workday and are typically compensable (except for meal breaks). But the commute at the beginning and end of the day, or arriving at a time of the employee’s discretion and waiting for a first work activity, is typically not compensable, even if employees are carpooling and discussing work-related issues, traveling in employer-supplied vehicles, or transporting work equipment from home. An exception can exist when an employee has an unusual assignment to travel to another city for work.

Time checking voicemails, reading emails, developing an employer-required plan or route for the day, completing required paperwork, or loading or stocking equipment is all compensable, along with the starting up of a computer. Some employees take advantage of the computer startup trigger by turning on their computer and spending several minutes getting coffee and socializing. Employers might eliminate these extra minutes of compensable time by requiring such personal activities to take place before the power button is pressed.

Employees who are required to arrive at a location at a specific time and then wait for assignments begin their work day at latest at the specific time the waiting begins, except that under some circumstances this time might not be compensable if the employee is free to use the time for personal purposes. Employees who are required as an integral and indispensable activity to put on specified protective clothes on the employer’s premises start their work day at latest when they start to put on those clothes.

The employer is also liable for off-the-clock work time if the employer knew or should have known that the employee was working. For this reason, employers are often best advised, where feasible, to have clear employee policies prohibiting work and access to work emails outside of normal hours.

To be sure, it is recommended that employers track the hours of any employee who either is paid hourly, does not clearly fall within one of the legal exceptions to overtime pay (not covered in this article), or could feasibly work enough hours that he falls below the minimum wage.

Clearly, there are pitfalls awaiting employers. A review of employee manuals and time tracking procedures with a qualified professional is wise.

 

The August 13th edition of “The Law” will discuss the importance of obtaining title insurance when buying a home.

Questions can be submitted online to thelaw@clarkcampbell-law.com.

Independent Contractors

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: How is an independent contractor different from an employee, and why does it matter?

A: Businesses hire daily to promote profit and growth, often viewing these relationships as “employment”, but workers are not always employees under the law. When you hire lawn care or some other personal service, you usually do not concern these service providers as your “employee”, issue a W-2, or withhold taxes. Instead, these are typically independent contractor relationships.

Generally speaking, independent contractors provide goods or services but maintain control over how to provide such goods or services. While there is no single test for determining whether a worker is an employee or independent contractor, there are two concepts that are helpful to consider.  First, an employee is “economically dependent” on the employer, while the independent contractor is in business for himself.  Second, independent contractors maintain primary control over how to deliver their goods or services.  It is from these two primary concepts that one can derive the numerous factors used by the IRS and courts to analyze any given relationship.

The distinction between independent contractor and employee is important to businesses, because the distinction impacts how employers must treat those they hire. A business who hires employees must pay both state and federal employment taxes, but the business does not have to pay such taxes for independent contractors. Employees are protected by numerous federal and state laws, and those protections often do not extend to independent contractors. Finally, while businesses are held liable for the actions of their employees, the general rule in Florida (with many exceptions) is that businesses are not held liable for the actions of independent contractors.

As such, it is often advantageous for businesses to identify their workers as independent contractors instead of employees. However, businesses must be careful not to improperly characterize the relationship. Doing so may expose the business to significant liability. Businesses should always carefully review the factors set forth by both Florida and the federal government before characterizing a worker as an employee or independent contractor, and businesses should never base the decision solely on which characterization is most advantageous for the business.

 

The July 16th edition of “The Law” will discuss valuation of businesses and shareholder interests for buyouts.

 

Kyle Jensen is a litigation attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. and presented on this topic at the June 25 Central Florida SCORE Business Roundtable in Lakeland. Questions can be submitted online to thelaw@clarkcampbell-law.com.

Breastfeeding

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: My employee returned from maternity leave and must express milk regularly. What are my obligations when she requests a break and private space?

A: As an initial matter, the Florida Civil Rights Act considers pregnancy discrimination as sex discrimination. You cannot treat employees adversely because of pregnancy or the fact that they have children. A state public health statute recognizes breastfeeding as an “important and basic act of nature which must be encouraged”, and therefore mothers can breastfeed wherever they are otherwise permitted to be, regardless of whether breasts are covered.

Last month, the United States Equal Employment Opportunity Commission (EEOC) issued guidelines stating, among other things, that lactation is a pregnancy-related medical condition and that breastfeeding employees must have the same freedom to address lactation needs as coworkers would have to address “limiting medical conditions”. Accommodations need to be made. But to what extent?

The Patient Protection and Affordable Care Act (ACA) included an amendment requiring employers to provide both reasonable break time and a “shielded” location to express milk during the child’s first year. The employer does not need dedicated space, but the employer must make a suitable, private space other than a bathroom available upon request. The extra break time need not be compensated, provided that the employee is completely relieved of duty.

The protections of the amendment extend only to employers covered by the federal Fair Labor Standards Act (FLSA)—and whether your business meets that requirement could be the subject of a much longer article—but employers with fewer than fifty employees may be able to avoid the break time requirement if they can demonstrate that compliance would impose an undue hardship when looking at the difficulty or expense of compliance in comparison to the size, financial resources, nature, or structure of the business.

Earlier this year, the American Civil Liberties Union brought its first case under the ACA’s breastfeeding provision: a mother was forced to choose between lactation in a bathroom or a dirty locker room alongside dead bugs. It remains to be seen how courts will respond to increasing breastfeeding discrimination litigation, but it appears enforcement will primarily be by the EEOC as individual employees have difficulty bringing lawsuits for damages under the FLSA absent lost wages.

The August 28th edition of “The Law” will address responding to document subpoenas.

Questions may be submitted to thelaw@clarkcampbell-law.com.