LinkedIn has become an essential tool for many professionals. The site provides a platform for making business connections, sending direct messages, gathering marketplace information, and posting updates and content. But the very features that make the site useful for business and career development can also stir up trouble where non-competes and non-solicits are involved.
A number of courts have grappled with the impact of social media sites like LinkedIn on non-compete and non-solicit agreements. Most recently, in Bankers LIfe and Casualty Company v. American Senior Benefits, LLC et al, an Illinois appellate court considered whether a former branch sales manager for a life insurance company violated his agreement not to solicit company employees when he used LinkedIn to make connections with former colleagues after he left to work for a competitor.
Merely inviting a former co-worker to connect on LinkedIn seems a far cry from an improper solicitation—although I have seen lawsuits and cease-and-desist letters based on grounds even flimsier than this. "Non-solicit" does not mean "cut off all contact whatsoever." In this case, however, there was a small twist: The former sales manager had also published a job posting for his new employer on his LinkedIn page that could be viewed by those with whom he was connecting.
Last year I launched an organization for lawyer, judges, professionals, and academics called the Society for Law and Culture. Through engagement with the best of philosophy, literature, history, theology, and the arts, the Society aims to strengthen the ties between law and culture and promote a renewed sense of law as a vocation and humane profession.
The next Annual Gathering of the Society for Law and Culture will be held May 19, 2018 at the Russell Kirk Center for Cultural Renewal in Mecosta, Michigan. As with the Society's inaugural gathering, attendees are expected from around the country. The Society has confirmed an amazing roster of distinguished speakers to address the theme, "Moral Imagination and the Law."
Please watch the Society for Law and Culture website in coming months for more details. If you would like to receive periodic updates about the Society, please email me.
Too many employers play games with sales commissions. They delay payment. They use flimsy pretexts to withhold payment. They use accounting tricks to lower the amounts paid. They hold commissions over the heads of their salespersons to keep them in line.
Fortunately, Michigan law affords robust protections to sales professionals. Under the Sales Representative Commission Act (SRCA), an employer that fails to pay a commission when due is liable for damages—and double damages it the failure was intentional. Notably, no showing of bad faith is required. To be liable for double damages, the employer simply must have withheld money owed to the sales representative on purpose. In addition, a sales representative who is forced to sue to recover a commission is entitled to recover the legal fees expended in obtaining a judgment against the employer.
(Note: Though this post focuses on employment relationships, Michigan law regarding sales commissions applies equally to independent contractor and other agreements.)
What If an Agreement Does Not Specify When Commissions Are to Be Paid?
Whether unintentionally or by design, some sales representative commission agreements are not models of clarity. In particular, an agreement may not make it clear when payment of a commission to the sales representative is actually due. The SCRA addresses this common situation. Under the statute, past practices between the parties shall control, and if there are no past practices, then courts must look to industry custom to determine when payment is due.
Many businesses require top executives and sales professionals to sign non-compete agreements. These individuals typically have access to vital trade secrets or customer relationships that could be used to damage the business if the person leaves to work for a competitor or set up a competing venture.
Increasingly, however, non-competes are used with low-level employees such as fast food workers, customer service representatives, and hair stylists. This practice has met with a flurry of criticism. (For some recent examples, see here, here, and here.) One prominent critic contends that non-competes enable employers to “use the threat of litigation to constrict wages and employee mobility,” and that “[w]orkers bound by noncompetes cannot rely on outside offers and free-market competition to fairly value their talents.”
An opinion from the Michigan Court of Appeals sheds light on the subject. The case, BHB Investment Holdings, LLC v. Ogg (Feb. 21, 2017, unpublished), involved franchises of two competing swim instruction chains, Goldfish Swim School and Aqua Tots. Goldfish Swim School of Farmington Hills (“Goldfish”) sued a part-time instructor who was terminated and went to work for Aqua Tots Canton (“Aqua Tots”) in alleged violation of his non-compete and non-solicit agreements. Goldfish also brought claims against Aqua Tots. The instructor earned $12.50 per hour at Goldfish and $11 at Aqua Tots.
Non-compete law varies drastically by state. Some states broadly favor non-competes. Other states virtually ban them. Some states impose highly specific limitations across the board. Others take a more flexible, case-by-case approach. Courts in some states will reform or strike out portions of an overly broad agreement to make it enforceable. Others will refuse to enforce an overly broad agreement at all. And this is just the beginning. Each state has distinct rules governing the reasonable scope of a non-compete, the business interests that may be protected by a non-compete, the consideration required to support a non-compete, and the showing needed to obtain an injunction, among other things.
Bottom line: A non-compete agreement that is enforceable under one state's laws may not be enforceable under another's. Consequently, "choice of law"—the rules that determine which state's laws apply in a dispute—is often a crucial consideration in the non-compete context.
A recent case from the Sixth Circuit Court of Appeals drives this point home. In Stone Surgical, LLC v. Stryker Corp., the medical device company Stryker sued a top sales representative for going to work for a competitor in violation of his non-compete agreement. Stryker is headquartered in Michigan. The sales rep lived in Louisiana and received products, delivered products to doctors and hospitals, and conducted sales meetings in Louisiana.
[This post originally appeared on Patently-O.]
Last week I wrote about the doctrine of “inevitable disclosure” as it relates to the Defend Trade Secrets Act of 2016 (DTSA), the statute that created a general, private cause of action for trade secret misappropriation under federal law. Because inevitable disclosure is of continuing importance and controversy, I wanted to unpack the issues further here. As discussed below, the DTSA leaves room for trade secret plaintiffs to assert inevitable disclosure.
Trade secret plaintiffs frequently face problems of proof. Gathering evidence that a suspected individual or company has actually misappropriated trade secrets, or legitimately threatens to misappropriate trade secrets, can be a substantial hurdle to getting a lawsuit off the ground.
Take a typical scenario where an employee of company A goes to work for company B, and A alleges that the employee is using its trade secrets on behalf of B. In some cases, company A will have evidence that the employee swiped its secrets before leaving, perhaps by emailing himself a customer list or downloading technical specifications onto a flash drive. Company A might even have evidence that company B is now using the secrets, perhaps because it is soliciting A’s customers or has launched a product based on A’s specifications. In many cases, though, the activities of the employee and the new employer are a black box. The employee was exposed to trade secrets at Company A, and is now working for Company B, but Company A has not uncovered evidence of specific disclosures to Company B. Company A may have reason to believe the employee must be disclosing secrets to B, or threatens to do so, but has no way to confirm this directly prior to filing suit and obtaining discovery—a catch-22. Is company A without recourse?
Non-Compete law is complicated and fraught with uncertainty. Employers sometimes exploit this uncertainty to exact compliance. For departing employees and the companies that hire them, the good news is that non-competes are often harder to enforce than it may first appear.
Non-compete agreements are different from other agreements. They are subject to closer judicial scrutiny than most other types of contract. To be sure, some states are tougher on non-competes than others. But even in the most pro-non-compete jurisdictions, a court will refuse to enforce a non-compete if certain exacting criteria are not met. Why is that?
I recently had the opportunity to present a talk titled, "Protecting Your Creative Assets," a guide to intellectual property for creative entrepreneurs. I always enjoy speaking on IP Iaw, and the attendees were a fun group.
The presentation offered a practical overview of trademark, copyright, patent, trade secret, and internet law, along with strategies for securing one's own creative assets while steering clear of costly conflicts with others. As I said in the introduction, nobody wants to be the guy or gal who:
With intellectual property, an ounce of prevention is worth a pound of cure. After a number of attendees asked for a copy of the slides, I thought it might be useful to distribute them more widely. A condensed version of the slides can be found here.
Law and the Creative Economy comments on trade secrets, non-competes, intellectual property, and other areas of law. The blog is only for informational purposes. Lawyer Maxwell Goss maintains this blog. Click here to contact Max.