Specifically, the new poster includes updated information on the ADA Amendments, some updated DOL language, and information on the new Genetic Information Nondiscrimination Act (GINA) which goes into effect November 21. 

The EEOC website has information on ordering new posters, but also has a downloadable version of the new poster, and a downloadable supplement to the 2002 poster, if you’ve got a glossy version of that one that you want to keep up. 

Go download one of these two notices and put a pushpin in it.  Not only will it keep you in compliance, but your employees notice when things like that change, and it makes you look like you’re thinking about their rights.  (That’s a good thing.)

A little background on noncompetes before we go any farther.  A noncompete, of course, is an agreement betwen an employee and a company that the employee won’t compete directly with the employer if he quits.  Usually, the agreement is limited to a certain geographic area, a certain amount of time, or both. 

Okay, so here’s where things get interesting:

The Il-Legitimate “Business Interest Test”?

For a long time, Illinois appellate courts have used two tests for determining whether a noncompete was overly limiting. The first test – the “Time-and-Territory” test – is sort of the industry standard. The court determines (based on prior cases) whether or not the time and distance limitations included in the agreement are a reasonable restraint of trade. If so, then the agreement is valid. If they are found to be unreasonable, then the court may either void the agreement or adjust it to make it palatable.

The second test, however – the “Legitimate Business Interest” test – makes the court’s process a little more complicated. Under this test, a covenant not to compete will be enforced if (1) the employee acquired confidential information through his employment and then attempted to use it for his own benefit; or (2) if, by the nature of the business, the customer relationship is near-permanent and the employee would never have had contact with the customers but for his employment with the company. In other words, under the Legitimate Business Interest test, noncompetes are only valid if some trade secret violation occurred on top of any violation of the agreement itself.

Making matters worse, the use of the tests has not been mutually exclusive: some decisions only refer to one or the other, and some reference both.

The Sunbelt Rentals Decision

On September 23, 2009, the Fourth District Appellate Court issued an opinion in Sunbelt Rentals, Inc. v. Ehlers discussing the two tests. In this case, Sunbelt, an equipment leasing company, sued its main competitor, and one of its former employees (Ehlers) who had recently tried to move his efforts over to the competitor. Sunbelt argued that Ehlers had violated the restrictive covenant in his employment contract which forbade him to work in direct competition with Sunbelt, soliciting its customers or renting similar equipment within a 50-mile radius of his former store. Ehlers and his new employer countered that, because Ehlers did not take any proprietary information with him when he left Sunbelt, his former company had no “Legitimate Business Interest” sufficient to enforce the noncompete agreement.

In rejecting Ehlers’ argument, the Sunbelt Court held that the Legitimate Business Interest Test was created “out of whole cloth” by the Appellate Courts, and that it should no longer be used to determine the validity of noncompetes. The Court noted that the Illinois Supreme Court had never used the “Test”, even though it had decided plenty of noncompete cases since the test was introduced 30 years ago.

Going back to the origin of the Legitimate Business Interest Test, the Sunbelt Court concluded that the so-called “test” had been mashed together from multiple, unrelated Supreme Court opinions, and did not actually constitute a legal test at all. The Court further noted that both the earliest and most recent Illinois Supreme Court cases use only the Time-and-Territory Test to determine whether restrictive covenants were valid. The lesson from these cases, the Court said,

…is that courts at any level, when presented with the issue of whether a restrictive covenant should be enforced, should evaluate only the time-and-territory restrictions contained therein. If the court determines that they are note unreasonable, then the restrictive covenant should be enforced.

Because both the time and territory restrictions in the Sunbelt agreement were valid, the Court held, the agreement itself was valid, and Sunbelt was entitled to damages from both Ehlers (for breaching his agreement) and his new employer (for interfering with Sunbelt’s contract).

The Takeaway

With the elimination of the Legitimate Business Interest Test, the Fourth District has made it much easier and clearer to enforce an otherwise-valid restrictive covenant in Illinois. Under the Sunbelt decision, all an employer must do is ensure that its restrictions on time and distance are reasonable, and the court will not stand in the way of the company and employee’s freedom to contract.  If you’re the hiring company, however (or the employee), a major arrow in your quiver has been taken away. 

The Sunbelt opinion was issued by the Fourth District Appellate Court, which means it is controlling law only for the middle of the State.¹ It will be very interesting to see if any other Appellate courts latch onto the Fourth District’s thinking.  I doubt all of them will.  Eventually (finally, maybe), this issue has to make its way to Springfield. 

In the meantime, however, where your noncompete lawsuit is filed in Illinois suddenly makes quite a difference.

1. See here for a map of the Illinois appellate districts

It has been that way for many years, and while the body of decisions by the IELRB grows, it’s you’d think that the jurisdiction of the Board is rarely questioned.  Schools are in, everyone else is out. 

Of course, no issue of labor & employment law is ever really settled.  Even whether schools are within the jurisdiction of the Education Labor Relations Board.

When is a School a School?

A union in Kane County filed with the IELRB to acknowledge majority representation of the teachers of a charter school, and the Board certified the union.  The school took issue, arguing that the IELRB does not have jurisdiction over charter schools because they’re not “educational employers” as defined by the IELRA.  The Board disagreed, and the school appealed.

The school’s argument was that the Charter School Act exempts charter schools from “other [s]tate laws and regulations under the School Code”, and that this exemption included the Education Labor Relation Act.  The union countered that the IELRA was not an education law, but rather a law about how an employer that happened to be a school dealt with its employees.

The Fourth District Appellate Court sided with the school.  The court separated the phrase excluding charter schools from certain state laws into two interesting parts:  “other state laws” and “regulations under the School Code”.  The court pointed to non-education laws that are specifically mentioned in the Charter Schools Act, saying that the legislature clearly did not want to limit the exlusions to education-related laws:

…to conclude that charter schools are not exempt from the Education Labor Act would be to assume the legislature overlooked the Education Labor Act when it drafted the list of specific exceptions. We reject this assumption and conclude that the omission of the Education Labor Act from the list of specified exceptions is not somehow a legislative oversight.

Questions of Intent

The court’s opinion notes that both sides, along with numerous other interested parties, wrote briefs analyzing the legislature’s intent in drafting and passing (or opposing) the Charter School Act, as a way of proving that the schools should or shouldn’t be under the Board’s purview.  The court did a decent job of sidestepping the political issue inherent in that discussion by holding that the statute was plainly written, and refusing to consider what the intent of specific legislators was in drafting it.

A Moot Point?

The court’s opinion ends with a note that a recent legislative change specifically states that charter schools are “educational employers”.  The law isn’t in effect until next year, though, so the court said it couldn’t apply to the case before the court.  Nonetheless, it seems that one major difference between charter schools and typical public schools – the lack of unionized teachers - may be in flux in the coming years. 

At the very least, it looks like next year we won’t be questioning whether schools are under the jurisdiction of the IELRB.

This time around, all I had to do was watch Sunday Night Football.

This week, the Patriots and Jets revived one of the best rivalries in the NFL, a bitter divide that New England has dominated for years.  But the Jets had a little extra help going into the game:  two weeks ago, the Patriots let backup quarterback Kevin O’Connell go.  He was quickly signed by New York and drilled for any inside information he could provide the Jets on New England’s strategy.

According to the NY Daily News, both teams downplayed O’Connell’s information sharing.¹  Plus, this is not the first time one of the two teams has adopted what the paper called a “sign-pump-discard strategy” of hiring a recently-released player, drilling them for information, and canning them after the game.  But I think the results should speak for themselves – the Jets beat the Patriots in the Meadowlands for the first time in years, and so far, O’Connell is still playing for New York.

Here’s the takeaway: your business is not the NFL. ² In the corporate, non-professional-sports world, hiring an employee because of her knowledge of a competitor’s business a pretty big no-no.  A company generally has proprietary rights to its trade secrets, and employees that switch to rivals with these secrets to share can quickly run afoul of state employment laws.

So, what is a trade secret?  A recent blog post by TS expert (and new Twitter acquaintance) Russel Beck spells it out nicely:

“‘Trade secret‘ means information, including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

*** In sum, a trade secret has three essential components: (1) information; (2) value; and (3) secrecy.

Normally, that means stuff like client databases, patents, and the like.  A playbook would likely fall into that category, too.  So, how do you protect your secrets from competitors that might snatch up one of your second-string quarterbacks?  A couple of suggestions:

1. Make It a Trade Secret.

Redundant?  Yes – and it may feel that way when you’re doing it, too, but making sure everyone knows a trade secret is just that – secret – is key to protecting your information.

If you don’t want a client list disseminated to the public, put “CONFIDENTIAL” on the document.  Keep your patents, formulas, code, etc. behind lock-and-key, either literally or virtually.

Many courts will ask what precautions you took to protect your info as a way of determining if something was a trade secret in the first place, so this step is really, really important.

2. Let Your Employees Know.

This, of course, means confidentiality agreements.  An employee’s signature acknowledging that your confidential information cannot be shared is probably the strongest defenses if that same info ends up in a competitor’s hands.  Depending on your state, these agreements may be piggy-backed with a noncompete agreement, but in many cases that’s not necessary or advisable.  See #3 for more specifics on that.

If your business involves any type of proprietary information – a recipe, an algorithm, a specific marketing or demographic study – your employees should sign something at least saying that they acknowledge your right to keep the thing secret.

You may also want to discuss the issue with your employees at some point.  Especially if you haven’t had nondisclosure documentation, asking a long-time employee to sign something like that can put a bad taste in their mouths.  Talking to them before you toss the piece of paper in front of them can put the issue in a positive light – protecting trade secrets should not be an “us versus them” thing, but without good communication employees may take it as just that.

3. Talk to an Attorney.

Trade secret laws vary from state to state, and many are piecemeal mixtures of statutes and decades of case law that can lead to intricate rules about what is a trade secret and how it must be protected.  If you are going to have your employees sign NDAs, or if you have something that you aren’t sure fits the description, call an attorney.

Don’t wait until it gets stolen and used against you – by then there may be little your lawyer can do.  Besides, a lot of times NDAs are issued as part of a larger anticompetition strategy, and only a good lawyer can tell you what’s legal and what’s not when it comes to restricting your employee’s ability to work for a competitor.

There are lawyers out there who can help  you regardless of the size of your business or budget.  If you need some help finding one, you can email me – I may know someone.

Finally…

Back to the NFL for one last piece of advice. After the game, some reporters asked Tom Brady about the significance of New York’s new backup QB and the information he may have provided.  In analyzing his team’s loss, Brady shows that the right mentality about trade secrets includes putting them in the appropriate place on the scale of importance.   From the NYDN:

“You’ve got to change some things because I’m sure Kevin has told them some things that can help them,” Brady said. “But at the end of the day, it comes down to how well you can execute. Having some inside information…you still have to throw the ball, complete it and block.”

1. The Jets also entered the game with a new starting quarterback who I hear has done some good things elsewhere…
2. Unless you’re own a football team.  In which case, I can’t help you.

Quick – who’s your favorite guitarist? Your favorite song?  Turn on the radio and flip around the stations for 30 seconds. Chances are you will hear a guitar. But not just any guitar. Chances are very good that you will hear a single style of solid-body electric guitar, pumping warm tones through double humbucker pickups, a guitar that has been manufactured by Gibson¹ since 1952.  That guitar, named after its inventor, is called the Les Paul, and it is the most important single instrument in the history of rock and roll.

Les Paul, a jazz guitarist and inventor, redefined modern American music.  He created the guitar that gave Eric Clapton, Duane Allman, Eddie Van Halen and Jimmie Paige their fame.  He also invented modern multi-track recording, without which all modern recording would be impossible.  But he didn’t make a guitar for Clapton.  He made it for Les Paul.  When he was frustrated with his inability to get a sound he liked, he would simply invent whatever sound or recording device he needed.

Why am I taking time out of labor & employment law to talk about a guitarist?  Les Paul was a lover of music, and he was relentless in his pursuit of perfection.  His passion, filtered through his inventions, spread like a current and continues to provide us a world of music that could not have existed without him.  You don’t have to be a musician to learn something from a man like that. Besides, without Les Paul, I would have never seen my son spinning around with a plastic guitar, losing his mind to “Crazy Little Thing Called Love”. 

Les, thank you.  Thank you for keeping thousands of irresponsible, tatooed people out of regular jobs and touring the world.  Thank you for giving us working mopes something to do at home that makes us feel like heroes.  For getting me through law school (are you listening, kids?  Seriously – an electric guitar is better than Adderall in the middle of an all-nighter). 

Les, thank you for loving what you do so much that everyone around you loves it, too. You are my hero.

As much as anyone of Paul’s stature can, he died today from complications of pnuemonia. But come on. Les Paul is immortal. 

If you don’t believe me, turn on the radio.

1. or Epiphone, which is owned by Gibson now

If you’re like I was, you’re now asking what language they speak in this Utopia.  Well, it’s English.  Moostly, ya noo. 

Yep, jobless midwesterners, break out that Bison penant  - North Dakota wants you!

A report from Marketplace details how North Dakota is soliciting workers from hard-hit midwestern states like Ohio¹ and Michigan² for its booming work needs.

According to Marketplace, the Flickertail State is reveling in a combination of planning and timing – their banks steered clear of the subprime mess, and they lured companies like Microsoft to set up shop (if Jeff Krause is right, though, let’s hope it’s not an Office 2007 distribution center or something). 

While all that was going on, the coasts suddenly realized there was a huge land mass between them that could be used to create renewable energy, and North Dakota added a whole new industry to its list of hiring sectors. The state currently has a $700 million surplus and just lowered its taxes.

Will it be a switch from what you’re used to?  Sure, especially if you’re coming from a big city.  But don’t judge the state too quickly.  Here’s what one person featured in the story had to say about her new home:

Oh, Bismarck is beautiful! It’s clean, and there’s a mall, and it’s a nice mall, and has some of my favorite stores. 

Wait – even their malls are surviving?  Man, when can I move?

1. 11% unemployment
2. 15% – highest in the country

Two recent cases decided by the 1st District Illinois Appellate Court have brought an interesting facet of our unemployment law to the fore:  you don’t have to be a lawyer to represent a party in an unemployment hearing.¹

In both cases (here and here), former employees appealed the Illinois Department of Employment Security’s denial of benefits, alleging that the hearing was voided because the former employer had hired a “representative” that asked questions of witnesses and made factual closing statements. 

In both opinions, the First District noted that the unemployment statute is meant to create an informal process, and specifically allows for a “duly authorized agent” to represent either party at the hearing.  The courts also noted that factual questioning and analysis of this one specific issue – unemployment insurance – doesn’t qualify as “practicing law”. 

I’m not sure about that last point.  The official definition of ”the practice of law” is:

“the giving of advice or rendition of any sort of service by any person, firm or corporation when the giving of such advice or rendition of such service requires the use of any degree of legal knowledge or skill.” 

I don’t quite see how summarizing facts at an unemployment hearing would be useful if the person summarizing those facts doesn’t have an understanding of the underlying law.  Not saying the courts were wrong – there is obvious leeway in the statute for non-lawyer representation – and there are valid public policy reasons for allowing non-lawyers to assist companies and aggrieved employees, not the least of which is sheer cost. 

But the exposition in these decisions about factual work being outside the practice of law creates a shaky precedent for me in any context.   What do you think?

Finally, remember that unemployment insurance typically requires that you prove you’re still looking for work.  So if you do have to go in for a hearing, ask around – you never know whose hiring these days.

1. This is not only true in IL – a lot of other states have similar language in their statutes

Last week, CLE-Pro and blogger Sean Carter issued a challenge to the online legal community to enter into a no-holds-barred-blog-posting cage match called “Blawger Survivor“.  The rules were simple:  For the next three weeks, everyone has to publish at least one post per day, and that post has to link to or mention another blog in the competition.  Miss one day of posting, and you’re out.  Make it through the grueling process, and you will be rewarded with the coveted title of “Blawger Survivor”¹ and maybe a copy of Sean’s book, which I didn’t know existed but now really, really want.²

So, to anyone who has visited this blog more than once (which in my view makes you a regular), please do not be alarmed by the new ferver with which my posts go up.  I promise that it’s not that labor and employment law information exploded or anything (though that would be nice, if that happened).   I’m participating because I’ve been looking to tweak the focus of this blog a little, and there have been a lot of stories that I’ve just passed up because I was too busy/lazy to write about them.³  I’m hoping Blawger Survivor will give me an opportunity to cover some of these issues and maybe branch out into some areas I wouldn’t otherwise hit.

Oh, and this post notwithstanding, I promise not to sacrifice any quality for quantity.  Unless I’m really tired, or busy.  Or it’s 11:50 and I realize I forgot to post anything.  Or I want to watch TV.

So, if you have any ideas for blog posts, please let me know.  Three weeks is a lot of weeks, as far as blogging goes, and the competition is crazy.  Dan Schwartz at CT Employment Law Blog, whose “I’m-at-a-convention-and-can’t-write-a-post” posts are link-filled novels, already has two substantive posts up today. 

While you’re waiting for me to write something worth reading, why not click on the link to Sean Carter’s blog  and check out some of the other participants?  There’s a list of us in his sidebar.

Wish me luck…

1. which had better come with a sweet logo I can put up on this newly-redesigned masterpiece of a blog
2. I can tell you right now that winning will also come with some crazy carpel tunnel unless I get a gelly wrist pad and fast.
3. Ricci, anyone?

Original photo by eye2eye (flickr)

The Workplace Prof Blog tipped off this story in the National Law Journal about the ongoing litigation between three former law professors at the Ave Maria School of Law and the school’s founder and financier, Tom Monaghan (the Domino’s guy).

The lawsuit has been going on for over two years now, with the professors claiming they were fired for voicing concerns over the legality of uprooting and moving the ABA-accredited school to Florida.

Now Monaghan has filed a motion to dismiss the case using what some see as a novel approach.  From the NLJ:

In the latest twist to the two-year-old suit… Monaghan… filed a motion last month claiming that the law professors are “ministerial.” Therefore, he argues, because the school is a religious institution, the administration over these minister-professors is exempt from civil trial court under the “Establishment and Free Exercise of religious clauses of the First Amendment.”

Monaghan also claims that the institution is eligible for “ecclesiastical abstention,” requiring courts to “abstain from inquiring into, or interfering with, governance of the religious institution.”

Seems crazy, right?  You’d think there’d be no support for a position like that, but it turns out that in cases where professors – law schools included – are actual ministerial employees, ecclesiastical abstention has been a decent defense.  The NLJ article mentions McDonough v. the Catholic University of America (83 F.3d 455 (D.C. Cir. 1996)) - where a nun/law professor’s sex discrimination case was thrown out as a ministerial matter outside of the court’s purview.  And Monaghan’s motion points to various sections of the Catholic canonical law regarding treatment of university faculty as a sign that the courts should stay away.

The difference here, of course, is that none of the professor plaintiffs are actual clergy.  Instead, Monaghan argues that if their jobs require them to address some theological issues related to their specialty (which Canonical law requires), they are ministers enough for the court to abstain from hearing the case. 

The McDonough court framed the ministerial exemption pretty broadly, actually:

[T]his circuit and a number of others have long held that the Free Exercise Clause exempts the selection of clergy from Title VII and similar statutes and, as a consequence, precludes civil courts from adjudicating employment discrimination suits by ministers against the church or religious institution employing them.

***

The ministerial exception has not been limited to members of the clergy. It has also been applied to lay employees of religious institutions whose “primary duties consist of teaching, spreading the faith, church governance, supervision of a religious order, or supervision or participation in religious ritual and worship….”  If their positions are “important to the spiritual and pastoral mission of the church,” they “should be considered ‘clergy.’”

(Citations Omitted)

Everything I’ve read about the motion sort of frames it as a bizarre stalling tactic (the attorneys for the professors certainly thinks it is), but if the standard in McDonough is applied, then I think Ave Maria at least has a solid argument here.

The first installment of “A Couple of Questions…” goes to Brian D. McCarthy, Chief Employment Counsel at the risk management powerhouse Arthur J. Gallagher & Co.  Before joining AJG, McCarthy spent 10 years on the other side of the table, as a business-side employment attorney at the Labor & Employment firm Franczek Sullivan (now Franczek Radelet).  

No suprise, then, that Brian gets the series going right with insightful answers about the relationship between inside and outside counsel:

CE: Okay.  A couple of questions.  Here we go.

1.  What is the most important factor in maintaining a good relationship with a corporate client?

BDM: That’s an easy one.  Make me think of you as an essential part of our business.

You can do that by demonstrating a desire to understand our business model and our specific objectives.  Don’t be a contractor; be a teammate.  Respect our goals and make them your own, without simply rolling over (this is not Burger King; the client is not always right).  Maximize my confidence that you will handle my business the same way I would handle it – better, even – because that is why we send work out in the first place.  These are the things that will truly build up your relational capital with corporate counsel.

All that other stuff that shows up in your high-end, four color glossy firm brochure?  That’s important, too – don’t get me wrong.  I demand a high level of legal expertise; an ability to meaningfully and practically communicate that expertise; a command of pertinent decisions, regulations and trends; transparent value in staffing and billing; and willingness to understand our business model and specific objectives.  But these qualities are the sine qua non, the absolute preconditions, of getting hired and staying hired by my corporate legal department.  They are only facets of the bigger picture we see in our favorite outside counsel, the “go-to” lawyers with whom we actually look forward to working.

Here’s a simplified test:  your corporate counsel client assigns you a piece of work in the late afternoon.  How does the matter weigh on your client that evening?  Over the weekend?  On Monday morning?  Is your in-house client calm, cool, collected and at peace with the world?  If not (or if you can’t answer that question), there is definitely room to improve the relationship.  Obviously, this simplification won’t apply to a bet-the-company case or your first assignment from a new client, but it’s a good general barometer. 

And the best news?  I’m a lot more likely to forgive and forget those inevitable missteps if they are made by one of my go-to lawyers.

2.  Has the recession changed your perspective on outside counsel?

BDM: No question it has. 

Corporate counsel who were previously focused on value and costs are becoming positively obsessed.  Many are simply drawing the line and saying:  “I won’t pay for this anymore.”  Computerized research?  Forget about simply passing on that overhead anymore.  Charges for faxes – are you kidding?  Gone are the days of dozens upon dozens of billable hours (let’s face it, mostly inexperienced associate hours) that are unconnected to realized value.

I’ll happily pay high rates for high quality and relevant experience.  Quality legal representation can be costly.  But I will be scrutinizing the value provided more closely than ever before. I’ll be looking to non-law firm consultants, contract attorneys and assistants and other nontraditional legal professionals who can do most of the work of associates in any number of disciplines – at a mere fraction of the cost. 

We could all take a lesson from the makers of “Borat,” who got big press, and saved a bundle, with their Indian off-shoring of legal work like research, litigation support, discovery, contract drafting and patent writing.  I’m not suggesting that most of my work could be sent to India, but I like that thinking.

Let me add that go-to lawyers, like the ones I talked about above, are the first to point out value that might be had from alternative staffing, billing and sourcing arrangements.  They concern themselves with hunting out and adding value to our relationship.  The result?  I now expect those suggestions from my business partners.  I would encourage other corporate counsel who aren’t getting them to pointedly ask outside counsel, why not?