Employment

Try Not to Use “Defalcation” in Your Employment Agreements

February 19, 2016

Few things anger employers more than learning that an employee who has been terminated has, before leaving, copied confidential documents. Courts often view this as an equitable justification for enforcing a covenant not to compete that might otherwise be “on the line” legally – maybe enforceable, maybe not. But what if an employee copies confidential documents and does nothing with them? In other words, doesn’t give them to a competitor or use them in a way harmful to the employer?  If the employer discovers this after the employee has left, does it justify declaring that the employee is being terminated “for cause” (retroactively) and denying him the one year of severance his employment agreement had promised him when he was terminated “without cause”? This was the issue in Eventmonitor v. Leland, which (rather oddly) went all the way to the Massachusetts Supreme Judicial Court. The precise issue was whether the employee had engaged in a “defalcation of company assets.” According to the employment agreement, “defalcation” was a basis for terminating the employee for cause and denying him severance payments. (The court chose not to grapple with the question of whether this could be done retroactively, as Eventmonitor tried to do, since a ruling on that issue was not necessary to decide the case). However, “defalcation” was not defined in the employment agreement. The court decided that “in ordinary usage defalcation requires at…

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Supreme Court Decisions ChangeLegal Landscape for Employers

July 7, 2013

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Nudge, Nudge, Wink, Wink – Are You “Soliciting” in Violation of an Employee Non-Solicitation Agreement?

July 2, 2013

Two note-worthy decisions have emerged from AMD v. Feldstein, a trade secret case pending in federal district court in Massachusetts. At the heart of the case is the conduct of several AMD employees who left to work for Nvidia Corporation. Inexplicably, they copied and took with them huge amounts of AMD data, actions which earned them a preliminary injunction in the first of two opinions, dated May 15, 2013. However, in the May 15th decision Massachusetts federal district court judge Timothy Hillman also addressed the thorny issue of  what constitutes a “solicitation” in violation of a non-solicitation agreement, and specifically solicitation of employees (as opposed to customers) of the former employer. The employee non-solicitation provisions in this case were fairly standard. For example, Feldstein’s provided that: during [Feldstein’s] employment with [AMD] and for a period of one year following the termination of [Feldstein’s] employment, whether voluntary or involuntary, [Feldstein would] not hire or attempt to hire an employee of [AMD], or directly or indirectly solicit, induce or encourage an employee of [AMD] to leave his or her employ to work for another employer, without first getting the written consent of an Officer of [AMD]. However, just what kinds of behavior violate such a provision, and which do not? Clearly, expressly asking or encouraging an AMD employee to leave AMD would do so (“you should leave AMD and come to work for Nvidia with me – you…

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You Want to Blog for Huffpost? Well, I Have to Warn You – We’re Pretty Darn Selective!

December 13, 2012

A lot of people blogged for The Huffington Post for free between 2005 and 2011. But after Huffpost was sold to AOL for $315 million in 2011, they had second thoughts about their generosity. They filed a class action seeking compensation for their work based on claims of unjust enrichment and deceptive business practices, seeking one-third of that money for the bloggers. The trial court, and now the Second Circuit, rejected their claims. As the Second Circuit stated early this week in Tasini v. AOL (2d Cir. Dec. 12, 2012): Plaintiffs’ basic contention is that they were duped into providing free content for The Huffington Post based upon the representation that their work would be used to provide a public service and would not be supplied or sold to “Big Media.” Had they known that The Huffington Post would use their efforts not solely in support of liberal causes, but, in fact, to make itself desirable as a merger target for a large media corporation, plaintiffs claim they would never have supplied material for The Huffington Post. The problem with plaintiffs’ argument is that it has no basis in their Amended Complaint. Nowhere in the Amended Complaint do plaintiffs allege that The Huffington Post represented that their work was purely for public service or that The Huffington Post would not subsequently be sold to another company. To the contrary, plaintiffs were…

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Apple, Google, Have You No Shame? Really!

October 1, 2010

While the debate over whether Massachusetts should adopt a law restricting the enforceability of non-compete agreements rages on (well, at least among a group of maybe 100 economists, lawyers and business people), California proudly observes that noncompete agreements are unenforceable in that state (except under very limited circumstances).   And, economists argue, that is one reason why the high-tech industry in Silicon Valley is more successful than its counterpart Massachusetts. Now, come to learn, things were not quite what they seemed.  I’m sure that 99% of California companies are in fact impacted by the California law — that is, they cannot impose covenants not to compete on their employees.  But a few companies — Google, Apple, Pixar, Adobe, Intuit and Intel — figured out an end-run around this law.  Apparently, the Federal Trade Commission tumbled to the fact that each of these companies agreed, with one or more of the others, not to solicit that company’s employees. For example, according to the FTC Apple and Google put each others employees on “Do Not Call” lists.

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First Circuit Declines to Reconsider Its Holding That Truth May Not Be a Defense Under 1902 Massachusetts Law

March 20, 2009

The First Circuit has denied Staples’ request that it hear the Noonan v. Staples case en banc, or that it ask the SJC to advise it on how to apply the 100 year old Massachusetts statute which provides that “actual malice” may create an exception to the principle that defamation must be false to be actionable. I posted on this case a few weeks ago (link here), and commented on the agita it had created in the First Amendment milieu. In fact, a vast number of publishers and First Amendment advocates filed an amicus en banc brief urging the First Circuit to reconsider this decision Today, the Court denied this request and let its February 13, 2009 decision stand. In an order several pages long, the Court found that Staples had waived any First Amendment challenge to the state law by failing to raise it earlier, and that Staples could not, moreover, cite a case supporting the proposition that the law was unconstitutional. Here are some selective quotes from the Order: Since its initial brief, Staples has argued under the premise that the term “actual malice” in § 92 means “malevolent intent.” Yet, Staples did not then challenge the constitutionality of such a construction. Thus, the . . . opinion found that it need not consider the issue. . . . The issue is waived, and the fact that the…

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