Why Not Move Away From Geographic Limits in Non-Competes?

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If your employees have access to sensitive or confidential information, it’s likely you required your employees to sign non-competition agreements. Pennsylvania courts don’t look favorably on non-competes and, as a result, they have placed certain limitations on the ways employers can limit their former employees. In the words of Pennsylvania courts, a non-compete must be reasonably limited in both temporal and geographic scope. In other words, your agreement may only last for a reasonable amount of time and it cannot cover a geographic area that is greater than necessary to protect your business interests.

The issue of temporal scope is not all
that complicated and courts won’t have a problem with limitations on employment lasting one or two years. However, the issue of proper geographic scope can be much more difficult to determine. So, instead of trying to determine your geographic footprint and/or the area in which your employee operates, let me suggest an alternative: don’t use a geographic scope.

Now I’m not suggesting that your non-compete should be unlimited in scope, because that will never pass judicial review. Rather, you should create a list of competitors and other employers that could benefit from the confidential information that your employee possesses and limit the former employee from joining those companies for a set period of time. Just be sure that your list of competitors is limited only to those who would truly benefit from your former employee’s knowledge, because if your agreement is challenged, you may be required to explain why each company is included on the list.

Additionally, your list should include a “catch-all” provision allowing you to supplement the list if a new competitor enters the market between the time that your employee signs the non-compete and the employee leaves your employ. Alternately, you could amend your non-competes and require employees to sign a new one when you amend it, provided you offer sufficient consideration each time you ask your employees to sign a new agreement. Of course, this approach requires you to keep an up-to-date list of competitors.

By limiting the former employee from joining your competitors, you can prevent the dissemination of your confidential information, while narrowly tailoring your restrictions in a way that will pass judicial muster. And, just as importantly, the agreement is fair to former employees, who can go work for an employer in the same area where your confidential information won’t be used against you.

Asking for Trouble

Hiring a new employee is full of decisions with legal significance, like whether or not to conduct a background check or whether to review the applicant’s social media pages. While these are certainly important issues, it is also important to consider the questions you may or may not ask during the interview process.

It is fairly obvious that you should not ask an applicant what religion they practice, their nationality or age. After all, Title VII includes religion and national origin as a protected classes, and the ADEA forbids discrimination against workers older than 40. However, you may ask an applicant if there are any days, weeks or time period when he or she cannot work, to determine their availability, or you can ask an applicant if he or she speaks any other languages, if it is relevant to the job, if you’re concerned about English fluency. Age questions, on the other hand, are generally only allowed to determine if an applicant is legally old enough to work for your business. However, other areas become more complicated

You may not ask a candidate if she is pregnant, if she intends to become pregnant or if she would return to work after maternity leave. However, if you are concerned about this particular area, there are questions you may ask. Inquiring into the candidate’s ability to work overtime and travel (if relevant to the job) should alleviate any concerns about whether family obligations will cause a problem. Similarly, asking the candidate about long-term career goals is proper and will allow you to gauge her commitment level.

The hiring of smokers and obese workers has become something of a hot-button issue lately, but asking if a candidate smokes is not advisable. While it is likely a poor choice to deny employment based solely on smoking, you could ask if he or she was previously disciplined for violating company policies regarding the use of tobacco products. Similarly, while you should not ask a candidate’s weight or body-mass index, you may inquire about the candidate’s ability to perform the necessary job functions, like standing for certain periods or frequent bending and lifting.

Finally, and often most confusing for employers, you cannot ask a candidate about disabilities. However, you may ask the applicant whether or not they are able to carry out the necessary job functions and perform them in a safe manner. You should not ask the applicant about any accommodations he or she may need until you have determined that the candidate is qualified for the job and you are considering them for employment. At that point, you will have to determine whether you can make reasonable accommodations for the applicant’s limitations, preferably with the assistance of legal counsel.

Prior to interviewing, you should prepare a list of questions with your legal counsel. A prepared list of questions will help you avoid asking any illegal or inappropriate questions, and also ensure that none of the candidates receive treatment that could be deemed favorable.

EEOC Offers Guidance on Using Arrests and Convictions in the Hiring Process

The EEOC voted 4-1 to release enforcement guidance regarding the use of arrest and conviction records in the hiring process. With the easy availability of criminal records today, and a population who is increasingly coming into contact with the criminal justice system, particularly African-American and Hispanic men, the EEOC determined that updated guidance was needed. While acknowledging that having a criminal history is not a protected class under Title VII, liability may lie where an employer’s reliance on a criminal record to deny employment treats an employee differently due to his or her protected status or disproportionately screens out a protected group without relation to the position and business necessity.

The issue of whether an employer’s policy disparately treats a protected group is usually much easier to determine. Essentially, if an employer’s background check process treats an applicant from a protected group differently than an applicant outside that group (regardless of whether the other applicant is also in a protected group), then a finding of disparate treatment is likely.

However, determining whether a facially neutral criminal background check policy disparately impacts applicants in a protected group requires significantly more analysis. If an applicant can show that the employer’s policy eliminates members of a protected group more than applicants that are not part of the protected group, which may be as simple as showing that members of the protected group are arrested and convicted at a higher rate, the policy likely has a disparate impact. The employer must then show that the policy is justified in light of the job requirements and the necessities of the business.

In determining whether the policy is job related and consistent with business necessity, the EEOC emphasizes that arrests and convictions must be treated differently. An arrest is not sufficient to deny employment, but an employer may make the employment decision based upon the conduct underlying the arrest, if the conduct makes the applicant unfit for the job. The important distinction is the focus on the conduct, not the arrest. In short, the conduct may be considered if it would be sufficient to deny employment if the applicant had not been arrested.

Conviction records tend to be more reliable, and therefore, may be acceptable grounds for denying employment. However, the Commission does recommend that employers refrain for asking about convictions on job applications and limit any inquiries to those related to the position. To show that the policy operates to deny employment only to those applicants whose criminal conduct, and the dangers it indicates, are linked to the risks of the position, employers should either:

  • create a screening process that is narrowly tailored, with the process validated per the Uniform Guidelines on Employment Selection Procedures or
  • develop a screening process where, upon screening out an applicant, an individualized assessment is conducted

The individualize assessment requires notifying the applicant and allowing him or her to demonstrate that they should not be excluded. The employer should consider a number of factors during the assessment, including: the circumstances of the conduct, the number of convictions, whether the same time of work was performed post-conviction, the employment history before and after the conviction, rehabilitation efforts and character references. While quite onerous, if the applicant does not cooperate with the employer’s efforts to gather information, a decision may be rendered with the information the employer was able to gather. While not mandatory, the Commission does note that a screening process with an individual review will be less likely to violate Title VII.

Where federal laws and regulations disqualify convicted applicants from certain occupations, the employer is entitled to deny employment based on applicable convictions. However, state and local laws that limit or prohibit the employment of applicants with certain criminal convictions are preempted by Title VII and are not a viable defense.

In light of this new guidance, employers would be wise to eliminate policies where applicants are excluded for any negative criminal history, in favor of a policy that is narrowly and specifically tailored to the open position, with an individual review process. In order to narrowly and specifically tailor the policy, the employer should consider the requirements of the job and the liability risks that the job entails, and then determine the specific offenses that indicate unfitness for performing job. Consideration must also be given to the duration of the exclusion based on the available evidence. Finally, and of great importance, managers and other hiring decision-makers must receive training regarding the new hiring procedure in order to ensure that the criminal background check policy is implemented as intended and in compliance with Title VII.

To Handbook or Not to Handbook

Terrible Shakespeare paraphrasing aside, the question of whether or not an employee handbook is necessary has been discussed, sometimes heatedly, on a number of occasions. It is easy to see why the employee handbook is ostracized, many are long, boring, heavy and complicated, to the point where an employee needs to hire his or her own legal counsel to parse through the legalese. This assumes, of course, that the employee is even reading the handbook.

I count myself as a proponent of employee handbooks, and not because I write them. If you have read any of my other blog posts, you will notice that I am a firm advocate of clear communication with employees.

Many employee handbooks forget the main purpose of a handbook, to communicate the policies to the employee. For example, your vacation policy should only require a few sentences: how many days they get, the way vacation is accrued, and the policy for requesting vacation.

The contents of an employee handbook will always differ from business to business. Most employers want policies regarding time off, discrimination, and harassment. Your business may want or need to have a dress code, or a computer/social media policy; and the bulk of a handbook’s content should be specifically tailored to your business. However, one rule should govern handbook drafting: keep it as simple as you can. And I would be happy to discuss your particular handbook at any time.

Got Trade Secrets?

Whether you realize it or not, there’s a good chance that your business has trade secrets that are protected under the law. The Uniform Trade Secrets Act, adopted by the majority of states, defines a trade secret as information, including a formula, drawing, pattern, compilation including customer list, program, device, method, technique or process which derives independent economic value from not being generally known or available, and is subject to reasonable efforts to maintain its secrecy. Essentially, the information is considered a trade secret if it provides competitive value to its owner and the owner takes substantial steps to keep it secret.

While most businesses do not possess trade secrets on the same level as the formula for Coke, it is still fairly common for most to possess trade secrets in some form or another. If your business has customer lists, a special method for performing a task or process for making a product, you could have a trade secret. Of course, for information to be considered a trade secret, the business must treat it as such.

Generally, the first step in protecting trade secrets is including a confidentiality policy in your employee handbook that sets forth the employees’ confidentiality obligations. The policy should that any trade secret information should be returned upon termination or retirement, and it should never be communicated to a third party without authorization.

Next, it is important that only employees who need to know the information have access to it. Any documents or other information stored electronically should require a password to access them. Password protection will limit the number of people with access and, if information is stolen, can help to determine the person that last accessed the information.

When employees have access to information that is extremely sensitive, it would be prudent to require a confidentiality agreement coupled with a non-competition agreement. It is important to remember that every state has different requirements for covenants not to compete, particularly with regard to the temporal period and the geographic scope. And a covenant not to compete, like any contract, requires some form of consideration. For example, an employee agrees to sign the covenant not to compete in exchange for the opportunity to work for the employer. The situation is more complicated if you are asking an employee to sign a non-compete after the hire date; in that case it is generally sufficient to offer a bonus payment or extra vacation days in return for signing the agreement.

If an employee leaves the company, particularly when they have regular access to trade secrets, it is a good practice to obtain records of their computer activity leading up to their departure. If you are forced to file a lawsuit, any suspicious activity prior to departure will work heavily in your favor.

The level of protection required for your trade secrets will vary depending on the type of trade secret, its usage and the size of your business, so its wise to seek legal counsel when developing or updating your confidentiality policy.

Background Checks Aren’t for Everyone

Employers routinely use background checks when hiring new employees, without considering the consequences of using them on every applicant. The EEOC’s current standing policy provides that criminal background checks should be limited to only those positions where such information is “job-related and of business necessity,” and should only seek information about convictions, not arrests.

The Fair Credit Reporting Act, in addition to providing rules regarding credit checks, imposes a number of requirements on employers seeking to obtain a criminal background check.  Before obtaining a criminal background check, an employer must disclose in writing to an individual that the report may include in-depth information about his or her character, general reputation, personal characteristics, mode of living, criminal, driving and work history.  The disclosure must be delivered no later than three days after the report was first requested and include a statement informing the individual of their right to request additional disclosures and receive a written summary of legal rights. If an individual requests additional information about the investigation, the employer must mail or otherwise provide the information within five days of receipt of the written request, or the request date of the report, whichever is later. Employers must take “reasonable measures” to protect against unauthorized access to or use of information in connection with the disposal of consumer information.

In order to prevent legal trouble, employers can take a few easy steps. Employers should have a clear reason for requiring a criminal background check, relating to the open position. For example, a position where the applicant will have access to the employer’s or customer’s money could require a background check to ensure that the applicant does not have any fraud convictions. In addition, employers should discuss the information they are allowed to consider with legal counsel, and then limit the background check to that information, so that no improper information is included in the background check, which ensures that there is no chance that improper information would be considered during the hiring process. Finally, blanket policies, where every applicant is given a background check, should be avoided. A discussion with legal counsel can provide specific guidance on when criminal background checks are appropriate, and what information can be sought.

The Cost of Curiosity

In a growing trend, employers are asking job applicants and employees to provide login information to their Facebook pages and other social networking accounts. Many are questioning the propriety of asking for login information, particularly because an applicant or employee may believe refusing will cost them a job. However, even reviewing social media profiles, or utilizing a third-party application, to obtain information about applicants and employees may expose employers to legal liability.

Facebook has already confirmed that password sharing is prohibited under its Terms of Service. Facebook’s “Statement of Rights and Responsibilities” Section 4(8) explicitly prohibits password sharing:   “You will not share your password, (or in case of developers, your secret key), let anyone else access your account, or do anything else that might jeopardize the security of your account.” While violating the letter or spirit of the Facebook Rights and Responsibilities can lead to deletion of the user’s Facebook account, there are few real legal consequences for such violations. The Department of Justice regards entering a social networking site in violation of the terms of service to be a federal crime, but admitted that they would not prosecute offenders.

There are real legal dangers in asking an applicant or employee for login information, or even reviewing their social media accounts.  Many people post information on social media sites that may show a protected status (age, sex, religion, disability, genetic information, race, national origin and pregnancy), lawful off-duty conduct (alcohol or smoking), or criminal history.  Such information may be, albeit unintentionally, factored into hiring or workplace decisions. It could be particularly damaging if an employer requested access to social media accounts, and then makes a decision that detrimentally affects the applicant or employee. It simply creates more fodder for a potential lawsuit.

Employers that insist on reviewing applicant or employee social media profiles should take steps to maintain objectivity. Assigning a non-decision-maker to review the social media profiles, before passing on relevant information onto the hiring personnel, can help to prevent those making the hiring decision from relying on improper information. Employers may also want to limit their social media search to LinkedIn, because it is a professional site, which is much less likely to display improper information.

In the end, employers are generally better off not trying to obtain information about applicants and employees via Facebook and other social networks. The possibility that important information may be unearthed is greatly outweighed by the potential legal pitfalls and lawsuits a search may create.

Hat-tip and thanks to Susan Stobbart Shapiro