Momentum continues to build in Massachusetts for that state to adopt the California model and ban the enforcement of employee covenants not to compete in the state. Last fall, we told you that Gregory Bialecki, Secretary of Housing and Economic Development under Gov. Deval Patrick (D), went on record as saying that the administration supports the “outright elimination of enforceability” of noncompetes in Massachusetts in a story broken by Scott Kirsner of the Boston Globe.
Of course, there is often a world of a difference between a politician “supporting” something and being willing to actually spend political capital to try and bring about actual legislation. At first, Gov. Patrick’s support was limited to 2013’s H.B. 1715, which (as we explained here, over a year ago) would not have prohibited noncompetes, but would have instead created a statutory regime that prohibited such clauses that exceeded six months in length. That bill failed to pass the legislature in 2013.
On Friday, we described a lawsuit brought recently by five Buffalo Jills cheerleaders claiming that they should have been paid the minimum wage for all of the hours that they worked for the squad but were not. We said that a key issue in the case is whether the Jills are employees or independent contractors for purposes of New York wage and hour law because employers are required by the law to pay employees – but not independent contractors – the minimum wage. The lawsuit raises another question: is it a valid defense to the Jills’ claims that the defendants required them to sign contracts expressly agreeing that they are "independent contractors"? Here is one of those rare legal issues with a simple answer, at least under the federal wage and hour law called the Fair Labor Standards Act: No. As recently as last year, the U.S. Supreme Court said of the Fair Labor Standards Act: "The FLSA establishes federal minimum-wage, maximum-hour, and overtime guarantees that cannot be modified by contract."
So companies should beware that having people who work for them agree in writing that they are independent contractors does not inoculate the companies from wage and hour claims. And people who work for companies should know that just because they signed something saying that they are independent contractors does not necessarily mean that they are for purposes of the wage and hour laws. They may in fact be entitled under the law to be paid the minimum wage and overtime.
Here as we approach the close of April, we’ve noticed (in something of our Moneyball moment) that three of the four cities where Zuckerman Spaeder has offices – New York, Baltimore, and Washington – host baseball teams that have won more than half their games thus far this season. Our colleagues in Tampa are the only ones with a team winning below .500. Maybe we can make up for that by opening an office in Milwaukee, where the Brewers have won nearly 75% of their games.
In any event, the items below came over our transom this work and are worthy of note in the world of executive employment disputes:
In a lawsuit filed on Tuesday, five Buffalo Jills cheerleaders claim that the Buffalo Bills NFL franchise and two companies that manage the squad are violating New York wage and hour laws. The Jills allege that they are "employees" for purposes of New York law and therefore must be paid the minimum wage - $8 per hour in New York – for their work as Jills. We have explored wage and hour laws – the federal Fair Labor Standards Act and similar state laws – here at Suits by Suits before but not the employee versus independent contractor distinction that is the key to many wage and hour cases and on which the Jills’ case could turn.
The answer to that question, at least according to the Ninth Circuit Court of Appeals, is “no.”
It seems straightforward, but getting to that “no” requires a little bit of an understanding of insurance – in this case, directors’ and officers’ (“D&O”) insurance. A D&O policy was at issue in this case, Forest Meadows Owners Assoc. v. State Farm Ins. Co., in which the policyholder – a condominium association – was sued by an employee it had fired, and sought coverage from its insurer.
You can read about it in the Times: the publisher of Texas Monthly sued The New York Times Companylast week over Jake Silverstein leaving his post as editor-in-chief of Texas Monthly to be editor of The New York Times Magazine. Silverstein had a three-year contract with the Texas publisher that was supposed to run through February 2015. The publisher claims that The New York Times Company tortiously interfered with that contract, causing Silverstein to break it. This is a common scenario for sought-after executives when they switch companies: the companies fight in court over them but not against them. The executive in the middle may feel like she dodged a bullet by not being named as a defendant in the lawsuit. In fact, it is not so simple.
Jerry Kowal doesn’t have a lot of nice things to say about his former employer, Netflix. In a recent lawsuit filed in California Superior Court, he claims that Netflix was a “cold and hostile company,” with a “cutthroat environment.”
According to Courthouse News’s description of Kowal’s complaint, Netflix didn’t have very nice things to say about Kowal, its former content acquisition executive, either. Kowal alleges that when he told Netflix he was leaving for Amazon, Netflix lashed out by accusing him of stealing confidential information and passing it on to Amazon. As a result of these accusations and Amazon’s “strict liability policy,” he was fired.
Now, Kowal has sued Netflix, its CEO Reed Hastings, executive Ted Sarandos, and Amazon, alleging a number of torts including defamation, false light invasion of privacy, civil conspiracy, intentional interference with employment relationship, blacklisting and wrongful termination. Kowal’s suit shows that an employer’s decision to accuse a departed employee of wrongdoing carries with it a significant litigation risk, especially if the employee loses his job as a result of the accusation.
We here at Suits By Suits used up pretty much all of our literary creativity in drafting last week’s Inbox, a stirring tribute to the late, great director John Hughes as seen through the cast of his seminal film, The Breakfast Club. So this week, in the words of Joe Friday, you get just the facts, ma’am – which is to say, a terse rundown of the week’s developments delivered in a gruff, no-nonsense style:
Oh, and just one more thing:
In researching and writing Monday’s blog post, I came across another unique wrinkle in the Florida statute that governs covenants not to compete, § 542.335 of the Florida Statutes. I think it's worth examining that provision in more detail as part of our ongoing efforts to educate employers and employees as to the varying state-by-state nuances in different jurisdictions that can affect the ultimate questions as to whether and how that state will enforce an employee’s covenant not to compete.
As the regulatory and business environments in which our clients operate grow increasingly complex, we identify and offer perspectives on significant legal developments affecting businesses, organizations, and individuals. Each post aims to address timely issues and trends by evaluating impactful decisions, sharing observations of key enforcement changes, or distilling best practices drawn from experience. InsightZS also features personal interest pieces about the impact of our legal work in our communities and about associate life at Zuckerman Spaeder.
Information provided on InsightZS should not be considered legal advice and expressed views are those of the authors alone. Readers should seek specific legal guidance before acting in any particular circumstance.
John J. Connolly
Partner
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Andrew N. Goldfarb
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Sara Alpert Lawson
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Nicholas M. DiCarlo
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