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Archive for the ‘Employment Law Blog – NC’ Category

Many North Carolina Non-Compete Covenants Could Be in Jeopardy

Posted on: August 8th, 2017

By: Paul H. Derrick

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Automatic renewal provisions are ubiquitous in employment contracts, and many such contracts include non-compete obligations that limit the extent to which an employee can use his/her knowledge and skills on behalf of a competitor in the same industry. A decision by the North Carolina Business Court could have a profound effect on whether non-compete covenants are valid at all when an employment agreement automatically renews.

In American Air Filter Company, Inc. v. Samuel C. Price, Jr. and Camfil USA, Inc., the employee and his employer entered into an employment agreement 17 years after his employment began. The contract contained an automatic renewal provision, as well as non-compete obligations that limited the employee’s future employment for a period of time after his employment ended. Because contracts entered into after employment has already begun often require new consideration beyond continued employment (e.g., a bonus, pay increase, or promotion), the company paid the employee something of value that he was not otherwise entitled to receive. Years later, and after the employment agreement had automatically renewed several times, the employee quit and went to work for a competitor.

The former employer sued for breach of contract, claiming that the worker’s new employment with a competitor violated the non-compete covenant in the agreement. The court determined that that the employee had received sufficient consideration to make the agreement enforceable and valid at the time it was signed. However, it concluded that the agreement was no longer valid at the time the employee went to work for a competitor because the original employer had not provided additional consideration each time the contract automatically renewed in subsequent years. Because the employment agreement was not supported by additional consideration when it renewed, its non-compete covenant was invalid and the employee did not violate any legal obligation when he went to work for a competitor.

A couple points are worth noting. Although the court was applying Kentucky contract law to this particular case, the relevant laws of Kentucky and North Carolina are very similar, and there is no indication that the court would have reached a different result if it had applied North Carolina law. Also, decisions of the North Carolina Business Court are not binding on other courts unless they are affirmed by an appellate court. However, the state’s trial and appellate courts typically look to the Business Court’s decisions for guidance in cases involving restrictive covenants, so it is likely that this decision could become persuasive authority.

For now, it is safe to say that businesses in North Carolina should be aware of this substantial development if they use non-competes and other restrictive covenants in their employment agreements. At the very least, changes may be required in employment agreements that contain automatic renewal provisions so that some amount of new or additional consideration is given each time the contract renews.

If you have any questions or would like more information, please contact Paul Derrick at [email protected].

Lawmakers Seek to Block New EEO-1 Reporting Form

Posted on: July 26th, 2017

By: Paul H. Derrick

The U.S. House Appropriations Committee has dealt a potentially crippling blow to the future of the Equal Employment Opportunity Commission’s revised Form EEO-1. Lawmakers inserted a rider into the government’s annual funding measure that would prohibit the EEOC from spending any of the agency’s budget allotment on its plan to collect pay data from employers on the new form.

Unveiled in early 2016, the revised EEO-1 form would require private employers, including federal contractors, with 100 or more workers to compile and disclose a variety of payroll data with each filing. The data would include information about rates of pay, hours worked, and more. Employers with fewer than 100 workers would continue their current EEO-1 reporting practices.

In addition to blocking efforts to collect pay data, the appropriations bill also directs the EEOC to make reducing the backlog of pending discrimination charges a top priority. According to the Committee’s report, lawmakers want the agency to focus on resolving complaints that employees actually filed, rather than trying to use pay data to decide whether to pursue litigation over things about which “no complaint was filed by an actual/former employee or applicant” in the first place.

Collection of data for the new EEO-1 form was, and technically still is, scheduled to get underway beginning with the period from October 1 through December 31, 2017. The first deadline for filing the new reports is March 31, 2018. If the appropriations bill ultimately becomes law, however, the revised Form EEO-1 almost certainly will not be implemented in the upcoming fiscal year.

We will continue to keep you apprised of developments in this area as they occur. In the meantime, if you have any questions or would like more information, please contact Paul Derrick at [email protected].

DOL Invites Public Comment on Overtime Rule

Posted on: July 26th, 2017

By: Paul H. Derrick

The U.S. Department of Labor has announced that it is formally seeking public comment on the 2016 compensation revisions in the regulations defining the federal Fair Labor Standards Act’s so-called “overtime rule” or “white collar” exemptions.

The overtime rule, which has been blocked by a federal court since November 2016, would require employers to pay certain executive, professional, and administrative employees at least $913 each week in order to avoid having to pay them overtime for all time worked beyond 40 hours in a work week. Under pressure from the business community, the Trump administration previously has suggested that the DOL would likely come up with a salary threshold that is lower than $913 per week but higher than the current level of $455.

The DOL’s announcement says that it is seeking input on 11 broad topics, including:

  • Whether factors such as number of employees and geographic location should be considered in setting the salary threshold for a given employer;
  • Whether executive, professional, and administrative employees should be subject to different salary thresholds;
  • The extent to which employers had already increased salaries of exempt employees (to at least $913 per week) in anticipation of the overtime rule going into effect and what strategies might be in place to deal with employees who would have been eligible for overtime pay under the now-blocked rule;
  • Whether an exemption test that relies only on duties (and does not consider salary) might be preferable, and, if so, which duties should be taken into account; and
  • Whether and on what basis the compensation thresholds should be “automatically updated.”

A copy of the DOL’s request for public comment is available here. The 60-day comment period will end on September 25, 2017.

We will continue to keep you apprised of developments in this area as they occur. In the meantime, if you have any questions or would like more information, please contact Paul Derrick at [email protected].

UPDATE: Governor Signs N.C. Farm Bill into Law; Unions Vow Legal Challenge

Posted on: July 18th, 2017

By: Paul H. Derrick

The ink was barely dry on Gov. Roy Cooper’s signature on the Farm Act of 2017 when leaders of the Farm Labor Organizing Committee (FLOC) and other unions vowed to take legal action to stop the implementation of the law.

As we recently noted, FLOC says the new law would cripple its efforts to collect dues and to organize farmworkers. The Farm Act makes it a violation of the state’s public policy for farms to be required to collect membership dues from employees and forward them along to a union, even if the union and the farm have executed a collective bargaining agreement that requires such dues collection. The law also makes it a violation of public policy for a union to persuade a farm to enter into a union contract as a means of settling a lawsuit or avoiding litigation in the first place.

In a prepared statement posted on FLOC’s website, union president Baldemar Velasquez said that “Gov. Cooper chose to be on the wrong side of history.” He went on to say that “the fight is not yet over. We plan to challenge this [law] in the courts.” Meanwhile, FLOC has planned rallies and press conferences to enlist public support for its cause, and state AFL-CIO secretary-treasurer MaryBe McMillan has pledged the assistance of the unions in her organization, as well.

North Carolina consistently ranks at or near the bottom among all states in terms of percentage of workers being represented by a union. For decades, state officials on both sides of the political aisle have joined with pro-business interests to tout North Carolina’s relatively union-free environment as a major factor in attracting new business to the state.

We will continue to keep you apprised of developments in this area as they occur. In the meantime, if you have any questions or would like more information, please contact Paul Derrick at [email protected].

Unions Cry “Foul” Over North Carolina Legislative Action

Posted on: July 12th, 2017

By: Paul H. Derrick

The North Carolina legislature has passed a measure that has union leaders up in arms. The Farm Act of 2017 contains two provisions that the Farm Labor Organizing Committee (FLOC), the only farmworker union in the state, says would make it virtually impossible to collect dues and to organize farmworkers, especially the migrant workers who make up a large segment of the agricultural workforce.

One provision declares it a violation of the state’s public policy for “agricultural producers” (i.e., farms) to be required to collect membership dues from employees and forward them along to a union, even if the union and the farm have executed a collective bargaining agreement that requires such dues collection. The other controversial provision also makes it a violation of public policy for a union to persuade a farm to enter into a union contract as a means of settling a lawsuit or avoiding litigation in the first place.

According to FLOC’s website, the union typically asks farms that are accused of wage and hour violations or other employment-related matters to recognize it as the bargaining representative of the employees and sign the union’s standard collective bargaining agreement as a means of resolving the dispute. That practice would no longer be lawful under the terms of the Farm Act. Union leaders also would have to travel around the state to collect dues from their members, rather than having the farms take care of it through payroll deductions.

FLOC has only two collective bargaining agreements in North Carolina. One is with an individual farm and the other is a master agreement with a large trade association. The latter agreement covers thousands of workers at the various member farms. The state AFL-CIO has joined with FLOC in opposing the Farm Act and both labor groups are actively lobbying Gov. Roy Cooper to veto the measure.

We will continue to keep you apprised of developments in this area as they occur. In the meantime, if you have any questions or would like more information, please contact Paul Derrick at [email protected].