Copy

3rd Quarter Newsletter - Published October 1, 2021

IN THIS ISSUE:
  • The Importance of Brand Recognition, Haynsworth Sinkler Boyd
  • Tales from the Dark Side Redux, Willoughby & Hoefer
  • What Employers Need to Know About COVID-19 Vaccine Requirements in the Workplace, Womble Bond Dickinson
  • Federal Government Takes Aim at Employers' Non-Compete Agreements, Jackson Lewis

President's Message

Jordan Dinos, President

Dear ACC South Carolina Chapter Members,

Welcome to the brand-new ACC-SC year!  On behalf of myself, our officers, and board, allow me to express my gratitude for the opportunity to serve this phenomenal organization.  With approximately 212 members across South Carolina (and beyond!), from the upstate to the capital to the coast, and with an even broader range of industries, it is an honor to serve this talented and dynamic group of professionals.

I’d also like to thank our sponsors for their generous support and the key role they play in allowing us to provide best-in-class educational programming to our members.  Most recently, our 2021 Annual Meeting offered topics as varied as labor relations, antitrust, vaccinations, tax, NIL law, and 30(b)(6) witness prep.  While we’d hoped to gather in person and enjoy some entertainment afterward, the ongoing pandemic prompted a change of plans.  We’ll continue to monitor the situation in the year to come and hope to see you in person soon.

On that note, as articles about
zoom fatigue accumulate and serious publications ponder the fate of real pants, I want to hear from YOU about how we can best serve you from a distance—from timing and topic of virtual programming to the first event you’d like to see planned when we’re back in person.  On these and all topics, I promise that we’ll consider your input and be a better organization for it.   

Thanks again for your support and engagement—I look forward to doing great things together in the year ahead.

2021 ACC SC Chapter Virtual Annual Meeting

Thank you so much to those who sponsored our 2021 Virtual Annual Meeting. It was a great program with great attendance throughout the 7 hours of CLE provided.

That credit has been reported to the SC Commission on CLE for all attendees. If you are interested in self-reporting, the CLE Course Number is: 910256ADO. CLE certificates have been sent to all attendees. If you have a question about this please contact kconrad@capconsc.com.

Presentations, as well as a recording of the meeting, are available on the ACC South Carolina Chapter
website here. Thank you to all who made this meeting a success!

To request access to the Witness Checklist from the Butler Snow presentation during the ACC SC Virtual Annual Meeting, please click here

The Importance of Brand Recognition
Written By: Todd M. Hess

Our brains respond differently to names over other words that are generally used but that lack any well-established association. Endorphins excite our brain when we hear the sound of a name with which we have established a positive recognition. Such a positive recognition may be the result of our own favorable experiences associated with a stay at a particular hotel, dining at a specific restaurant, or positive and memorable use of a product having a particular brand name.

A brand name associated with any service or product becomes a moniker through which others may recommend such services or products, establishing the needed response in a person's mind when seeing or recollecting a past referral. For example, brand names can establish a positive experience in the minds of most persons relative to the generic product name. Some examples include Cinnebon® versus Cinnamon Roll, Starbucks® versus Coffee, Tobleron® versus Candy Bar, Nathan's® versus Hot Dog, and Budweiser® versus Beer. Names may also establish negative associations in certain people. Examples include CopyCAT knock-off fragrances (United Kingdom), You're Fired trademark to Donald Trump, and New Coke renamed Coke II, which was discontinued in 2002.

While no one brand may appeal to everybody, the goal of the branding effort is to appeal to those who are likely to buy your product or engage in your services. Thus, the marketing effort in developing the brand may initially be more focused, but it can be expanded to include others if the brand appeal is there.

Conventionally, marketing was focused on selling, but now marketing is primarily focused on branding. Money and time focused on branding can continue to benefit the organization, whereas when the primary focus is on selling, the brand may not experience the needed growth.

Selling is actually in decline because customers are more in the mode of buying. The Internet has become the dominant domain in terms of searching for needed products and services. Customers know what they are looking for and generally include those requirements in a search. If the product or service does not match the criteria they are looking for, it gets bypassed. However, when a customer recognizes a brand they have developed a positive experience with, the endorphins drive the customer to explore that brand further to see if it meets the criteria. Even if it does not fully meet that criteria, the customer may recognize why a particular criterion is not of any importance given the positioning of the brand in the marketplace.

The Internet has changed the way that products and services are branded. For example, travel agents used to book travel arrangements for people. However, now, with the Internet, people are able to search out the fare they are willing to pay and fully make their own accommodations if they so desire. In some cases, depending on the provider of those services and that person's experience with the provider, they may be driven to pay a little higher price seeking comfort with those services. Travel is just one example where people now digitally seek out their product and service choices. Clearly, the Internet is a catalyst for the move from a seller's market to a buyer's market.

While there have been big brand successes on the Internet—Amazon and Google, for example—this does not necessarily mean your company or organization needs to have a similar branding effort. For example, Apple has been successful at selling online and accommodates sales through its app and its Apple Stores. Amazon is also opening brick-and-mortar stores, recognizing this is still a purchasing choice for some consumers. Many goods and services are sometimes best offered through a brick-and-mortar store for the customer to stop with questions, define the final product form or service, or even obtain service on a previously purchased product. An analysis of the extent of your company or organization's involvement on the Internet should be done in tandem with the branding strategy.

A concern involving not only the expansion of a brand on the Internet but any expansion of the brand in any market is the possibility of diluting the impact the brand has on those products or services intended to be included in the brand's scope. Examples of this dilution in the past have included certain automobile manufacturers, including Chevrolet, for example, and, even to some extent, Tesla who has expanded the reach of its name beyond a myriad of electric cars, but also extends to an electric boat, supercharger stations to power these transportation devices and "clean" power-based tools including solar panels.

When marketing and brand building become inextricably linked, marketing becomes a component of the brand-building process. However, brand building constitutes other components, including product or service quality control, reliable product delivery, responsive customer service—i.e., those sides of the organization that the customer typically sees or has some connection with. In essence, a brand is a commitment to the buyer that the product or experience they are purchasing drives the desired feeling they achieve when the product is used or the service is delivered. The confluence of economics and the psychological impact drives the existence and strength of brands.

In addition to the factors identified above, legal use and protection of the mark associated with a brand is another component of the brand building and preservation process. Protection of the brand to prevent another party's inappropriate use of the mark is the subject of trademark law. Furthermore, ensuring the use of a mark in association with the brand does not infringe upon the intellectual property rights of others, which could prove costly to the brand. Many companies have either needed to pay a large sum of money to continue use of a brand that belongs to somebody else or, even in some instances, discontinue use of the brand altogether.

Businesses that strive to excel through the services or products they offer can miss a valuable opportunity to associate and continuously use a name connected with such services or products. Well-established brands allow a business's goods or services to be recognized in a crowded market space where consumers have many choices. From a legal standpoint, such marks may be registered with the United States Patent and Trademark Office (USPTO) and become a registered trademark that is available for your sole use in connection with the service and/or product for which you have registered the mark. While there are common law rights in a mark that has not been registered, those protections are limited and include protection only in the geographic area where the mark has been used in association with the product and/or service. Also, if somebody else has registered that same mark in association with a service or product that closely resembles your service or product that predates your use, they can legally force you to stop using that mark. So, what typically amounts to less than a couple of thousand dollars in legal fees and registration costs to have a mark registered in the USPTO, usually is money well-spent. It helps establish and protect a name through which you can market your services or products without the fear of retribution from others who may claim ownership to that mark.

Products and services typically have limited life cycles relative to the brand used to promote them. Brands can continue to survive even when products or services used in association with that brand terminate and are replaced by upgraded or revised products or services. Brands may continue to be used to convey quality, credibility and experience in replacement products and/or services. Brands add value to a company and can be found on the balance sheet of many such companies. Also, the brands and associated trademarks of a company that is being considered for purchase should be evaluated as part of the due diligence process in establishing the value of the company.

Indeed, many acquisitions of companies are motivated by the brands that are being acquired. Some well-known examples include Tata Motors of India’s purchase of Jaguar and Range Rover from Ford for $2.56 billion; InBev's acquisition of Budweiser to continue to expand their worldwide distribution of brands that include Stella Artois (Belgium), Becks (Germany), Boddingtons (United Kingdom), SABMiller (acquired afterward) and Tolstiak (Russia) Labatt; and Kraft's purchase of Cadbury for $19.5 billion and then later H.J. Heinz Co.'s purchase of Kraft Foods as supported by Warren Buffett at close to $37 billion. Interestingly, Kraft-Heinz eventually took a goodwill impairment charge and wrote down the value of Kraft and Oscar Meyer brands by $15.4 billion.

In addition to brand strength that has already been established, some marks may be of importance due to the creative aspects of the companies with which they are associated. In particular, established trademarks in hotels and restaurants tend to encompass the creative aspects of accommodations or the preparation and presentation of dining fare. Some examples of registered trademarks associated with hotels and/or restaurants include Your Mom's House®, Sea Watch® and Beach Hut®, which are examples of word marks. Designs or a design plus words may also be registered, with the latter being preferred when attempting to establish some needed name recognition.

If you have a business and you eventually establish, or have established, a positive experience surrounding a particular mark, then you should consider registering that mark as a trademark to safeguard the protection you have in association with that mark. Brand protections add value to a business.

Todd M. Hess is an intellectual property attorney at Haynsworth Sinkler Boyd, with more than a decade of business and industrial intellectual property experience. He helps clients obtain patents, trademarks and copyrights, and serves as counsel in related litigation, including trademark, trade secret and patent infringement matters. Todd is a certified mediator in the Superior Courts of North Carolina and Eastern, Middle and Western Districts of North Carolina. He is licensed in Georgia, North Carolina and South Carolina. 
 
Prior to joining HSB, Todd was an attorney with a boutique intellectual property firm and served as in-house counsel for two major manufacturers where he was responsible for United States and global patents, trademarks and domain name registrations. He managed portfolios of more than 700 issued patents, 1,300 registered trademarks and 200 domain name registrations.
 
Additionally, Todd is a registered Professional Engineer and a Certified Financial Planner™. He published Protecting Your Brand in 2019.

Tales from the Dark Side Redux
Written By: Walker Humphrey

A few years ago, I published my first “Tales from the Dark Side” article which called out various litigation mistakes I’ve seen corporate defendants commit.  It was based on my observations as a plaintiff’s lawyer trying asbestos cases across the country before returning to South Carolina in January 2017, where I now represent both plaintiffs and defendants in a variety of matters at trial and on appeal.  I’ve opted to re-share some old “secrets” from my work as a plaintiff’s trial lawyer and some new observations to help you better protect your clients.  These are some of the pitfalls I’ve seen that you want to avoid in litigating your cases.  May we all continue learning the lessons of the past.

Follow Your Records Retention Policy
In the 1980s, one asbestos defendant refused to produce its historical medical library containing information on the hazards of asbestos because it was too voluminous.  It later destroyed the library and changed its responses to, paraphrasing, “Oh that little thing?  It was tiny and had nothing, so we got rid of it.”  However, the company’s record retention policies from the 1980s required that the library be preserved indefinitely because it had been requested in litigation.  The company’s 30(b)(6) witness candidly admitted to me the library was destroyed in violation of this policy.  That walked the company into a recurring motion for an adverse inference instruction based on spoliation of evidence.
[1]

Record retention policies are extremely useful tools.  Every company should have one.  But you must follow them, lest a shortsighted strategic move haunt you decades later.

Select Your 30(b)(6) Witness Carefully
This doesn’t pertain to the witness I just mentioned.  He was candid, forthright, and precise without unnecessarily giving anything away.  He was the witness you want.  He plays well to a jury and dutifully serves your company.  But not every defendant selects one this wisely.

There are two extremes I have seen.  One is the obstinate, hardnosed witness who won’t admit the sky is blue so long as denial serves some interest of the company.  This witness may work well if the strategy is to try your case in summary judgment motions and then settle if unsuccessful.  But if you might try your case to a jury, this witness can become your worst enemy.  Just one video of this deposition reinforces the jury’s worst, even if unfounded, fears that corporate defendants are obstructionist, combative, and untrustworthy.

At the other end of the spectrum is the witness who gives up too much.  I personally liked these witnesses.  But I must confess they are not the best for you.  Adequate preparation on the scope of the examination, the issues involved in the litigation, and the evidence is key to avoiding this pitfall.  You don’t want—as I have seen—your 30(b)(6) witness giving up the farm, taking an immediate break at the request of counsel to confer (an option not available in South Carolina), and then asking to make a “clarification” on the record (which the plaintiff’s lawyer may not allow).  You also don’t want—as I also have seen—the witness taking the stand at trial with a written letter from the defense attorney directing how he should testify sticking out of his pocket.  And you certainly don’t want that letter being admitted into evidence without objection…

Pay Attention to the Scope of a 30(b)(6) Notice
A 30(b)(6) deposition notice defines the subjects on which your witness must be prepared to testify.  You are not required to select a witness who has personal knowledge of the listed topics.
[2]  Instead, you can educate hand-selected individuals and prepare them to testify from the evidence reasonably available to your company.[3]  This allows you to choose one individual to testify on all the identified topics rather than a slew of witnesses who must be individually prepped and deposed.

Regardless of who testifies, the witness must be prepared to speak on your company’s behalf as to each topic.  Having an unprepared witness can lead to sanctions.  So too can limiting the witness’s responses to only the identified topics.  The 30(b)(6) notice limits the scope of the witness’s required knowledge, not the scope of permissible inquiry.
[4]  If the plaintiff’s attorney strays from the notice and asks questions unrelated to the listed subjects, the witness must be allowed to answer the question.  If he or she has no knowledge, then the plaintiff can’t complain.[5]  But you cannot instruct a witness to not answer a question on this ground.[6]  I’ve obtained sanctions to the tune of thousands of dollars for this.

Keep It Simple
PowerPoint is an excellent tool for trial.  I’ve yet to try a case without multiple presentations, from opening, to direct, to cross, to closing.  Much ink has been spilled advising on the content of slides.  I want to make a slightly different point. 

Keep your design and layout clean and unadorned.  You don’t want your PowerPoint to look like a polished Boardroom presentation.  Remember, many jurors subconsciously are weary of corporate defendants.  A presentation that is too slick, too polished, and too expensive re-enforces that perception.  Opt instead for something simple.  I use a plain white or black background with contrasting plain text, simple images, and single-color text boxes as necessary.  A lot of work goes into them, but the emphasis is on the substance of the slides and not how fancy they look.  The result is a more effective communication of your ideas without any distractions.

Keep Your Discovery Responses Consistent
This is most applicable to those involved in multi-jurisdictional litigation.  On a hunch, we served one company with identical requests for admission in multiple cases.  The requests were generic and not case specific.  The responses we received had various inconsistencies in salient facts that had no facial explanation.  We showed a collection of them to the company’s 30(b)(6) witness, and all she could say was, “I’m sure we had a reason.”  That immediately undermined the company’s credibility before a jury going forward.

It appears the company had different lawyers drafting discovery responses for different jurisdictions.  Without sufficient oversight, the company raised a large red flag by sending inconsistent responses to one law firm.  If you are involved in the same litigation in multiple jurisdictions, consider centralizing the drafting of discovery responses to minimize the risk of opening the door to these unforced errors.

Be Strategic with Motions in Limine
Many corporate defendants file an inordinate number of motions in limine.  I’ve seen over 100 filed by a single defendant.  While they certainly burden plaintiff’s counsel in responding to them, they also overburden the court.  In one of my trials, an incensed judge slammed the defense motion binders on the bench as they piled so high that they began falling to the floor.  One falling binder took down the American flag behind the judge’s chair.  The judge then angrily proclaimed, “Now, what I am supposed to do with these?”  That’s not a good start to a trial.  Judges have also sanctioned defense lawyers for filing too many motions in limine.

Motions in limine should be strategic and reserved for critical or highly prejudicial evidence.  This communicates to the judge that you have been thoughtful, are cognizant of court resources, and have determined what truly matters in your case.  Remember also that rulings on motions in limine in South Carolina state court are preliminary only.
[7]  To preserve the issue for appeal, the party seeking admission must still introduce the evidence at trial followed by a contemporaneous objection.[8]  Before filing a motion in limine you expect to be contested, ask yourself if the evidence is something you would object to during the trial.  If not, consider letting the motion go.

Be Careful Relying on Others
In multi-defendant litigation, defendants frequently band together to share experts, trial logistics, and knowledge.  Of course, these cost-saving measures are to be commended.  But what happens when the defendant who has taken the lead on expert retention, arranging for trial support, and cross-examining the plaintiff’s experts settles?  Best case scenario, you’re left footing the bill and trial just got more expensive.  Worst case scenario, the support and relationships you were relying on vanish—you’re left without an expert and the knowledge to effectively cross-examine the plaintiff’s experts.

Trial is a fluid process, and you could end up in the spotlight at any time.  Make sure any co-retention agreements for expert witnesses require that the expert testify for you even if everyone else settles.  Don’t go into trial unprepared to take the lead on presenting and crossing witnesses, as that responsibility could fall on you at any moment.  I’ve seen that mistake result in costly jury verdicts.  If you want to rely on technology, have backup equipment and technicians available as necessary. 

Watch Out When Interviewing Former Employees
You aren’t always going against an individual in litigation.  Often, your opponent will be another corporate entity.  The rules for interviewing an opponent’s former employees can be murky.  During one trial of mine, a major question arose regarding the propriety of opposing counsel’s secret meetings with my client’s former CEO.  The judge paused trial so I could cross examine the lawyer under oath about what happened.  I don’t think she enjoyed it.  Be sure to cross your t’s and dot your i’s before contacting an adversary’s former employees, and particularly before contacting former management.

The Golden Rule
“Do unto others as you would have them do unto you.”  Fortunately, this rarely is an issue in South Carolina.  But it does come up.  If you reach an agreement with opposing counsel, you should abide by it.  It may be tempting to abandon the agreement to score a point down the road.  But your opponent will remember it, even if you ultimately don’t win that issue.  Your credibility is lost in that case and all others.  Furthermore, your failure to follow an agreement likely made the remainder of the case much more expensive for your client.  It isn’t worth it. 

Preserve That Error
I have two appeals pending right now where the trial lawyers arguably didn’t preserve their objections.  Error preservation requirements can be complex and unforgiving, particularly in state court where there is little room to beg for forgiveness.  And appellate law clerks assiduously review the record for preservation issues even if the parties don’t catch them.  Consider retaining appellate counsel early to build your trial record if the issues are important enough.

Honestly Evaluate the Risk You Face
Many cases go to trial because at least one party has failed to fully and honestly appreciate the risk posed.  To be fair, many plaintiffs fall into this trap.  But so do many defendants.  They are too confident in their position and fail to understand or appreciate the plaintiff’s case.  Then they can’t figure out why the jury found for the plaintiff.

This is easier said than done without resorting to hindsight, and no two cases are alike.  You must have a good relationship with outside trial counsel who can in turn be honest with you about both your case and the plaintiff’s case.  Surprises can and do happen.  But being frank about your case and having counsel who can be frank about your case, helps avoid them.

 

[1] See Stokes v. Spartanburg Reg’l Mem’l Med. Ctr., 368 S.C. 515, 522, 629 S.E.2d 675, 679 (Ct. App. 2006) (approving of adverse interest instruction to be given for spoliation of evidence).
[2] 8A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure: Civil § 2103 (3d ed. 2021).
[3] Id.
[4] E.E.O.C. v. Freeman, 288 F.R.D. 92, 99 (D. Md. 2012).
[5] Id. 
[6] Id. 
[7] State v. Moses, 390 S.C. 502, 511, 702 S.E.2d 395, 400 (Ct. App. 2010).
[8] Id.

Walker Humphrey is an attorney in the Charleston office of Willoughby & Hoefer, P.A.  Following law school, he clerked for Justice Kaye Hearn on the South Carolina Supreme Court.  He then worked for a national trial firm based in Dallas before returning to South Carolina and joining Willoughby & Hoefer.  His practice focuses on commercial, environmental, and securities litigation, as well as appeals.

What Employers Need to Know About COVID-19 Vaccine Requirements in the Workplace
Written By: Richard Rainey, Ashley Kutz Kelley, and Mark Henriques

In June, with tens of millions of Americans getting vaccinated, the COVID-19 pandemic finally seemed to be in full retreat. The prospect of a nearly normal summer seemed tantalizingly close, and employers looked forward to welcoming workers back to the office in the fall.
 
Instead, the Delta variant struck and as a result, case numbers have nearly returned to their pre-vaccination peaks. Hospitalizations and deaths rose during the summer months and vaccinations stalled. Only 55 percent of the population is fully vaccinated, with 64 percent having at least one vaccine dose.
 
Employers are frustrated, concerned and looking for answers. Many are taking or considering more proactive steps, particularly employee vaccine mandates, to keep their workplaces safe. But with such mandates come a complex array of legal and business considerations, not the least of which is employee reaction—both for and against workplace vaccine requirements.
 
Womble Bond Dickinson Labor & Employment attorney
Richard Rainey recently joined Business Litigation attorney Mark Henriques for a webinar discussion of “What Employers Need to Know About COVID-19 Vaccine Requirements in the Workplace.” The following Q&A discussion is taken from this webinar, with additional analysis by Womble Bond Dickinson attorney Ashley Kutz Kelley.
 
 
The Legal Standing of Vaccine Mandates
 
MH: “Vaccinations aren’t new. Can you give us some of the history of vaccine requirements to put things in context?”
 
RR: “We’ve had vaccine mandates of various natures throughout the years. We’ve required vaccinations for children to go to school. With employers, I have a number of hospital clients that have required flu vaccines for years. They have policies in place to deal with exemptions due to religious or medical reasons, but they’ve been doing it for a long time without a lot of controversy.”
 
MH: “Have we gotten any governmental guidance? What has the EEOC said at the federal level?
 
RR: “The EEOC is clear that employers can mandate the vaccine. The ‘Should we?’ question is a bit more complicated.”
 
MH: “From the business litigation side, the courts have upheld mandates involving the COVID-19 vaccine. The Supreme Court
upheld Indiana University’s mandate requiring students to be vaccinated. A U.S. District Court dismissed a lawsuit challenging Houston Methodist Hospital’s vaccine requirement for employees. And in South Dakota, a federal judge held three U.S. Marshals in contempt of court after they refused to disclose their vaccination status.”
 
MH: “Are there any restrictions on mask mandates or social distancing mandates?”
 
RR: “They’ve been pretty readily accepted. I’ve had instances where employees have tried to claim a medical exemption to wearing a mask. You have to at least go through the process, but in many cases, employers have found they aren’t able to accommodate that request and this is a safety protocol that has to be followed.”
 
AK: “Employees with respiratory-related medical conditions may, in some instances, request reasonable accommodations under the Americans with Disabilities Act related to mask mandates.  Employers should engage and interact with any such employees in a good faith effort to identify accommodations that would allow them to safely perform the essential functions of their job in COVID-19 pandemic.  One option may be cloth masks instead of surgical masks, or vice versa, if appropriate.  In other instances, where alternative accommodations were not found to be suitable, employees may not be able to safely perform the essential functions of their job.”
 
Religious Exemptions to Vaccine Requirements
 
RR: “Mark, you referenced the Houston Methodist Hospital case. In that case, 142 people refused to comply with the vaccine requirement and lost their jobs. As I previously mentioned, you have to give reasonable accommodations for a person’s religious beliefs and ADA accommodations.
 
“The religious belief question has been a tough one. There are two parts to the test: 1. A person must have a “sincerely held religious belief.” The EEOC has made it tough to challenge someone’s belief, but it is possible to do. For example, if a person has been acting inconsistently regarding those beliefs, that could be a way to challenge it. The courts also have held that personal or political views don’t rise to the level of a religious belief. So if someone said, ‘I saw on Facebook that if you get the vaccine, they put a chip in your arm so I don’t want to take it,’ that wouldn’t be a religious belief.”
 
“The second prong is whether you can reasonably accommodate it. Working from home could be a reasonable accommodation. Or masking and distancing could be. There is some case law from the flu vaccine that safety can be paramount, and that if accommodating the exception would create an undue hardship for the employer, that can be a reason not to accommodate. But it’s very much a case-by-case basis.”
 
AK: “An employee opposing a vaccine due to a personal belief is not enough to constitute a religious exemption.  This is tricky terrain for employers to tread cautiously, but by following a legally compliant process or framework many potholes can be avoided.”
 
MH: “What are the mechanics of an employer determining a religious belief?
 
RR: “The best practice is to have a form in which the employee must request an accommodation. It may require supplemental information from their church or additional questions asked of the employee.”
 
AK:  “It is important to be consistent.  Establish a process, and follow it.  While some religious beliefs may be more mainstream or well-known than others, employers should avoid granting employees of one religious belief exceptions without question while scrutinizing others.  All such requests should be evaluated on the same playing field.”
 
Medical Exemptions to Vaccine Requirements
 
MH: “What about medical exceptions? Why kinds of medical issues are people claiming in connection with the COVID-19 vaccine?
 
RR: “With the flu shot, the CDC and EEOC have been strict that allergic reactions have to be severe to count as a medical exception. And with the COVID-19 shot, there haven’t been too many of those severe allergic reactions. I also have seen claims of underlying conditions. The vaccine does have a rare side effect of myocarditis, so that might be a reason for someone with a heart condition.”
 
MH: “Does a doctor generally have to supply information for a medical exception?
 
RR: “Yes. It would be just like any other ADA accommodation process, and those typically require medical documentation.”
 
MH: “What about people who have already contracted COVID-19?”
 
RR: “Right now, the CDC says if you have had COVID-19 in the past, you still need to get vaccinated. So as an employer, that’s what I would point to.”
 
MH: “Do you have to provide employees with your rational for why you are requiring the vaccine?
 
RR: “I’ve had situations where employees have asked for that. The response is pretty simple—provide them to the link to the CDC website where they talk about the importance of vaccines.”
 
 
Accommodations and Testing Considerations
 
MH: “For people who claim those exemptions, is masking, distancing, remote work or some combination of those how companies are handling accommodations?”
 
RR: “Yes, those and testing—producing a negative test result, typically on a weekly basis. The cost of a lot of that testing will be borne by the employees, which hopefully will be an incentive to get vaccinated.”
 
MH: “Is time spent testing considered company time for hourly employees?”
 
RR: “I would err on the side of that being paid company time, since it is a requirement.”
 
MH: “Can employers ask about vaccination status for employees who are coming to the office?”
 
RR: “It’s another ‘Can we? / Should we?’ issue. The EEOC guidance is clear that you can ask. But you should keep that information confidential and separate from the personnel file. I think it makes a lot of sense to ask—how are you going to keep your workforce safe unless you have a true measure of how many people are vaccinated?”
 
 
Proof of Vaccination Issues
 
RR: “Delta has changed the game. More and more employers are now requiring proof of vaccination status.”
 
MH: “Are there risks of voluntary reporting without proof? What are the best practices?”
 
RR: “The risks is that if you don’t require reporting, you are depending on the good faith of employees. On the other hand, there might be some employee pushback if you require reporting.”
 
MH: “And what about record-keeping? How should employers keep these vaccination records?”
 
RR: “I would think about keeping them in a separate COVID-19 vaccination file, and you need to make sure access to that is limited. Access should only be provided on a ‘Need to know’ basis. And if a person has been approved for an exemption, their supervisor doesn’t need to know all the details about it, just that they’ve been approved for an exemption.”
 
MH: “Collective bargaining can complicate issues around vaccination mandates, testing and proof of vaccination requirements. What do employers need to know if they are in a collective bargaining situation?”
 
RR: “You need to pull out the collective bargaining agreement itself. There may be an argument that the union has waived its right to bargain over that issue. Many CBAs allow employers to unilaterally impose safety requirements, but others don’t.”
 
 
Other Vaccination Mandate Considerations
 
MH: “What about clients or customers imposing rules, rather than the employer itself?
 
RR: “That’s one reason many of my clients are looking at a mandate—they have customers who are requiring vaccinations before going on their site. In those cases, they are telling employees who are going to those customer locations that they have to be vaccinated.”
 
MH: “What about compliance and enforcement, either of your own policies or with local governmental mandates?”
 
RR: “I’d treat it as any other safety violation, because that’s what it is. Typically, that’s some type of progressive discipline.”
 
MH: “Are there any issues about boosters or types of vaccines required?
 
RR: “If the CDC is saying you have to get a booster, I think that’s sufficient for employers to mandate boosters. As far as the type of vaccine, that’s typically left up to the employee.”
 
MH: “Should employers be concerned about forged vaccination cards?”
 
RR: “I would take a look at what they give you—some of these forgeries aren’t that great and you can tell they aren’t on the up-and-up.”
 
AK: “Forged or fraudulent vaccination cards are a significant concern for many employers.  First, I suggest that employers look to what they already have in place, irrespective of the COVID-19 pandemic:  policies in their employee handbooks that prohibit dishonesty, or engaging in fraud or lying.  Typically, such policies clearly state that such actions can result in immediate termination of employment.  When communicating with employees about vaccination cards, including a reminder that falsifying a vaccine card violates the handbook and may result in termination of employment is a helpful first step.  Consistency in enforcing it, as always, is key.”
 
MH: “What about only requiring certain employees, such as those in public-facing positions, to be vaccinated?”
 
RR: “There’s not a one-size-fits-all approach. I can see a situation where a company could mandate vaccines for some employees but not others. For example, I’ve seen some companies require vaccinations for new hires but not existing employees.”
 

Click here to learn more about Navigating the Legal Challenges of COVID-19.
Ashley Kutz Kelly represents companies in commercial litigation matters, including employment, human resources, business product liability disputes, and works with clients to efficiently resolve problems. She brings a practical perspective to issues critical to the modern workplace through proactive counseling, negotiation, and litigation.
Richard Rainey advises his clients on hiring, firing, layoffs, employee discipline, employee defections, FMLA compliance, wage and hour classifications and other employment issues in order to avoid claims of discrimination, harassment, retaliation, unpaid overtime, whistleblowing and unsafe working environments. In addition, he helps his clients with employee training, handbooks, affirmative action plans, OFCCP compliance, and workplace investigations and audits. 
Mark Henriques currently chairs the Firm’s COVID-19 Task Force.  In his practice he focuses on complex commercial cases, including the defense of class actions.  He has successfully litigated cases involving construction, real estate, fraud, unfair trade practices, non-compete, non-solicit and non-disclosure agreements, and breach of contract.

Federal Government Takes Aim at Employers' Non-Compete Agreements
Written By: Allison Hawkins, Matthew Blasko and Laura Ahrens

The federal government has taken recent strides to significantly rein in the use of non-compete agreements by employers. President Joe Biden’s Executive Order on Promoting Competition in the American Economy and the House and Senate bills titled “Workplace Mobility Act of 2021” seek to limit the enforceability of non-competes to the narrowest of circumstances.

A non-compete agreement is a restrictive covenant that aims to prevent unfair competition by an employee after they leave their employment. Employees often are presented with and sign non-compete agreements at their initial hiring and in consideration for employment. While employed, employees may have access to a company’s commercial strategy, competitive pricing structure, customer preferences, and other confidential information that the business has spent valuable time and resources developing. Non-competes implicate employers’ legitimate interests by preventing unfair competition through exploitation of confidential information by former employees. Non-competes also implicate employees’ interests in mobility, professional advancement, and the ability to earn a livelihood.

In the past, non-competes provided employers a shield of protection for when high-level employees threatened their competitive edge in the marketplace by going to work for a competitor. However, increasingly, employers are providing non-competes to lower-level employees who do not have the same access to confidential information or pose the same threat to a company’s competitive advantage. Businesses have started using restrictive covenants as a sword to unreasonably deter employees from leaving the company or pursuing other opportunities outside the company out of fear of a lawsuit.

Historically, restrictive covenants were governed by state common law. Over time, many states have enacted statutes to more closely regulate the use of restrictive covenants. Some states have statutorily banned non-competes or enacted laws that limit the scope of non-competes. Many other states have expanded the scope of enforceable non-competes by taking a broad view of a company’s protectable interests. Into this historically state-controlled arena now enters the federal government. The federal government’s stated goal is to protect those employees who do not have the sophistication to understand the framework of an enforceable agreement.

Executive Order on Promoting Competition in the American Economy

On June 9, 2021, President Biden issued the Executive Order on Promoting Competition in the American Economy. In a general effort to promote economic competition, the expansive Executive Order (EO) is far-ranging and seeks to lower prices for families, increase wages, and promote innovation to foster economic growth across numerous industries. The EO tasks more than a dozen federal agencies with over 70 initiatives to generate competitive market improvements for Americans in transportation, healthcare, and agriculture, among other industries and economic sectors. The EO expressly addresses the allegedly stifling impact that non-compete agreements and clauses have had on the American labor market.

Targeting Non-Compete Agreements and Clauses

The EO directly targets non-compete agreements as an obstacle to the competitive marketplace: “[p]owerful companies require workers to sign non-compete agreements that restrict their ability to change jobs.” The Biden Administration does not favor what it views as the stifling competitive effect of the current non-compete agreement enforcement scheme. It believes that eliminating potential restrictions on worker mobility will raise wages and enhance economic opportunities for American workers.

According to the EO fact sheet, and echoed by White House press secretary Jen Psaki, “[t]ens of millions of Americans – including those working in construction and retail – are required to sign non-compete agreements as a condition of getting a job, which makes it harder for them to switch to better-paying options.” Further, the fact sheet posits that, “[r]oughly half of private-sector businesses require at least some employees to enter non-compete agreements, affecting some 36 to 60 million workers.” The focus of the directive targeting non-compete agreements appears to be rooted in the Biden Administration’s belief that non-compete agreements inhibit employees in blue-collar jobs from obtaining better or better-paying jobs.

Interestingly, the EO is not just limited to traditional non-competitive restrictive covenants. Section 5(g) states:

To address agreements that may unduly limit workers’ ability to change jobs, the Chair of the FTC [Federal Trade Commission] is encouraged to consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.
(Emphasis added.)

This text appears to apply not only to non-compete agreements, but also other restrictive covenants and clauses that are enforceable in many states, such as employee and customer non-solicitation agreements. The directive expressly applies to the “unfair use” of non-compete clauses or agreements, so the FTC may choose not to curtail the use of reasonable non-compete agreements or those that impact certain industries or job positions. Still, the scope of the EO should be cause for concern for employers.

Enforcement of the Non-compete Initiative

As it currently stands, the EO does nothing concrete to change the law of non-competes. It simply encourages the FTC to exercise its rulemaking authority in this space. The FTC has not published a notice of proposed rulemaking, which means that any substantive legal changes are likely months or even years away.

In addition to encouraging the FTC to regulate in the field of non-compete agreements, the EO establishes a White House Competition Council, to be led by the Director of the National Economic Council. This Council has been tasked with monitoring and finalizing progress on the EO’s directives.
While the EO has not made any changes to the law, it provides insight into the Biden Administration’s view that non-compete agreements and similar restrictive covenants stifle market competition and negatively impact millions of Americans’ job prospects. It is not too early for employers to begin thinking about options for protecting their business interests depending on the regulatory approaches the FTC may take. Employers should consider narrowing the scope of restrictions in their non-compete covenants and limit the use of non-competes to those employees who could undermine business if they left. Employers should also tailor their focus toward protecting valuable business information and trade secrets.

Workplace Mobility Act of 2021

In February 2021, both the House and Senate introduced identical bills titled the Workforce Mobility Act of 2021 (WMA). The WMA is a bipartisan effort to create a federal prohibition on non-compete covenants, with limited exceptions. While the bill has both Democratic and Republican support, there have been recent failed attempts by Congress to pass similar bills, even with a Republican controlled house and Republican president. The bill is in the committee review stage, and it likely will not be passed in its current form. Even though the WMA may not ultimately become law, employers should be aware of the affirmative steps they need to take to be prepared for the law’s passage.

The WMA proposes a broad ban on non-compete agreements. Section 3 of the Act states, “no person shall enter into, enforce, or threaten to enforce a non-compete agreement with any individual who performs work for the person and who in any workweek is engaged in commerce or in the production of goods for commerce.” The Act targets typical non-compete covenants, such as similar business, geography, and time restrictions.

This prohibition derives from the bill’s sponsors’ opinion that non-compete agreements broadly restrict employment options for workers, reduce wages, and slow innovation. The federal bill also reflects a growing effort among some states to limit the enforceability and scope of non-compete covenants. For example, like the WMA, California and North Dakota enacted statutes that make non-compete agreements unenforceable, subject to limited exceptions.
[1] Other states have taken a more limited approach by making non-compete covenants unenforceable for low earning employees. For example, Nevada will not enforce a non-compete for hourly employees.[2] The WMA is more aligned with California and North Dakota’s approaches in that it is a broader prohibition with narrowly tailored exceptions.

Non-Compete Exceptions

The WMA does not ban all non-compete agreements. There are limited exceptions. A person selling their business can agree with a buyer to refrain from carrying on similar business within a specified geographic area. That said, the specified geographic area is limited in scope. The buyer of the business must engage in similar business in the specified geographic area. The area must also be limited to the area where the business conducted business before the agreement. Along with selling a business, this exception applies to a business owner that sells substantially all of its operating assets and goodwill to a buyer.

The exception extends to the “senior executive officials” of the selling business. Senior executives include those who played an integral role in the senior executive management team, were responsible for making major decisions for the seller, and had a compensation rate in the top 10 percent in the company. Any time restriction preventing executives from engaging in similar business cannot exceed one year. Further, the executive and buyer must enter into a severance agreement. The last exception allows partners to enter into non-compete agreements in the event of a dissolution or dissociation of the partnership. A partner may agree to not engage in similar business in the geographic area in which any business of the partnership has been performed.

Trade Secrets

Importantly, businesses can still protect their trade secrets under the WMA. According to the findings section, it is not Congress’ intent to prevent employers from protecting trade secrets and customer lists. Section 4 specifically states, “nothing in this Act shall preclude a person from entering into an agreement with an individual working for the person to not share any information . . . that is a trade secret.”

WMA Enforcement

The WMA tasks the Department of Labor and the Federal Trade Commission with enforcement, and it provides substantial fines and remedies for violations. If enacted as drafted, employers would need to take measures to make its employees aware of the prohibition. Companies must post a conspicuous notice of the WMA on their premises. The WMA also calls for the Secretary of Labor to carry out activities to create public awareness. Companies that fail to post a notice or enter non-compete agreements in violation of the act are subject to fines up to $5,000 per week in violation. There is also a private right of action for individuals under the WMA. Individuals who successfully bring an action may be rewarded actual damages, costs, and reasonable attorney’s fees. The Secretary of Labor will have the right to investigate alleged violations and bring action to obtain relief on behalf of the individual aggrieved.

Conclusion

Even though the Workplace Mobility Act is not yet law, employers can be proactive now. Employers can tighten up their existing non-compete agreements to comply with the rigorous standards for enforcement that apply today under state law and consider narrowing the scope of employees who sign non-compete agreements. In considering whether to enforce a non-compete against an employee, the courts will take into account many factors, but the focus usually comes down to the nature of the employer’s protectible business interest and whether the non-compete provision is narrowly drafted to protect only that interest. Employers need to carefully draft non-compete agreements with these factors in mind. Please contact a Jackson Lewis attorney with questions about non-compete compliance (including multi-state compliance reviews), the recently issued executive order, or other topics discussed in this article.

Focused on labor and employment law since 1958, Jackson Lewis P.C.'s 950+ attorneys located in major cities nationwide consistently identify and respond to new ways workplace law intersects business. We help employers develop proactive strategies, strong policies and business-oriented solutions to cultivate high-functioning workforces that are engaged, stable and diverse, and share our clients’ goals to emphasize inclusivity and respect for the contribution of every employee. For more information, visit
https://www.jacksonlewis.com.

[1] N.D. Cent. Code § 9-08-06; Cal. Bus. & Prof. Code § 16600.
[2] Nev. Rev. Stat. Ann. § 613.195.
Twitter
LinkedIn
Website
Copyright © 2022 ACC SC Chapter, All rights reserved.


Want to change how you receive these emails?
You can update your preferences or unsubscribe from this list.

Email Marketing Powered by Mailchimp