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Feature Article
VIRGINIA
SUPREME COURT STRIKES DOWN LOCAL GOVERNMENT CONTRACTOR’S NON-COMPETE AS
OVERLY BROAD
If ever there was a
more apt application of the phrase “the devil is in the details,”
it is with non-compete agreements. This was demonstrated by an interesting decision
by the Virginia Supreme Court striking down a local government contractor’s
non-compete as overly broad, in the case of Omniplex World Services v. US Investigations.
The non-compete said the employee could not use his/her security clearance to
go to another company to do work for the government client, even if the job
duties at the new job were completely different. In striking down the non-compete
as overly broad, the majority focused on this notion that the employee could
not leave and do completely different tasks for the government client. But the
dissent said that in the current government contracts climate, an employee's
security clearance is often his/her most vital asset, and companies expend a
lot of time and resources getting employees cleared.
The dissent recognized the common
practice of contractors to "poach" cleared employees from competitors,
and then train them to do whatever the contractor requires. This is what the
non-compete was apparently designed to prevent, but the Virginia Supreme Court’s
majority decision did not really delve into this analysis.
It is becoming increasingly
common in non-compete agreements for companies to include narratives explaining
the rationale behind the non-compete, which the employee affirms up front when
signing the agreement. In fact, the employer in this case may have had better
luck getting the Court to uphold its non-compete if it had actually included
language in the non-compete itself explaining that tying the restriction to
the employee’s security clearance as opposed to job duties was designed
to prevent “poaching” by other contractors.
Full
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The Court Report
FORMER
HR DIRECTOR GUILTY OF CRIMINAL FRAUD AND EXTORTION AFTER STEALING EMPLOYER’S
COMPUTER FILES AND DOCUMENTS
The Virginia Court
of Appeals recently upheld a ruling that the former human resources director
for S&M Brands, Inc. was guilty of criminal fraud and extortion when he
transferred over 800 of S&M Brands’ computer files to a third-party
server, and only offered to return the files if the company forgave a $6,000
loan he owed them. The case is DiMaio v. Virginia, and the company at
issue is a Virginia-based manufacturer of cigarettes. Although disputes with
departing employees over company files are not uncommon, it is rare that such
conduct results in serious criminal convictions as in this case.
According to the Court’s decision,
Jeremy DiMaio was the human resources director for S&M Brands, Inc. In 2003,
he obtained a $6,000 loan from the company and agreed to pay it back through
payroll deductions starting in January 2004. However, DiMaio gave notice of
his impending resignation in April 2004, and made various attempts to prevent
the payroll department from deducting the loan payments from his paycheck. S&M
then fired DiMaio, and subsequently discovered that he had transferred over
829 company files – including business forms and templates for employee
agreements, offer letters, sales manuals, insurance forms, and noncompete agreements
– to a password protected third-party server. According to court testimony,
DiMaio notified the company that he would be willing to return the files if
his debt was forgiven. A search warrant executed at DiMaio’s residence
recovered the missing computer and employee files, valued at well over $100,000
according to the company president.
The Court of Appeals upheld
the trial court’s findings of felony fraud and felony embezzlement. The
Court rejected DiMaio’s argument that the company was unable to prove
the value of the files, crediting executives’ testimony about the value
to determine that it exceeded the $200 threshold amount needed to sustain a
felony charge, as opposed to a misdemeanor. DiMaio also argued that he was organizing
the files for a smooth transition to the new director and made no threat of
extortion. The Court found no support for this contention, saying the facts
showed that DiMaio intended to keep the files until his debt was forgiven by
the company. Finally, the Court rejected DiMaio’s argument that he lacked
criminal intent for his actions, saying that the evidence, when viewed as a
whole, clearly showed that DiMaio’s intent was to wrongfully retain the
files and use them as a threat to the company to forgive his outstanding debt.
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FOURTH
CIRCUIT REVERSES $1.1 MILLION DISCRIMINATION VERDICT BECAUSE CLAIMS WERE NOT
PROPERLY RAISED WITH THE EEOC
The
Fourth Circuit Court of Appeals recently overturned a large jury verdict in
favor of an employee in an employment discrimination case, because the employee’s
main evidence at trial was not included in his administrative charge filed with
the EEOC. The national origin discrimination case was originally heard at the
trial court level by a jury, which returned a verdict of over $1.1 million in
favor of the employee. On appeal to the Fourth Circuit, the employer argued
that the jury verdict should be reversed because the employee’s trial
allegations of co-worker harassment were not part of his previously filed administrative
Equal Employment Opportunity Commission (EEOC) charge. Upon a close examination
of the underlying EEOC complaint, the Fourth Circuit agreed with the employer
that the employee never mentioned harassment by co-workers in his original
charge, but rather only alleged that he was harassed by supervisors.
The Appeals Court also noted that the EEOC complaint contained different time
frames and conduct than the evidence presented at trial to the jury that resulted
in the large verdict.
The employee worked for
approximately twenty years at Patuxent Institution (“Patuxent”),
which is a correctional facility operated by the Maryland Department of Public
Safety and Correctional Services. During his tenure at Patuxent as a correction
officer, he filed several internal discrimination complaints against his supervisors
and external EEOC complaints against Patuxent. His external EEOC complaints
consisted of allegations regarding Patuxent’s failure to promote him because
of his national origin and sex and unspecified harassment by his supervisors.
But at trial, the employee’s evidence in support of his hostile work environment
claim involved different actors, time frames and conduct. Particularly, the
employee alleged that his coworkers made degrading comments to him, such as
“camel jockey,” “go back home and ride your camel,”
“crazy Indian,” and “go back to India and wash elephant nuts
for a living.”
In reversing the employee’s
large jury verdict, the Fourth Circuit acknowledged that the treatment by the
employee was ugly and disturbing. However, the Appeals Court stated that Congress
enacted Title VII’s administrative charge requirement to serve as notice
and an opportunity for conciliation between the parties, and that these were
the specified procedures for handling discrimination complaints. The Court also
noted that the purpose of the initial EEOC charge is to put the employer on
notice of the alleged discrimination, thereby allowing the employer to conduct
an investigation. Because the employee raised many of his discrimination allegations
for the first time at trial, the institution never had a chance to investigate
and resolve the issues.
This decision highlights
the importance of comparing an employee’s administrative EEOC charge to
his/her lawsuit allegations for consistency. Because employees typically do
not hire a lawyer to assist them with the administrative phase of a discrimination
claim, courts will usually construe discrimination charges liberally in favor
of the employee. As this case demonstrates, however, if an employee’s
later allegations in a lawsuit far exceed the scope of his EEOC charge, then
the employee’s new allegations could be procedurally barred at trial.
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LEWD
COMMENTS NOT ENOUGH TO ESTABLISH HOSTILE WORK ENVIRONMENT, BUT MAY RESULT IN
TITLE VII RETALIATION CLAIM
In
yet another reminder to employers that retaliation claims are often more lethal
than the underlying discrimination claim, a Virginia federal district court
recently dismissed a female employee’s sexual harassment and hostile work
environment claims against a Virginia mattress company, but allowed the employee’s
Title VII retaliation claim to proceed to trial. In Bowen v. Tempur Production
USA Inc., the female employee alleged that she was subjected to outrageous conduct
by her co-workers, including that one male co-worker threatened to masturbate
on her free mattress so he could tell people he had a good time in her bed.
The Fourth Circuit has set the bar for sexual harassment claims pretty high
for employees to prevail, and even this deplorable conduct was not severe or
pervasive enough to support a winnable claim. Had the company left the female
employee alone after she made her complaint about the harassment, this would
likely be the end of the litigation in favor of the mattress company. However,
the female employee alleged that she was fired shortly after making the complaint,
and on this allegation, the Court determined that she could go to trial on her
retaliation claim.
According to the Court’s
decision, the coworker asked the plaintiff out, made comments about attire that
would show off her legs and rear end, and told her he planned to masturbate
on her free mattress so he could tell people he had a good time in her bed.
The company conducted an internal investigation into the plaintiff’s complaint,
and informed her that she would no longer be partners with the coworker. She
remained in the same department as the coworker, and was fired a few weeks later.
The Court found as a matter
of law that the incidents were not pervasive or severe enough to create an abusive
environment. The Court made this determination based on the short time span
of the abusive activity and the fact that the behavior stopped after a complaint
was filed; that the comments were not physically threatening or humiliating;
and that the plaintiff made no claims that her work suffered.
The Court did find a genuine
issue of material fact with respect to the plaintiff’s retaliation claims
that required resolution by jury trial. The Court pointed to the short time
span between the plaintiff’s protected activity in making the complaint
and her termination, as well as the lack of evidence presented by the company
to support its claims that the plaintiff’s complaints were disruptive
to coworkers. The Court did not support the company’s argument that the
plaintiff was fired because of the manner in which she complained and not the
complaint itself, saying there is too thin a line between the two to determine
what Title VII is designed to protect, and that it should be left to a jury
to decide if the reasons for termination were mere pretext for retaliation against
the plaintiff.
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KIDNEY
PATIENT FOUND TO BE DISABLED -- ELIMINATION OF BODILY WASTE IS “MAJOR
LIFE ACTIVITY” UNDER THE ADA
The
Fourth Circuit recently held that the elimination of bodily waste – the
critical bodily function that is lost with kidney failure – is a major
life activity under the Americans with Disabilities Act (ADA). But the Court
made clear that an employee must still prove he is substantially limited in
his ability to eliminate waste to fully qualify for the ADA’s protections,
and therefore a person’s need for kidney dialysis is not automatically
considered a disability under the ADA. In making this ruling in Heiko v. Colombo
Savings Bank, the Fourth Circuit also made clear that not every instance of
organ failure will constitute a major life activity under the ADA.
The employee, Mr. Heiko,
suffered from end-stage renal disease – near complete kidney failure –
and as a result his body was unable to eliminate waste without regular dialysis
treatments. The treatments were required three afternoons each week for four
hours each time. Thus, Mr. Heiko needed to alter his work schedule, but still
continued to maintain his 40 hours a week schedule. Mr. Heiko brought a lawsuit
against his employer, Colombo Savings Bank when he did not receive a promotion,
alleging that his qualifications were superior to that of the employee who did
receive the promotion, and that the reason he was passed over was because of
his disability. The lower court found that Mr. Heiko was not disabled because
it determined waste elimination is not a major life activity under the ADA.
The three prong test under
the ADA for determining whether someone is disabled is (1) whether he has a
physical or mental impairment, (2) whether the impairment limits a major life
activity, and (3) whether that limitation is substantial. The parties agreed
that Mr. Heiko’s end-stage renal disease was a physical impairment, therefore
the Court focused on the major life activity and substantial limitation elements.
Mr. Heiko argued that his
kidney failure impacted his ability to eliminate bodily waste, a bodily function
that the Court explained is “of life-sustaining importance” and
therefore qualifies as a major life activity. The district court had reasoned
that waste elimination was merely a characteristic of kidney failure, rather
than the “effect of this impairment.” Following the district court’s
reasoning, the Forth Circuit explained, would result in the ADA not covering
major life activities that are closely linked with serious disabilities, such
as blindness, since the inability to see could be recast as merely a characteristic
of such an impairment.
The Fourth Circuit also
found that given the nature and severity of Mr. Heiko’s kidney failure,
his impairment substantially limited his ability to eliminate waste. The Court
focused on the fact that Mr. Heiko was hooked up to a dialysis machine for twelve
hours every week, that in order to begin his dialysis treatments he had to have
a surgery, that there were significant side effects to the dialysis, and that
his condition continued for years. The Court cautioned, however, that the substantially
limited question is an individualized one done by the court on a case-by-case
basis, and the coverage under the ADA may not be the same for every patient
with end-stage renal disease.
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SUPREME
COURT RULES IN FAVOR OF FACTORY WORKERS, EXTENDS WORKDAY TO INCLUDE TIME SPENT
WAITING AND WALKING TO WORKSITE
The United States Supreme Court has ruled in favor of factory workers in a workplace
dispute by saying that workers must be paid for the time between suiting up
in protective gear and heading to the factory floor. The ruling in IBP, Inc.
v. Alvarez resolved a split among federal appellate courts over when the work
day begins, and may impact the pre-shift requirements employers often place
on employees.
The specific employees in
question are slaughterhouse workers who are required to arrive at a central
site before their shift actually starts and wait in line to receive and put
on protective equipment before proceeding to the actual worksite. The dispute
between the employer and the workers centered on whether the workday included
the time spent suiting up and walking from the dressing site to the work stations.
Previously, employees were
generally not entitled to be paid for mandatory preliminary or postliminary
work activities under the Fair Labor Standards Act. The Supreme Court, however,
ruled that all activities before or after the regular work shift that are “integral
and indispensable” to a job’s principal activities, are compensable.
The reasoning behind the Court’s decision was to institute a “continuous
workday” scheme that doesn’t stop the clock when moving from one
work station to another.
The immediate application
of this case is only to the slaughterhouse employees and similar factory-oriented
jobs where federal and state regulations and company rules mandate the wearing
of protective clothing in the workplace. However, it should be a wake-up call
for other employers that any company-mandated pre or post-shift activities imposed
on employees could expose the company to a compensation claim similar to the
one resolved by the Supreme Court here.
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FOURTH
CIRCUIT SAYS BEING REPLACED BY SOMEONE WHO IS IN THE SAME PROTECTED CLASS IS
NOT ALWAYS FATAL TO AN EMPLOYEE’S DISCRIMINATION CLAIM
The U.S Court of Appeals for the Fourth Circuit has
reversed a lower trial court ruling by deciding that a female employee did not
lose her Title VII right to sue for discriminatory discharge simply because
she was replaced by another woman. The Court in Miles v. Dell, Inc. created
a “different decision-maker” exception to the general rule that
a Title VII plaintiff must show that the job remained open or was filled by
a member outside the former employee’s protected class. Under the general
rule, if a company fires a female employee and then fills her spot with another
female, the company can point to the new hire to refute that it discriminates
against women. The wrinkle in this case that led the Fourth Circuit to create
the exception was that the supervisor who fired Miles did not hire her female
replacement. Therefore, the Court found that a jury could still conclude that
the supervisor who terminated Miles was biased against women.
According to the Court’s
decision, Kimberly Miles joined Dell in January 1999 as an account manager.
In March 2001, James Glaze became her supervisor, and shortly thereafter, Miles
informed Glaze that she was pregnant. Miles contended that supervisor Glaze
then took biased employment actions against her, eventually leading to her termination
in June 2002. These actions included reduction of her sales territory, reassignment
of her key accounts to less qualified employees, increase in her performance
quotas, and requesting permission from management to terminate her based on
false information. Dell eventually hired a woman, Susan Patrick, to fill her
position, though Miles alleged that Glaze tried hiring a male first before being
vetoed by supervisors.
The Court, citing precedent,
said that while it is generally true that one of the requirements in proving
a case of discriminatory discharge is proof of replacement outside the protected
class, this is not a hard and fast rule. Formulating the exception, the Court
said that a Title VII plaintiff does not need to show she was replaced by someone
outside the protected class when the hiring and firing decisions are made by
different decision-makers. The Court went on to say that even without invoking
this exception, Miles’ claim for pregnancy discrimination could stand,
as the protected class was pregnant women, not all women. Miles’ retaliation
claim, however, was dismissed because she failed to mention it in her EEOC charge.
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VIRGINIA
ADDS SEXUAL ORIENTATION BIAS TO LIST OF PROHIBITED FORMS OF DISCRIMINATION
Virginia Gov. Mark Warner
amended Executive Order One on December 16, 2005, adding sexual orientation
bias to the list of prohibited forms of discrimination against state employees.
This Order would not apply to private employers in Virginia. Through a statement
on its website, the governor’s office says the amendment follows the policy
of Virginia’s largest employers, the General Assembly, and the majority
of other states that already provide for specific protection against discrimination
based on sexual orientation. Language prohibiting sexual orientation bias was
also included as part of Gov. Warner’s proposed biennial budget, a move
that the governor’s office hopes will help Virginia recruit and retain
a quality workforce. A spokesman for Gov.-Elect Tim Kaine says that Kaine is
supportive of the new ban and will sign the executive order once he assumes
office in January 2006.
Read
the amended Executive Order One...
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JUDGE
FOR YOURSELF
| Issue: |
An optician working
for Sears Optical in Roanoke claimed that the eyeglass company’s advertisement
of a 50% discount on a pair of eyeglasses was false, and that the company
never intended to sell a pair of eyeglasses at such a discount. The optician
sought the advice of an attorney, who told him that he could face possible
criminal and civil liability if he participated by selling eyeglasses in
this fraudulent manner. When the optician refused to go along with what
he claimed to be the false advertisement, he was fired. Does he have a valid
claim for wrongful termination in Virginia? |
| |
|
| Answer: |
Not according
to a federal judge in the Western District of Virginia, who recently dismissed
the optician’s “Bowman” claim on these facts in the
case of Lucker v. Cole Vision Corporation. The Court here was following
established precedent that Virginia does not generally reward employees
who engage in so-called “Good Samaritan” conduct, such as
the optician here who was trying to protect customers from being duped
by the advertisement. This case underscores that Virginia is one of the
strongest “at-will” employment states in the nation, and that
absent violation of federal discrimination laws, there are very few winning
challenges that an employee can make to a termination.
|
| |
Case Study:
http://www.vawd.uscourts.gov/opinions/turk/luckervcole.mtd.pdf |
The above articles
are for your personal information only and are not intended as legal advice. Nor
is this material intended to replace consultation with a professional. Always
consult a licensed attorney for your particular case. Nothing herein shall create
an attorney/client relationship. This newsletter is specifically for educational
purposes.
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2006 Albo & Oblon, L.L.P., All rights reserved.
David
Oblon, Managing Partner, Albo & Oblon
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