GANFER & SHORE, LLP
CLIENT EMPLOYMENT LAW ADVISORY
DAMAGE TO INSURANCE BROKER'S REPUTATION HELD TO
CONSTITUTE IRREPARABLE HARM; COURT BARS SOLICITATION
Several senior executives of plaintiff insurance broker resigned on the same day to join a competing agency, taking with them 38 (later 60) employees. A significant number of clients also defected from the agency. Ultimately, the agency lost more than 100 clients and more than $20 million in revenue to the competitor. The agency sued and the New York Supreme Court issued a preliminary injunction barring the executives, the competing agency, and other former employees who were subject to restrictive covenants, from (1) soliciting business or entering into any business relationship with any client on whose account they had worked at the former employer, or (2) soliciting any employees to work for the competitor, while the litigation was pending. Aon Risk Servs. v. Cusack, 2011 WL 6955890 (Sup. Ct. N.Y. Co. Dec. 20, 2011)
Although these injunctions are generally quite difficult to obtain, in this case the court determined that the substantial scope of the economic and reputational damage already suffered by the plaintiff agency, together with the court's belief that plaintiff's competitors would be encouraged to solicit plaintiff's employees, clients, and prospects because they believed the agency to be "wounded" by the wholesale defections of executives, employees, and clients constituted irreparable harm. The court found that monetary damages could not adequately compensate plaintiff for losses such as these.
As the court observed, the loss of so many "employees and dozens of clients doing business with . . . [plaintiff] in hundreds of lines of insurance . . . harms [plaintiff's] goodwill, reputation in the marketplace with its clients and prospects, and relations with its remaining employees, because it causes clients to question . . . [plaintiff's] ability to service the business."
EMPLOYEE MISCONDUCT PRIOR TO RESIGNING
PROVIDES BASIS FOR ENFORCING NON-COMPETES
In AllianceBernstein, L.P. v. Clements, 31 Misc. 3d 1234(A), 932 N.Y.S.2d 759 (Sup. Ct. N.Y. Co. 2011), an employee resigned without providing 60 days' notice as required under his non-compete agreement. The employee immediately began working for a competitor, and solicited the former employer's clients on the very day that he resigned. The New York State Supreme Court enforced the notice provision. It enjoined the employee from working for the competitor for 60 days, and from soliciting the former employer's clients or employees.
InAyco Co. v. Frisch,2012 WL 423134 (N.D.N.Y. 2012), a federal judge in Buffalo granted a temporary restraining order and preliminary injunction enforcing an employer's non-compete with its departing employees. The court enjoined the employees from (a) working for a competitor for 90 days, and from (b) disclosing any confidential information. Here, too, employees had engaged in wrongdoing prior to their resignations, including taking confidential information and advising their clients that they were moving to the competitor. Significantly, in finding that the employer would suffer irreparable harm, the court observed that just such harm was suggested by language in the employees' non-competition agreements that provided, inter alia, that breach of the restriction would leave the employer without an adequate remedy at law and would entitle it to injunctive relief.
PREGNANT EMPLOYEE TERMINATED BEFORE BECOMING ELIGIBLE
FOR FMLA LEAVE MAY NEVERTHELESS STATE CLAIMS UNDER THE FMLA
In a recent case under the Family and Medical Leave Act ("FMLA"), plaintiff advised her employer that she was pregnant and would request FMLA leave after the birth of her child, which was expected about five months later. Two months after plaintiff advised her employer of her plans – but three months before she became eligible to take FMLA leave, the employer terminated her.
Plaintiff sued, alleging that her termination, coming just after she had requested FMLA leave, constituted both interference and retaliation under the FMLA. The trial court dismissed the lawsuit on the grounds that (a) the employer could not have interfered with plaintiff's FMLA rights because she was not entitled to FMLA leave at the time she requested the leave; and (b) as plaintiff was not at that time eligible for FMLA leave, she could not have engaged in protected activity, and, accordingly, her employer could not have retaliated against her. Plaintiff appealed.
The appellate court reversed the dismissal in Pereda v. Brookdale Senior Living Communities, Inc.2012 WL 43271 (11th Cir. 2012), and sent the case back to the lower court for trial. The court stated that allowing the district court's ruling to stand would create a loophole "whereby an employer has total freedom to terminate an employee before she can ever become eligible" and that "[s]uch a situation is contrary to the basic concept of the FMLA.",
The appellate court also stated that the FMLA's notice period (which requires that an employee provide an employer with 30 days' notice of foreseeable leave), was "meant as protection for employers to provide them with sufficient notice of extended absences." Hence, the court held, failing to provide a remedy for an employee who provided more than 30 days' notice as required by the statute would create a "trap for newer employees" and would provide employers with a "significant exemption from liability."
THE EEOC'S RECORD IN FY 2011: HIGHEST NUMBER OF CHARGES IN
HISTORY WERE FILED AND $455.6 MILLION IN RELIEF OBTAINED
The U. S. Equal Employment Opportunity Commission ("EEOC") reports that it received a record number of discrimination charges and obtained a record amount of relief for discrimination claimants in 2011. The EEOC received 99,947 charges of harassment, discrimination and/or retaliation against employers and obtained a record $455.6 million in relief for applicants and employees in FY 2011, a $51 million increase over FY 2010. Retaliation charges accounted for the largest number of complaints (37.4%), followed by race discrimination (35.4%). Religious discrimination claims showed the highest percentage increase (9.0%) of any of the charge categories.
The cases presented in this Advisory are drawn from courts located throughout the United States. They may or may not apply to a given employer based upon regional interpretations of federal law as well as any applicable state or local laws. If you have any questions concerning labor or employment law, please contact Robert I. Gosseen, Esq., who heads this practice area at Ganfer & Shore, LLP, at (212) 922-9250, ext. 288, or your contact at the firm.