On September 18th, New York Attorney General Barbara D. Underwood, announced a settlement with WeWork Companies that will end their use of overly broad non-compete agreements for nearly all of its employees nationwide. This settlement ends the routine practice of WeWork requiring all levels of employees to sign a contract including a non-compete restriction regardless of job duties, knowledge of confidential information, or compensation.

In addition to the settlement announcement, the Attorney General’s office has also released “Non-Compete Agreements in New York State – Frequently Asked Questions” as a guide for employees to understanding the law on non-competes moving forward.

The guide provides insights concerning:

The legality of non-competes in New York State
Whether you should or should not sign a non-compete
How employers enforce non-competes
Your options if you signed a non-compete

A link to the guide can be found here.

Click here for more information on how Castaybert PLLC can assist you in drafting, enforcing, or negotiating your non-compete.

October 2, 2018.

The #MeToo movement has generated nationwide discussion on the subject of sexual harassment and resulted in increased workplace sexual harassment complaints. In order to stop sexual harassment, New York State passed the 2019 New York State Budget, including the Stop Sexual Harassment in NYC Act, as well as extensive revisions to New York human rights laws. These changes increase employer liability for, and enhance employee protections against, workplace sexual harassment and gender discrimination. The laws also expand the law to cover every for-profit and not-for-profit entity in the state of New York. Accordingly, New York employers of all shapes and sizes should be aware of these new statutory requirements.

2019 New York State Law

The 2019 New York State Budget, signed into effect by Governor Andrew Cuomo, evokes many changes of which employers should be aware, including:

1. Mandatory Annual Sexual Harassment Prevention Policy and Interactive Training Program

Effective October 9, 2018, New York State employers must:

Implement a new sexual harassment policy that meets or exceeds the guidelines provided by the forthcoming model sexual harassment prevention policy created by the New York State Department of Labor and New York State Division of Human Rights.
Distribute their new or revamped policies to all employees and provide a standard complaint form for employee use.
Implement an interactive sexual harassment prevention training program that features:
- an explanation and specific examples of sexual harassment;
- detailed information about federal, state, and local laws concerning sexual harassment and available remedies for victims;
- the responsibilities of supervisors; and
- a description of employee rights and all internal and external forums for bringing complaints.
Render the training in the language spoken by their employees.
Conduct the above-described sexual harassment trainings for all employees annually.

Per the finalized guidance on the new legislation released by Governor Cuomo, the deadline for employees to receive sexual harassment prevention training is October 1, 2019. This gives employers a full year to implement compliant training programs.

2. Prohibition of Mandatory Arbitration of Sexual Harassment Claims

Effective July 11, 2018, New York Civil Practice Law and Rules bans mandatory binding arbitration provisions in employment contracts, except where inconsistent with federal law or included as part of a collective bargaining agreement. Although this provision could be preempted by the Federal Arbitration Act, prior to a Supreme Court ruling (or denial of certiorari) on the subject, employers should operate under the assumption that it is constitutionally sound.

3. Extension of Employer Liability for Sexual harassment to Non-Employees

Effective April 12, 2018, employers may be held liable for:

sexual harassment claims brought by non-employees such as independent contractors, subcontractors and other employees working under service contracts.
sexual harassment experienced by non-employees if the employer had knowledge or should have known about the incident(s) and did not take prompt and appropriate action to resolve the issue.

4. Prohibition of Non-Disclosure Agreements

Effective July 11, 2018, New York State Law will prohibit non-disclosure provisions in sexual harassment settlement agreements unless the complainant consents. In order to obtain consent, the employer must ensure:

the complainant prefers a non-disclosure provision;
the complainant is given 21 days to consider the non-disclosure provision; and
the complainant is given seven days to revoke acceptance of the non-disclosure provision.

Stop Sexual Harassment in NYC Act (New York City Law)

As with the New York State Laws, the Stop Sexual Harassment in NYC Act requires the attention of all NYC employers. The following is a list of provisions, many of which became effective upon Mayor De Blasio’s signing on May 9, 2018, of which employers should be aware:

1. Extended Statute of Limitations for NYC Sexual Harassment Claims

As of May 9, 2018, the statute of limitations for sexual harassment claims under the New York City Human Rights Law is extended from one year to three years.

2. Law Applies to All Employers

As of May 9, 2018, current city laws prohibiting gender-based harassment apply equally to all employers, rather than merely those with 4 or more employees.

3. Requirement to Distribute written policies, forms, information sheets, and hang posters outlining the sexual harassment complaint process

As of September 9, 2018, New York City employers will be required to conspicuously display a poster created by the New York City Human Rights Commission that outlines the rights of employees and responsibilities of employers with respect to sexual harassment policies and protocol. Employers must also distribute an information sheet containing the same information to current employees and new employees upon hire. The posters and information sheets must be posted and distributed in English and Spanish, and if employees speak a different language, these materials must be posted and distributed in that language as well.

4. Mandatory Interactive Anti-Sexual Harassment Training

As of April 1, 2019, employers with 15 or more employees must conduct annual, interactive anti-sexual harassment training with all employees and interns. To comply with the law, employees of the relevant employers must be trained according to the stated guidelines by that date.

According to the City Law, the “interactive” requirement means “participatory teaching whereby the trainee is engaged in a trainer-trainee interaction, use of audio-visuals, computer or online training program or other participatory forms of training as determined by the [New York City Human Rights] Commission.”

Though it is similar to the New York State Law, the City Law provides a longer list of mandates for the trainings and does not require training of employees until after 90 days of employment or retraining of employees who participated in the requisite training through another employer. Additionally, employers will be required to maintain training records dating back three years to demonstrate compliance with the law.

Conclusion

Given the extensive changes in New York State and City Law contained in this legislation to stop sexual harassment, New York employers should anticipate an upswing in sexual harassment claims. Accordingly, employers should immediately embrace and implement policy and training reforms to their current sexual harassment programs to protect their employees and insulate themselves from potential liability.

For an even more detailed discussion of these changes, read Tannenbaum Helpern Syracuse & Hirschtritt LLP’s comprehensive article here.

Learn about how Castaybert PLLC can assist you with an employment law matter here.

In 2017, courts grappled with various issues with respect to the Defend Trade Secrets Act. First, there are nuances regarding the timing of the conduct to which the Act applies. In Cave Consulting Grp., Inc. v. Truven Health Analytics Inc., 2017 U.S. Dist. LEXIS 62109 (N.D. Cal. Apr. 24, 2017), the court stated that the plaintiff failed to state a claim under the DTSA because it did not adequately specify whether the misappropriation occurred before or after the Act became effective (May 11, 2016). But the court allowed the plaintiff to amend its claim, suggesting that even though the alleged misappropriator may have acquired or disclosed the confidential information prior to May 11, 2016, the Act also contemplates a theory of liability for improper use of information. The court stated “[n]othing suggests that the DTSA forecloses a use-based theory simply because the trade secret being used was misappropriated before DTSA’s enactment.” Therefore, plaintiffs in DTSA actions should be sure maintain usage of trade secret information after May 11, 2016, even if they cannot prove that the information was taken after this date.

Second, specific requirements were identified regarding proper pleadings under the DTSA. Plaintiffs must adequately allege that they took reasonable steps to maintain the secrecy of confidential information. In an action where the plaintiff did not allege that employees were required to sign confidentiality agreements or any other indicia of reasonable precautions to protect secret information, the court dismissed with prejudice. Raben Tire Co. v. Dennis McFarland, 2017 U.S. Dist. LEXIS 26051 (W.D. Ky. Feb. 24, 2017). But where a plaintiff alleged that it required employees to sign a confidentiality agreement and that information was not disseminated outside the workplace, the court found this sufficient to withstand a motion to dismiss. Aggreko, LLC v. Barreto, 2017 U.S. Dist. LEXIS 35573 (D. N. Dak. Mar. 13, 2017).

Finally, enforcement rights under the DTSA have been narrowed. Ex parte seizures of property in trade secret misappropriation cases were limited in California and Indiana, where courts held that statutory seizure orders are be available in extreme circumstances, when injunctions or temporary restraining orders would be inadequate. See OOO Brunswick Rail Mgmt. V. Sultanov, 2017 U.S. Dist. LEXIS 2343 (N.D. Cal. Jan. 6, 2017). Standards for seizures of property under the DTSA have therefore been held to be higher than for seizures under Rule 65 of the Civil Rules of Federal Procedure, for which courts have indicated strong preference.

To learn about how Castaybert PLLC can assist with trade secret matters, please click here.

Traditionally, non-compete agreements were used to prevent employees from leaving a company and taking clients and important business information, including trade secrets, with them. In recent years, however, legislatures and courts have taken an increasingly hostile stance toward traditional non-compete agreements, and garden leave provisions are gaining popularity as a helpful alternative.

The Decline of Non-Competes for Low-Wage Workers

Multiple states, including Illinois, Maryland, Massachusetts, Missouri, New Hampshire, New York, Oregon, Pennsylvania, Vermont and Washington have proposed legislation that would ban or void non-competes for low-wage workers. In Maryland, non-competes would be ineffective for employees earning less than $15 per hour or $31,200 per year, and in New York, they would be banned on employees earning under $40,560 per year. In Illinois, non-compete agreements signed by employees earning under $1 million per year would be void.

Nevada recently enacted A.B.N. 276, which voids non-compete agreements unless they (i) are supported by “valuable consideration”, (ii) do not impose any restraint that is greater than required for the employer’s protection, (iii) do not impose any undue hardship on the employee, and (iv) impose restrictions that are appropriate relative to consideration provided. The statute also mandates that judges “blue pencil” overbroad non-competes so they are enforceable.

Two federal bills limiting non-competes have also been proposed: LADDER Act H.R. 2873 and MOVE Act S.1504. The LADDER Act (Limiting the Ability to Demand Detrimental Employment Restrictions Act) would (i) prohibit employers from entering into non-compete covenants with low-wage employees (those making less than the greater of $15 per hour or the state minimum wage) engaged in commerce or in the production of goods for commerce, and (ii) require an employer of such employees to post notice of that prohibition in a conspicuous place on the employer’s premises. The MOVE Act (Mobility and Opportunity for Vulnerable Employees) provides the same terms, except that it defines “low-wage employee” as an employee who earns less than (i) $15 per hour, (ii) the state or local minimum wage, or (iii) $31,200 per year.

The Rise of the Garden Leave

Garden leave provisions require an employee to provide notice in advance of his or her resignation (often 30 – 90 days), during which time the employee does not work but continues to earn a salary. Though the employee is free to simply “tend the garden” during this time, he or she is still on the employer’s payroll and therefore still owes a duty of loyalty, which means the employee cannot work with or for a competitor during this time.

There are a number of considerations in drafting a garden leave provision, which may be included not only in employment agreements but also in offer letters and stock option plans. Employers must determine who will be subject to the garden leave provision, how long the notice period will be and the compensation that will be paid (often, an employee will continue to receive his or her regular salary but will no longer be entitled to certain fringe benefits). The provision may allow the employer to shorten or waive the provision at its discretion. Most importantly, the provision should reserve the employer’s right to exclude the employee from performing work, potentially including a restriction on the employee’s access to the workplace.

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We wrote recently on the Second Circuit’s holding against former Hearst interns who claimed that the corporation violated federal and state wage and hour laws by not paying them. Shortly following the decision, the Department of Labor (DOL) issued “Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act,” a set of guidelines which outlines seven factors to help courts determine whether students working for “for-profit” employers are entitled to minimum wages and overtime pay.

For now, it is uncertain whether the New York State Department of Labor (NYSDOL) will adopt the seven-standard “primary beneficiary” test outlined by the DOL. The NYSDOL currently incorporates the DOL’s former six-part test for determining whether an individual is an intern or an employee. In applying the test, New York courts have focused on whether an internship reflects the kind of instruction received in a classroom and whether the employer benefitted economically from the intern’s work. The NYSDOL also requires the following six additional factors to be met in order for a position to be classified as an internship:

(1) the trainees or students are notified, in writing, that they will not receive any wages and are not considered employees for minimum wage purposes;

(2) any clinical training is performed under the supervision and direction of people who are knowledgeable and experienced in the activity;

(3) the trainees or students do not receive employee benefits;

(4) the training is general, and qualifies trainees or students to work in any similar business—it is not designed specifically for a job with the employer that offers the program;

(5) the screening process for the internship program is not the same as for employment, and does not appear to be for that purpose—the screening only uses criteria relevant for admission to an independent educational program; and

(6) advertisements, postings or solicitations for the program clearly discuss education or training, rather than employment, although employers may indicate that qualified graduates may be considered for employment.

The inconsistency between the DOL standards and New York’s state standards may well remain unchanged, or the NYSDOL could update its test to reflect federal guidance.

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In the digital age, employers must take various precautionary measures to ensure that trade secrets and other confidential information is not misappropriated by their current and former employees. Below is a list of steps employers can take to prevent improper access to valuable company information:

Constantly update the network credentials of current employees

Several recent cases have demonstrated that ex-employees can and do use their former colleagues’ account credentials to gain network access. To prevent this, current employees should change their passwords on a regular basis, and they should be instructed to never provide others with their passwords—this can in fact amount to aiding and abetting criminal conduct.

Ensure that current employees create unique passwords; use two-factor authentication

All too often, employees create simplistic passwords that can be easily guessed by others, especially those who know them well. Employees should be instructed to create unique passwords that differ from those used for other accounts. To assure a higher level of security, employers should implement a two-factor authentication process, which requires unique secondary identification (a passcode that has been texted to the employee, for example) each time the account is accessed.

Cut off ex-employees’ remote and cloud access capabilities

Immediately upon termination, employees should lose remote network access, as well as the ability to access companies’ cloud-based accounts such as Dropbox or Google Drive. Several cases have involved ex-employees who maintained remote access after they were fired and used this access in a way that damaged their former companies.

Collect all authentication and storage devices

Ex-employees often still maintain their access cards or digital storage that contains company information, such as USBs. These physical devices should be taken from employees at the time of termination.

Limit and monitor employee access to sensitive information

Current employees should only be able to access company material that is necessary to do their jobs. Employee access to privileged information should also be monitored, so it is readily apparent when a former employee’s access credentials are used, or when a current employee’s credentials are used in a suspicious or unlawful way.

Instruct employees about proper network behavior and the consequences of unlawful access

Employees should be trained that the fact that they can access a network or cloud-based account does not always mean that they should. The clearly applies when an employee has been terminated, but it also applies to current employees whose access to certain information should remain limited. Employees should be warned about what can happen to employees who unlawfully access confidential information: criminal convictions and prison sentences. Former employees have been sentenced for up to three years in prison for wrongfully using network access information.

To learn how Castaybert PLLC can assist with matters of employment law, please click here.

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On December 17, 2017, the New York County Supreme Court dismissed claims asserted by financial analytics firm First Manhattan Consulting Group that its competitor, Novantas, Inc., poached its employees to steal trade secrets. The specific claims against Novantas were tortious interference with contract, unfair competition, and misappropriation of trade secrets. First Manhattan also filed suit against two individuals who were officers at the firm and who were subject to contractual confidentiality and employee non-solicitation obligations.

Ultimately, the jury did not find Novantas to have engaged in a “pattern and practice of poaching” First Manhattan’s employees, and the tortious interference or unfair competition claims against the firm were dismissed. Most notably, the Court refused to submit the misappropriation claim to the jury on the grounds that the information presented by First Manhattan did not constitute specific trade secrets, and there no testimony concerning the alleged misappropriation. The case thus affirmed the necessity of detailed, comprehensive information about trade secrets to be presented at trial, including a full account of the nature of the misappropriation, as well as how exactly the plaintiff was damaged.

To learn how Castaybert PLLC can assist with intellectual property law, including trade secrets, click here.

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This past December, the Second Circuit held that unpaid students working at Hearst Communications were in fact interns, and not entry-level employees, as Xuedan “Diana” Wang claimed in her lawsuit against the corporation. Her 2011 complaint alleged that Hearst interns were actually entry-level employees, mislabeled as interns, who were denied minimum wage and overtime payment in violation of the Fair Labor Standards Act and state law. The Second Circuit, in determining “whether Hearst furnishes bona fide for-credit internships or whether it exploits student-interns to avoid hiring and compensating entry-level employees,” considered the test established in Glatt v. Fox Searchlight Pictures Inc., which asks who the primary beneficiary of the internship relationship is. Citing various relevant factors, including that the internships were tied to an academic program, that they provided an educational experience—even in including repetitive or menial tasks—and that Hearst made clear that there would be no monetary compensation, the Court ruled in favor of the defendant.

Shortly following the decision, the Department of Labor issued “Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act,” a set of guidelines which outlines seven factors to help determine whether students working for “for-profit” employers are entitled to minimum wages and overtime pay:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.

2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.

3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.

4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.

5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.

6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

It is important to note that though these factors clarify how courts analyze the legality of an unpaid position, no single factor is determinative, and “whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.”

To read more about the status of unpaid internships in the fashion industry, click here.

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To learn how Castaybert PLLC can assist with fashion law matters, please click here.

In its recent Chaca v. Abraham decision, the New York State Court of Appeals held that an employee may seek punitive damages where the employer’s discriminatory actions were willfully or wantonly negligent, or where there was “a conscious disregard of the rights of others or conduct so reckless as to amount to such disregard.” This aligns with the state’s common law standard for punitive damages, but it departs from federal law, under which punitive damages are not awarded without a showing the employer intentionally discriminated with malice or reckless indifference to protected rights. The Court maintained that its distinction is supported by the broad remedial purpose of the New York City Human Rights Law.

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Forms necessary for employee leave under the Paid Family Leave Law are now available online here. Forms are available for employees, employers, and insurance carriers. For employees, forms include those for bonding leave, leave for a family member’s serious health condition, and leave for assistance in connection with a military deployment.

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