Work Matters

Texas Supreme Court makes noncompetes more enforceable

I blogged before on Marsh USA Inc., et al. v. Cook. The Texas Supreme Court heard argument on Sept. 16, 2010, and came out with its decision last Friday. By a five-vote majority, with one well-written, funny concurrence by Justice Don R. Willett, and three justices in dissent, the court wiped away decades of noncompete law in Texas, making such agreements more enforceable. How did the justices make it happen? By changing the consideration needed to support a noncompete. Before, only confidential information given to the employee in exchange for the noncompete constituted valid consideration. In Marsh, Justice Dale Wainwright wrote for the court that stock options given to the employee would suffice, reasoning that the stock options incentivized the employee to work harder, thereby creating goodwill for the employer, which deserves the protection of a noncompete. But as Willett points out in his concurrence, if stock options can be consideration, then "any reward for a job well done — a raise, promotion, bonus or pension — could justify a noncompete on grounds it aligns employer/employee interests and thus bolsters ‘goodwill.’ ” While the employer won this case, many employers will lose in the long run. Noncompetes tie up talent, and it is the movement of talent that creates what the concurrence calls "economic dynamism." What's to be done if a client wants to fight the new regime? The concurrence sets out a game plan: Argue that “it is not enough merely to mutter the word” goodwill to create a valid noncompete and that the "unadorned assertion is insufficient." Rather the employer seeking to enforce the noncompete still must explain why the time, geography and/or scope limitations are reasonable and must show that the restraint does not reach beyond what’s necessary to protect the company's goodwill. Willett says that even after this decision, "You cannot simply buy a covenant not to compete." I am not sure. Let's see how the lower courts sort it out.

Hostility toward a racial group different than that to which the plaintiff belongs: Probative or not?

A group of Hispanic employees sue for a racially hostile work environment. The question: Can they prove their case by evidence of race-based hostility towards black employees? This was the issue the 5th U.S. Circuit Court of Appeals looked at in Hernandez, et al, v Yellow Transportation Inc. The answer delivered on May 12 was a very qualified “maybe.” The court's opinion notes that the district court's opinion was that the plaintiffs could not. The 5th Circuit's answer was “maybe” but only if “the hostility towards a racial group different than that of a plaintiff is in some fashion probative of the claim of hostility towards the plaintiff’s category of workers.” What would that look like? The 5th Circuit suggested it would be evidence of harassment directed towards black employees that would interfere unreasonably with the work performance of the Hispanic employees. What does that look like? The court did not say. Here, though, is a hidden gem in the opinion. The court reaffirmed its adherence to its 2007 decision in EEOC v. WC&M Enterprises Inc. In WC&M, the 5th Circuit remarked that, once a plaintiff establishes that a manager bears unlawful animus toward the plaintiff (national origin), then harassment not based on national origin (the same manager banging on the glass partition of the plaintiff's office) can support a hostile environment claim. Because the plaintiffs in Hernandez could not establish that the alleged non-race-based harassment was part of a pattern of race-based harassment, WC&M did them zero good.

U.S. Supreme Court rules in Wal-Mart Stores Inc. v. Dukes

Today, the U.S. Supreme Court released its long-awaited opinion on class actions, Wal-Mart Stores Inc. v. Dukes, an employer victory. The class was alleging that pay and promotion decisions at Wal-Mart were generally committed to the discretion of local managers and were exercised in a largely subjective manner. The class alleged that this set up resulted in sex discrimination and the 9th U.S. Circuit Court of Appeals approved a class of about 1,500,000 current and former employees, according to the high court’s opinion. Recall the old Wendy's commercial where a dissatisfied customer asked a Wendy's competitor, "Where's the beef?" Well, Justice Antonin Scalia, writing for the court, said essentially, "Where's the glue?" In other words, where is the commonality between employment decisions made involving 1,500,000 employees? The whole idea behind a class action is that it is an efficient way to resolve numerous complaints of discrimination in one fell swoop, but only if there are common issues to be decided. Here, the court rejected the opinion of a sociological expert that Wal-Mart had a "strong corporate culture" that makes it "vulnerable" to "gender bias" as long on conclusions and short on specifics. What about statistical evidence showing a national or regional disparity between women and men? The Supreme Court rejected this evidence, as well, because it was subject to too many localized variations writing, "Some managers will claim that the availability of women, or qualified women, or interested women in their stores' area does not mirror the national or regional average." Again, no commonality. Finally, the class’ argument that the fact that local managers had discretion over hiring was evidence of class discrimination was "just the opposite of a uniform employment practice that would provide the commonality needed for a class action. . . ." Remember the phrase from the economic meltdown, "too big to fail." In the Wal-Mart case, the class was just too big to be certified. It collapsed under its own weight. Class actions are still with us, but like a lot of other things, they will get downsized. By the way the court also addressed the more technical question of whether Federal Rule of Civil Procedure 23(b)(2), the provision permitting injunctive relief, also allows class treatment for back pay claims. The court said it did not.

A question each lawyer should ask to think intelligently about his brand

I was reading "Define Your Personal Leadership Brand in Five Steps” by Norm Smallwood in a Harvard Business Review publication. Smallwood has a useful fill-in-the-blank exercise to help fashion a brand-leadership statement: "I want to be known for being _____ so that I can deliver_____." I am a big believer in the power of questions and so is Smallwood. He suggests that, in doing the exercise, you ask yourself the following:

• Is this the brand identity that best represents who I am and what I can do?
• Is this a brand identity something that creates value in the eyes of my organization and key stakeholders?
• What risks am I taking by exhibiting this brand? Can I live this brand?

I would add that it is important to be realistic and authentic. Lawyers’ brands are never static but always evolving. This is a useful exercise for those starting out in their careers and those getting more senior in their practices.

Job seekers can prepare for outside-the-box interview questions

I was cruising the Internet and bumped into The Bold & Bizarre: 8 Real Interview Questions Meant to Catch You Off-Guard by Colin Dobrin. Want to work at Goldman Sachs as an analyst? Look for this curveball: "If you were shrunk to the size of a pencil and put in a blender, how would you get out?" Those who dream of a job as operations analysts at Capital One should brace themselves for being asked to rate how weird they are on a scale of 1 to 10. If your goal is getting hired as a project manager, Google throws this fast ball: Design an evacuation plan for San Francisco. Dobrin comes up with some funny answers. But while the questions may be entertaining (at least for the asker), I imagine their predictive power is minimal.

Wise advice on interviewing and hiring from a CEO

The May 29 Corner Office interview in The New York Times features Liz Elting, president and CEO of TransPerfect , a translation service. The Times asked her about how she makes hiring decisions. Here is her insight: "One of the things we’ve learned about hiring is that if we have any doubts, we don’t proceed." She stresses to her team that unless they feel in their gut that they must hire that person, they shouldn't. Her bottom line: Do not settle. That is good advice. Mark Twain remarked that it is easier to stay out than to get out. (Maybe he was talking about marriage; I don't recall.) Companies should empower managers to rely on their intuition and the collective intelligence of all who interview.