Posts tagged with "at-will employee"

How do I negotiate a severance package in Connecticut?

During these tough economic times, layoffs have become increasingly frequent. Unfortunately, employees of all experience levels are left with no job and facing a bare economy.  At a time like this, most employees may think accepting a severance package is the best choice.  But before signing anything, it is important to understand the basics of the severance package and the potential rights that might be relinquished in the process.

Before you attempt negotiations, you should first understand that there is no statutory minimum amount of time an employee must be given to consider the severance agreement.  A prevalent misconception is that all employees are entitled to 21 days to review a severance package offer.  Unless the package is offered to an employee over the age of forty, however, there is no specific review period defined by law.

Before deciding to accept, negotiate, or reject a severance package, it is important to understand completely what is being offered to you, including compensation, benefits, and insurance.  If you are in an industry that provides for deferred stock options or bonuses, it is important to understand whether you would still be entitled to it.  You should gather information concerning your employer’s welfare plans, health plans, vacation and sick leave policies, as well as any structured bonus plans or stock options.  If the severance package is only offering you what you would be entitled to, the agreement may lack adequate consideration.

Consideration, in the context of severance packages, means that an employee must receive something of value in exchange for giving up certain rights.  This “something of value” must be something other than what the employee is already entitled to.  Often, this comes in the form of additional pay or prolonged benefits.

Because the employee is receiving consideration, most severance agreements contain a release of a variety of legal claims against the employer.  This typically involves a release of all claims against the former employer that are based on age, race, national origin, gender, disability, and religion. These are critical rights all employees are granted under the ADEA, Americans with Disabilities Act, Employee Retirement Income Security Act, and Title VII of the Civil Rights Act.

When negotiating, it is important to keep the above facts in mind, but also that most employers are willing to negotiate severance on some level.  While it seems like the package is a “take it or leave it” deal, most employers are open to reasonable requests in negotiation.  There is always a risk that an employer will revoke the offer if any negotiations are attempted, but your chances of negotiating successfully increase if there is a claim that your particular severance package is not fair in light of your industry, your position, or the circumstances of your employment.  Additionally, the negotiations should not focus solely on the dollar amount connected with the severance agreement.  Employers might be willing to extend insurance coverage, disability benefits, or other items in lieu of an increase in dollar amount.

Given the breadth of the claims released and the intricacies of most severance packages, it is extremely important to consult with an attorney before signing. The attorneys at Maya Murphy, P.C., have years of experience in all sectors of employment law.  If you have any questions relating to your severance agreement, please contact Maya Murphy by phone at (203) 221-3100 or via e-mail at Ask@Mayalaw.com.

I Was Laid Off Due to Restructuring, but My Position Was Filled Two Days Later. I Was Forced to Sign a Separation Agreement. Can I Sue for Compensation in Connecticut?

An at-will employee can be terminated for any lawful reason in Connecticut.  For example, if you are an at-will employee, your company can terminate you for “restructuring,” even if they fill your same position days later.  Technically, an at-will employee is owed no explanation for termination.   Regardless, there are exceptions to an employment at-will termination.  You may not be terminated in any such way that violates your civil rights.  An example of this would be if you were terminated for your age, gender, or race.  Whether you have been terminated for any one of these reasons would rely heavily on the specific facts of the case.  To determine whether you may sue for compensation it would be important to sit down with an experienced employment attorney to go through every fact and circumstances of your employment.

In the same respect, you may have a claim for compensation if you were forced to sign the separation agreement under fraud or misrepresentation.  Again, it is important to describe to an employment attorney every detail about the separation agreement to determine your case.

If you have any questions involving employment law in Connecticut, please contact Joseph C. Maya, Esq. at (203) 221-3100 or e-mail him directly at JMaya@Mayalaw.com.

I Was Laid Off Due to Restructuring, but My Position Was Filled Two Days Later. I Was Forced to Sign a Separation Agreement. Can I Sue for Compensation in Connecticut?

An at-will employee can be terminated for any lawful reason in Connecticut.  For example, if you are an at-will employee, your company can terminate you for “restructuring,” even if they fill your same position days later.  Technically, an at-will employee is owed no explanation for termination.   Regardless, there are exceptions to an employment at-will termination.  You may not be terminated in any such way that violates your civil rights.  An example of this would be if you were terminated for your age, gender, or race.  Whether you have been terminated for any one of these reasons would rely heavily on the specific facts of the case.  To determine whether you may sue for compensation it would be important to sit down with an experienced employment attorney to go through every fact and circumstances of your employment.

In the same respect, you may have a claim for compensation if you were forced to sign the separation agreement under fraud or misrepresentation.  Again, it is important to describe to an employment attorney every detail about the separation agreement to determine your case.

If you have any questions involving employment law in Connecticut, please contact Joseph C. Maya, Esq. at (203) 221-3100 or e-mail him directly at JMaya@Mayalaw.com.

Continued Employment is Inadequate Consideration in Absence of At-Will Employment

Continued Employment is Inadequate Consideration in Absence of At-Will Employment
Cost Management Incentives, Inc. v. London-Osborne, 2002 Conn. Super. LEXIS 3967

Cost Management Incentives, Inc. was a company that specialized in the placement of employees in the pharmaceutical industry. This case addressed covenants signed by the company and two former employees, Ms. Yolanda London-Osborne and Ms. Kristen Herman. The company presented the two employees with non-compete agreements in May 1996 after several years of employment. The restrictive covenant contained a one-year non-compete clause and a two-year non-solicitation clause. Neither woman was afforded the opportunity to consult with a lawyer to go over the agreement and both felt they were in jeopardy of termination should they refuse to sign. The agreement did not offer anything in addition to their current salary and benefits. Mr. David Hallen, the president and Chief Executive Officer of the company, gave them approximately five minutes to skim and sign the agreements, preventing the women from gaining a firm grasp on what their obligations were under the agreement. The employees continued in their employment in same manner and with the same benefits until the company terminated them.
Cost Management sued the two former employees and asked the court to issue an order preventing any violations of the covenant. Ms. London-Osborne and Ms. Herman both sought an order declaring that the agreement was unenforceable on the grounds of inadequate consideration and the inappropriate and egregious conduct of the company’s management. Both former employees further contended that they did not breach the agreement and there was no indication that they were likely to do so. The court found in favor of the former employees and held that the restrictive covenants were unenforceable because they lacked consideration and their provisions were so broad that they unnecessarily restricted their ability to procure future employment.
The restrictions in the agreement prohibited employment with any business enterprise engaged in facilitating temporary and/or permanent placement in the pharmaceutical industry for one year after termination. The court found this specific nation-wide restriction to be reasonable since the company maintained national operations. The court however found that the two-year non-solicitation clause was unreasonable and rendered the covenant unenforceable. This was overly broad and restrictive since 70-75% of Cost Management’s business came from a mere six pharmaceutical companies. The court commented that Cost Management should have tailored this clause to protect its legitimate business interests without placing such an extensive hardship on former employees. Analysis of the covenants also led the court to hold that the provisions provided the employer with much more protection than was deemed necessary or permissible.
While the finding of unreasonable provisions is sufficient to invalid a restrictive covenant, the court went on to discuss the lack of consideration, a factor that also renders a non-compete agreement unenforceable. Connecticut law indicates that continued employment is not adequate consideration for a non-compete agreement for employees that are not working on an at-will basis. Continued employment is sufficient for employees working on an at-will basis but this was not the case with Ms. London-Osborne and Ms. Herman.
For these reasons, the court denied Cost Management’s request for injunctive relief and declared that the agreements were unenforceable and void under Connecticut law.
If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

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Continued Employment is Inadequate Consideration in Absence of At-Will Employment

Continued Employment is Inadequate Consideration in Absence of At-Will Employment
Cost Management Incentives, Inc. v. London-Osborne, 2002 Conn. Super. LEXIS 3967

Cost Management Incentives, Inc. was a company that specialized in the placement of employees in the pharmaceutical industry. This case addressed covenants signed by the company and two former employees, Ms. Yolanda London-Osborne and Ms. Kristen Herman. The company presented the two employees with non-compete agreements in May 1996 after several years of employment. The restrictive covenant contained a one-year non-compete clause and a two-year non-solicitation clause. Neither woman was afforded the opportunity to consult with a lawyer to go over the agreement and both felt they were in jeopardy of termination should they refuse to sign. The agreement did not offer anything in addition to their current salary and benefits. Mr. David Hallen, the president and Chief Executive Officer of the company, gave them approximately five minutes to skim and sign the agreements, preventing the women from gaining a firm grasp on what their obligations were under the agreement. The employees continued in their employment in same manner and with the same benefits until the company terminated them.
Cost Management sued the two former employees and asked the court to issue an order preventing any violations of the covenant. Ms. London-Osborne and Ms. Herman both sought an order declaring that the agreement was unenforceable on the grounds of inadequate consideration and the inappropriate and egregious conduct of the company’s management. Both former employees further contended that they did not breach the agreement and there was no indication that they were likely to do so. The court found in favor of the former employees and held that the restrictive covenants were unenforceable because they lacked consideration and their provisions were so broad that they unnecessarily restricted their ability to procure future employment.
The restrictions in the agreement prohibited employment with any business enterprise engaged in facilitating temporary and/or permanent placement in the pharmaceutical industry for one year after termination. The court found this specific nation-wide restriction to be reasonable since the company maintained national operations. The court however found that the two-year non-solicitation clause was unreasonable and rendered the covenant unenforceable. This was overly broad and restrictive since 70-75% of Cost Management’s business came from a mere six pharmaceutical companies. The court commented that Cost Management should have tailored this clause to protect its legitimate business interests without placing such an extensive hardship on former employees. Analysis of the covenants also led the court to hold that the provisions provided the employer with much more protection than was deemed necessary or permissible.
While the finding of unreasonable provisions is sufficient to invalid a restrictive covenant, the court went on to discuss the lack of consideration, a factor that also renders a non-compete agreement unenforceable. Connecticut law indicates that continued employment is not adequate consideration for a non-compete agreement for employees that are not working on an at-will basis. Continued employment is sufficient for employees working on an at-will basis but this was not the case with Ms. London-Osborne and Ms. Herman.
For these reasons, the court denied Cost Management’s request for injunctive relief and declared that the agreements were unenforceable and void under Connecticut law.
If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

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Sufficient Consideration for At-Will Employees

Sufficient Consideration for At-Will Employees
Home Funding Group, LLC v. Kochmann, 2007 U.S. Dist. LEXIS 41376

Home Funding Group, LLC was a New York corporation with primary business operations in Connecticut that engaged in the residential mortgage brokerage business. The company employed Mr. Nicholas Kochmann and Mr. Patrick Dougherty in its New Jersey office. They worked for the company from January 2004 to May 1, 2006 and July 18, 2006 respectively. The company had both employees sign an Employment Agreement that contained non-compete and non-solicitation clauses to protect Home Funding’s business interests. The employees later signed an “Invention Assignment Agreement” stating that Home Funding was the sole owner of any invention connected to their employment and that it would maintain full intellectual property rights. The agreement stated that Connecticut law would govern any legal disputes and litigation in state and/or federal court. Both employees signed a new restrictive covenant in March 2006 that amended and superseded the 2004 Employment Agreement.
Misters Kochmann and Dougherty both voluntarily terminated their employment with Home Funding and Hamilton Financial, a direct competitor in the mortgage broker industry, hired them shortly thereafter. Home Funding sued its two former employees for breach of the non-compete agreements and requested they be enjoined from further employment with Hamilton Financial. Misters Kochmann and Dougherty asserted that the agreements were not legally binding on them because they lacked valid consideration, claiming that continued employment is inadequate consideration for a covenant executed after the start of employment. The federal court sitting in Bridgeport, Connecticut rejected this argument and held that the agreements were properly executed, contained adequate consideration, and were binding upon the parties.
The former employees argued that Connecticut law requires an employer to promise to something different from what it is already obligated to do when it wants to modify/amend a restrictive covenant with one or more of its employees. The court however applied Home Funding’s legal assertion that at-will employees may be terminated at any time at the employer’s discretion and thus continued employment amounted to adequate consideration to support a valid non-compete agreement. The court noted that in this case, Home Funding had the burden of proof at trial to demonstrate that the agreement was correctly executed and enforceable. Home Funding was able to provide such proof and the federal court held in its favor. Had Misters Kochmann and Dougherty not been at-will employees however, the court would have likely held that the agreement did not have the requisite consideration and could have invalidated the agreement in its entirety.
If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

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Change in Business Services/Products Doesn’t Invalidate a Non-Compete Agreement

Change in Business Services/Products Doesn’t Invalidate a Non-Compete Agreement

DiscoveryTel SPC, Inc. v. Pinho, 2010 Conn. Super. LEXIS 2683

In 2002, DiscoveryTel SPC hired Mr. Ismael Pinho as its chief financial officer (CFO) as an at will employee. The parties later executed an employment agreement on December 27, 2004 that would go into effect January 1, 2005. The employment contract modified Mr. Pinho’s employment from at will to a one-year automatic renewable basis and outlined his salary, incentive bonuses, vacation, personal days, insurances, severance package, and several restrictive covenants. Mr. Pinho was prohibited from directly or indirectly competing with DiscoveryTel by being involved in the purchase and/or sale of international voice and traffic data systems during the term of the employment agreement or during any period for which he was receiving severance pay. Additionally, the agreement stated that he was bound by an indefinite non-disclosure clause pertaining to DiscoveryTel’s confidential and proprietary information. In between 2004 and 2010, DiscoveryTel experienced a corporate reorganization and shifted its focus and the services it provided. By 2010, it was no longer engaged in the purchase and/or sale of international voice and data traffic but instead facilitated the sale of telephone traffic.
Mr. Pinho informed the president of DiscoveryTel in a May 21, 2010 letter that he had accepted a position with World Telecom Exchange Communications, LLC (WTEC) and would be starting at the new company on June 1, 2010. DiscoveryTel brought suit and requested that the court grant its request for an injunction to prevent any violations of the restrictive covenants in connection to Mr. Pinho’s new employment. Mr. Pinho did not have an issue with the non-disclosure clause in the employment contract but asserted that his mere employment with WTEC was not a violation of the non-compete agreement. He contended that the agreement did not prohibit working for a competitor but rather specifically from “being involved in ‘any business relating to the purchase and sale of international voice and data traffic’”. He went on to argue that engaging in this sector of the industry should not violate a non-compete agreement because DiscoveryTel was no longer engaged in that specific industry activity. Additionally, he argued that the agreement had inadequate consideration and was therefore unenforceable.
The court found these arguments unconvincing however and granted DiscoveryTel’s request for injunctive relief and restrained Mr. Pinho from working for WTEC until December 31, 2010 (the end of the current employment term) in order to prevent further violations of the non-compete agreement. It looked to the modification in the nature of Mr. Pinho’s employment (from at will to a contract renewable on an annual basis) and enhanced benefits (mainly the introduction of a severance package) in the employment agreement to conclude that there was sufficient consideration. Finally, the court analyzed whether Mr. Pinho’s activities as an employee of WTEC violated the covenant, taking into account DiscoveryTel’s reorganization and shift in focus. The court ultimately held that Mr. Pinho had indeed violated the non-compete agreement by working at WTEC and that a mere change in business services/products did not render the non-compete agreement invalid or release Mr. Pinho from its obligations.
If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

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Industry Specific Factors Can Render Unenforceable a Covenant Not to Compete

A covenant not to compete may be unenforceable even if it is reasonable in terms of geographic designation and time limitation.  In Creative Dimensions, Inc. v. Laberge, 2012 Conn. Super. LEXIS 1464 (Conn. Super. May 31, 2012), two individuals sold their business and became “at will” employees of the purchaser.  At issue was a nation-wide agreement not to compete for a period of 18 months following termination of their employment.  The court found the covenant reasonable in time and space but unenforceable nevertheless because of certain other factors, including attributes of the underlying industry.

The employer offered goods and services in the area of trade show signs, services, and exhibits.  The former employees joined a sign company that, as a result, expanded into the portable and custom exhibits market.  In deciding the case, the Court focused on two of the five factors relevant to determining the enforceability of a restrictive covenant: the extent to which it (a) protects legitimate business interests, and (b) unreasonably restricts an individual’s ability to engage in an occupation or profession.

Significantly, the defendants were the only employees of the plaintiff subject to a covenant not to compete.  The employer argued that it had invested time, energy, and money in the defendants as at will employees.  To this contention, the Court responded: “. . . an employer’s desire to stop competition from an employee in whom the employer has invested time, energy, and money is not sufficient, alone, to support the validity of a Covenant not to Compete or not to Solicit.  Equitably, the Covenant must protect against something more, and must be bargained for in exchange for more.”  Stated differently, a covenant not to compete must seek to protect against something more than mere competition, i.e., some advantage the employee acquired that would render unfair his immediate competition.

In this case, there was no evidence that the employer had trade secrets or confidential data that defendants accessed prior to their departure. By the same token, the employer’s customers were either already public knowledge or readily accessible through its own website.  The relationship between the employer and its customers was not markedly different than those of other portable display businesses.  In fact, the employer’s customers often used the services of the employer’s competitors, and the employer on occasion even outsourced business to its competitors. Significantly, the employer did not require other employees to sign a covenant not to compete even though employees had been lost to competitors in the past.  As a result, the Court concluded that the employer did not truly believe that such covenants were necessary to protect itself within the portable display market.

The Court also found that the covenant seriously impeded defendants’ ability to pursue their chosen careers.  “The test for reasonableness is not whether the defendants would be able to make a living in other ways, or in other occupations, but whether or not the [covenant] as drafted and applied would unfairly restrain their “opportunity” to pursue their occupation.”

Finally, the Court emphasized that the portable display market “does not involve a fixed and unchanging clientele.”  The market is highly competitive, customer loyalty is fleeting, and sales staff are fairly transient.  In sum, while the defendants may have learned aspects of the trade show business while in the plaintiff’s employ, they were not provided with specialized or protected knowledge not readily available to others in the field.  Consequently, by virtue of their employ, defendants were not possessed of an unfair advantage in the market.

The lawyers at Maya Murphy, P.C., are experienced and knowledgeable employment and corporate law practitioners and assist clients in New York, Bridgeport, Darien, Fairfield, Greenwich, New Canaan, Norwalk, Stamford, Westport, and elsewhere in Fairfield County.  If you have any questions relating to your non-compete agreement or would like to discuss any element of your employment agreement, please contact Joseph C. Maya, Esq. by phone at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com.

 

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