New York Employment Lawyer Blog

On November 3, 2011, in Int'l Business Machines Corp. v. Visentin, the Second Circuit Court of Appeals affirmed a Southern District of New York decision denying IBM's application for a preliminary injunction to enforce a non-compete agreement and prevent a former employee from working for a competitor.

Visentin was employed by IBM in numerous roles over twenty-six (26) years. From 2007 through the end of his employment, he was General Manager of IBM's Integrated Technology Services ("ITS") business, where he was responsible for the development and sale of ITS products and services throughout North America.

On January 19, 2011, Visentin announced that he was leaving IBM to work for a competitor, Hewlett-Packard. However, Visentin had previously signed a non-compete agreement with IBM, which provided that he would not, during his employment and for a period of twelve (12) months following the termination of his employment, become employed by any competitor of IBM in any geographic area in the world for which Visentin had job responsibilities during his last twelve (12) months of employment with IBM.

Due to this agreement, Visentin even offered to remain at IBM for a reasonable transition period, but IBM declined that offer. Hewlett-Packard also took steps to avoid any overlap in responsibilities between Visentin's position at IBM and his new position, by insulating Visentin from former IBM customers, restricting his work to segments of its business for which he had not been responsible at IBM, and limiting him to working with established Hewlett-Packard clients.

As you might have guessed, IBM nonetheless instantly brought suit against Visentin alleging breach of the non-compete agreement and misappropriation of trade secrets, and moved for a preliminary injunction.

The Southern District of New York held that the non-competition agreement was overly broad and refused to grant IBM's request for a preliminary injunction. Reiterating the standard under New York law that "properly scoped non-competition agreements are enforceable to protect an employer's legitimate interests so long as they pose no undue hardship on the employee and do not militate against public policy," the Court recognized that while IBM's legitimate business interests were the protection of its confidential information and trade secrets, the agreement prohibited competition in areas where IBM had no legitimate business interests.

Thus, the Court held that IBM had not satisfied its burden of demonstrating that any of its confidential information or trade secrets would be disclosed or relied upon by Visentin as a result of his employment with Hewlett-Packard. According to the Court, Visentin was not a technological expert and was not on the front lines dealing with clients, and therefore had little knowledge of how deals were priced. The Court was also influenced by the fact that there was no evidence of prior wrongdoing or disclosure of confidential information by Visentin. As a result, the Court held that IBM was unable to establish that the non-competition agreement was enforceable under New York law.

Before signing a non-compete agreement, we always recommend that employees have a New York Non-Compete attorney review the agreement to ensure that the employee understands the terms of the agreement and the ramifications of signing it. Lastly, if you already signed a non-compete agreement and now have questions concerning the enforceability of your agreement, it's also smart to consult with a New York employment attorney.

The New York Wage Theft Prevention Act (the "Act"), effective April 2011, amended the New York Labor Law ("NYLL") and increased the liquidated damages penalty for failure to pay wages from 25% of the wages found to be due, to 100% of the wages found to be due.

In Ji v. Belle World Beauty, Inc. (Aug. 24, 2011), nail technicians at a beauty salon sued their employer, alleging that the salon paid them a fixed amount per day regardless of the amount of time worked, refused to permit them to take breaks, and failed to properly compensate them for working overtime. After complaining to management, the salon terminated the Plaintiffs' employment. Although the Plaintiffs were terminated in 2007, they argued that the Act should be applied retroactively, and they should be entitled to recover a 100% liquidated damages award.

The New York Supreme Court (New York's trial court) agreed, holding that: a) the Act was a remedial statute; b) the Act did not impair any vested rights of the employer; and c) the Act did not create any new rights of recovery for the Plaintiffs. Therefore, the Court permitted the Plaintiffs to seek a 100% liquidated damages award for wages that their employer failed to pay before the Act took effect.

However, a few months earlier, in Wicaksono v. XYZ 48 Corp. (May 2, 2011), the Southern District of New York (New York federal court) held that the Act was not retroactive and, therefore, the liquidated damage provision applied only as it existed at the time of the employer's wage violations. In this case, four waiters sued their former employer for wage and hour violations under both the federal Fair Labor Standards Act ("FLSA") and the NYLL. Regarding the Plaintiffs' state law claim, the court held that the enhanced liquidated damages provision of the Act should not be applied retroactively, reasoning that "retroactive operation is not favored by [New York] courts and statutes will not be given such construction unless the language expressly or by necessary implication requires it."

Due to this split between New York state and federal courts in the interpretation of the retroactive effect of the Act, employees alleging violations going back more than three years should consider filing their claims in state court where they can recover 100% liquidated damages going back six years, even where those claims accrued before April 2011.

If you believe that your employer is in violation of the FLSA and/or the NYLL by not properly compensating you, it's important to speak with a New York Wage and Hour attorney to accurately assess and determine all of your legal rights.

On April 12, 2011, the New York Wage Theft Prevention Act ("the Act") became effective, amending the New York Labor Law and increasing penalties for wage and hour violations. See this firm's December 13, 2010 blog entry for further information on the Act.

In addition to the written notice that must be given to all new employees, beginning in 2012, all private sector employers in New York State will also be required to provide each of their New York employees with an annual notice between January 1st and February 1st of each year.

Similar to the notice to new hires, the annual notice must contain the following information:
· The employee's rate(s) of pay;
· The basis of the employee's rate(s) of pay (e.g. by the hour, shift, day, week, salary, piece, commission, or other);
· Whether the employer intends to claim allowances as part of the minimum wage, including tip, meal, or lodging allowances, and the amount of those allowances;
· The employee's regular pay day designated by the employer in accordance with the frequency of pay requirements in the Labor Law;
· The name of the employer and any "doing business as" names used by the employer;
· The physical address of the employer's main office or principal place of business, and a mailing address if different;
· The telephone number of the employer; and
· Any "such other information as the commissioner deems material and necessary."

Employers are required to provide such notice in English and in the "primary language" of the employee, but only if that primary language is one of the languages in which the New York State Department of Labor ("NYSDOL") has prepared such dual-language forms. Currently, the NYSDOL has prepared dual-language forms in Spanish, Chinese, Korean, Russian, Polish, and Haitian-Creole.

Also significant, the Act creates a private right of action for employees to bring a lawsuit for the failure to comply with the amended notice provisions of the Labor Law, which can result in damages of up to $2,500.00, plus costs and attorneys' fees. If you believe that your employer has neglected to provide you with any of the required notices, it's important to consult with a New York Wage and Hour attorney as soon as possible to preserve all your legal rights.

In Eyes of the World, Inc. v. Boci, a New York court recently held that a former employee's restrictive covenant (non-compete agreement) prohibiting her from providing services to any client of her former employer was overly broad and, thus, unenforceable.

In this case, Defendant Boci worked for Plaintiff Eyes of the World, Inc., where she performed hair removal services. As an employee, Boci had signed a non-compete agreement which stated, "For a period of one (1) year following termination of your employment for any reason, you agree not to provide Salon Services in New York City to any client of Eyes of the World, Inc. for whom you provided services during the last twelve (12) months of your employment with Eyes of the World, Inc."

When Defendant Boci voluntarily resigned from her position, and began working for a competitor, Plaintiff sought to enforce the non-compete agreement, alleging that Boci performed services for eighty-six (86) former clients of Plaintiff at Boci's new place of employment within one (1) year of her termination.

The Court stated that, "In order to be enforceable, an anticompetitive covenant ancillary to an employment agreement must be reasonable in time and area, necessary to protect the employer's legitimate interests, not harmful to the public, and not unreasonably burdensome to the employee. ... Restrictive covenants are generally frowned upon by courts due to public policy considerations that seek to prevent restrictions on a person's livelihood. ... Consequently these covenants will be enforced only if reasonably limited temporally and geographically and then only to the extent necessary to protect the employer from unfair competition which stems from the employee's use or disclosure of trade secrets or confidential customer lists, or if the employee's services are unique or extraordinary."

Here, while Plaintiff attempted to establish that the services provided by Boci were unique and extraordinary, the Court rejected this argument, and found that Boci's skills were not unique or extraordinary, and furthermore, that it appeared clients "opted to follow Boci based on their needs and her ability." In addition, the Court found that there was no evidence that Boci had access to trade secrets, client lists, or proprietary information, ultimately holding that the non-compete clause was "unreasonable in its limitation, burdensome to the employee, and not necessary to protect the employer's legitimate interests."

The Court therefore struck down the restrictive covenant as overly broad and unreasonable, and dismissed Plaintiff's complaint.

Before signing a non-compete agreement, we always recommend that employees have a New York Non-Compete attorney review the agreement to ensure that the employee understands the terms of the agreement and the ramifications of signing it. Lastly, if you already signed a non-compete agreement and now have questions concerning the enforceability of your agreement, it's also smart to consult with a New York employment attorney.

In Kleinman v. Blue Ridge Foods, LLC (July 7, 2011), the Kings County Supreme Court granted an employee's motion for summary judgment on his breach of contract claims against his former employer.

In this case, pursuant to the terms of an employment agreement, Defendants hired Plaintiff as their Chief Executive Officer for a term of three (3) years. If Defendants wanted to discharge Plaintiff earlier, a prior written notice must be delivered to Plaintiff either personally or by mail. In addition, in the event Plaintiff's early discharge was without "cause," Plaintiff would be entitled to additional benefits, including a severance payment equal to twelve (12) months' salary.

After only four (4) months, with no prior written notice, Defendants abruptly discharged Plaintiff's employment. His discharge was communicated to him both verbally and in writing on that day.

Plaintiff then sued, asserting that, in accordance with his employment contract, since his discharge was without "cause," he was owed the severance and additional benefits.

While Defendants basically conceded that they failed to meet any of the "for cause" discharge provisions provided for in the agreement, they instead contended that Plaintiff could not recover the compensation he sought because the employment contract was unenforceable. Defendants claimed that Plaintiff defrauded them by misstating his work experience and "was in completely over his head and was at no time able to perform the job for which he was hired." They argued that the employment contract was thus void and unenforceable because they were induced to enter into it by Plaintiff's fraudulent misrepresentations as to his title and experience at his prior employment.

However, the court held that Defendants failed to establish a justifiable reliance on the purported misrepresentations, and noted a crucial factor was that Defendants failed to adequately verify Plaintiff's experience even though the means to do so were at their disposal.

The court thus ruled that Defendants terminated Plaintiff without "cause," as that term is defined in his employment contract. Further, the court found that Defendants breached the employment contract, as they failed to provide Plaintiff with the contractual notice and cure period. Therefore, the court held that Plaintiff was entitled to his actual damages, interest, attorney's fees, and costs under Section 198 and other provisions of Labor Law article 6, and the statutory liquidated damages under Labor Law § 198.

If you believe that your former employer has breached an employment agreement with you, it's always smart to immediately consult with a New York employment agreement attorney to preserve your legal rights.

On April 29, 2011, in Cortes v. Foot Locker, Inc.pdf, the Southern District of New York denied, for the second time, Plaintiffs' motion for class certification of their New York State Labor Law ("NYSLL") claims pursuant to Rule 23 of the Federal Rule of Civil Procedure ("Rule 23").

In this case, Plaintiffs sued their employer alleging that the store managers continually altered their time sheets to decrease hours and thus meet corporate quotas. In January 2010, the Court conditionally certified the case as an opt-in collective action under the Fair Labor Standards Act ("FLSA"), but denied Plaintiffs' motion to certify their NYSLL claims as an opt-out class, pursuant to Rule 23.

While Rule 23 does not govern FLSA collective actions, it does govern NYSLL class action claims brought in federal court. The primary difference between a Rule 23 class action and an FLSA collective action is the manner in which a class is formed. In order to participate in an FLSA collective action, an employee who is not a named plaintiff must "opt-in" or affirmatively consent to litigation of his or her claims in the named lawsuit. A Rule 23 class action does not require consent of class members. Instead, all members of the class are included as parties to the action unless they "opt- out." To opt-out, a class member must expressly request exclusion and formally withdraw from the lawsuit. In addition, while the FLSA's statute of limitations is only two years (three years for "willful" violations), the NYSLL has a six-year statute of limitations.

When the Court conditionally certified the FLSA opt-in collective action, it permitted Plaintiffs to take discovery beyond the FLSA's statute of limitations and gave them permission to renew their motion for Rule 23 class certification only if they uncovered evidence showing that the Defendant had committed violations outside of the FLSA's statute of limitations.

However, after discovery, when Plaintiffs did in fact renew their motion, the Court renewed its denial of the Rule 23 certification, stating that, "certifying a Rule 23 class as to plaintiffs' state-law claims would lead to a significant expansion of the scope of fact discovery, which, in turn, would likely substantially delay trial on plaintiffs' claims arising under the [FLSA] . . . If an opt-out class were certified on the New York state labor law claims, the proofs on those claims would potentially overshadow and overwhelm the claims that arise under federal law, as to which I have already certified an opt-in collective action."

Unfortunately, this is not the first time that a court stressed the incompatibility of certifying a collective action under the FLSA and certifying a class action under Rule 23 in the same case. As such, it's so important for all New York employees to first consult with a New York wage and hour attorney before initiating a lawsuit for unpaid wages.

New York State Labor Law ("NYSLL") § 162 covers the requirements concerning employee meal periods.

NYSLL § 162(1) requires that all employees working in, or in connection with, a factory must be given at least a sixty-minute noon day meal. NYSLL § 162(2) requires that all other employees who work in excess of six hours must be given at least a thirty-minute noon day meal break.

The "noon day meal" is recognized as one that is taken during the period extending from 11:00 a.m. to 2:00 p.m., meaning that the hours of employment must extend through the noon day meal period.

NYSLL § 162(3) requires that every person employed for a period starting before 11:00 a.m. and continuing later than 7:00 p.m. must be allowed an additional meal period of at least twenty minutes between 5:00 p.m. and 7:00 p.m.

NYSLL § 162(4) requires that all factory workers who work for more than six hours between the hours of 1:00 p.m. and 6:00 a.m. must be given a sixty-minute meal break and all other workers who work for more than six hours between the hours of 1:00 p.m. and 6:00 a.m. must be given a forty-five minute meal break.

Although it's clear that most employees are in fact entitled to meal breaks, in Russo v. 210 Riverside Tenants, Inc. (July 2010), the Southern District of New York recently held that there is no private cause of action for alleged violations of Labor Law § 162, as the NYSLL vests the New York Commissioner of Labor with the sole authority to enforce § 162. This means employees who are denied meal breaks to which they are entitled cannot bring a lawsuit in court, but instead, must present their claims to the New York Commissioner of Labor who is charged with regulating and enforcing the law.

When making the determination as to whether or not an employee is entitled to any meal break, it's always smart to first consult with a New York employment attorney.

The New York Wage Theft Prevention Act (the "Act") was signed into law today by Governor Paterson. The Act, effective April 12, 2011, amends the New York Labor Law to provide new protections for employees in New York, as well as stiffer penalties for employers who fail to pay their employees overtime or the minimum wage.

Tougher Civil Penalties

The Act increases the amount of liquidated damages an employee can recover in cases where a violation is shown and the employer fails to prove that it had a good-faith basis for believing it was acting in compliance with the law. Specifically, the Act now permits liquidated damages of up to 100% of the total amount of wages due, an increase from 25% under the existing law. This means that employees may be entitled to recover twice what they are owed in wages or overtime.

The Act also provides for the recovery of prejudgment interest and attorneys' fees in any civil action to recover unpaid wages brought by an employee.

The new law also gives employees expanded protections against employers who have been found to have violated the law, but still fail to pay. If an employer loses in court and still fails to pay within ninety (90) days, the employee can now collect an extra 15% of the judgment owed, as well as attorneys' fees and costs for enforcing the judgment.

Employee Notice of Wages

The New York Labor Law already requires employers to notify all newly hired employees at the time of hiring, in writing, of their regular rate of pay, regular pay day, and overtime rate of pay if they will be eligible for overtime. The Act now also requires employers to include the basis of the wage payment (e.g., whether paid by the hour, shift, day, week, salary, piece, or commission, or on another basis) as well as the employer's intent to claim allowances (e.g., tip or meal allowances) as part of the minimum wage.

Under the Act, the notice must be updated and provided again to the employee at least seven (7) calendar days prior to any changes to the employee's pay or other terms contained in the notice (unless such changes are reflected in the employee's wage statement).

Lastly, the Act requires that all employers obtain from each employee a signed and dated written acknowledgment, in English and in the primary language of the employee, of receipt of the notice.

If an employer fails to provide the required notice of wages within ten (10) business days of the employee's first day of employment, the employee may bring an action in court to recover damages of $50 for each workweek that the violation occurred or continues to occur (not to exceed a total of $2,500), plus costs and reasonable attorneys' fees.

Employers are now required to preserve and maintain the employee's acknowledgment(s) of the notice for a period of six (6) years.

Pay Statements

The Act requires that employers provide pay statements that specify the applicable dates the wages cover and the rate and basis of pay. For non-exempt employees, pay statements must also include the regular and overtime pay rates and the number of regular and overtime hours worked.

If an employer fails to provide the required pay statement, the employee may bring an action in court to recover damages of $100 for each workweek that the violation occurred or continues to occur (not to exceed a total of $2,500), plus costs and reasonable attorneys' fees.

The Act also increases the length of time an employer must preserve and maintain payroll records and/or pay statements from three (3) to six (6) years.

Anti-Retaliation Provisions

The Act also increases protections for employees who complain about employer violations, as well as for workers the employer merely believes has complained about violations. The Act permits the Commissioner to order additional remedies in the event of retaliation, specifically enjoining conduct, liquidated damages not to exceed $10,000, reinstatement with back pay, and/or front pay instead of reinstatement.

Criminal Penalties

The Act imposes new criminal penalties against employers that fail to pay minimum wage or overtime compensation. Any employer that pays less than the amount owed may be guilty of a misdemeanor, and if convicted will be fined a minimum of $500 and a maximum of $20,000 or imprisoned for up to a year. If a second violation occurs within six (6) years of the first conviction, the employer will be guilty of a felony.

The new law also includes new criminal penalties against employers that fail to maintain records. Such a violation is deemed a misdemeanor, with fines between $500 and $5,000 or imprisonment for up to one year. A subsequent violation and conviction within six (6) years will result in either a fine of $500 to $20,000 or imprisonment for a period not to exceed one year and a day, or both.

In sum, although the new law does not radically change the duties of New York employers, the Act does impose significant civil and criminal penalties for employers that fail to comply with the law. If you have any questions with respect to these new requirements, we recommend speaking with a New York overtime attorney as soon as possible.

As I was reviewing recent New York employment law cases, I came across an interesting one dealing with the enforceability of non-compete agreements. In The Ayco Company, L.P. v. Brian D. Feldman (October 2010), Plaintiff, a financial services firm, brought a lawsuit against a former employee, alleging that he breached a ninety-day non-compete provision contained in his employment contract. As a result, Plaintiff sought a preliminary injunction enforcing the terms of the agreement.

At the time he was hired, Defendant signed an Employment Agreement ("Agreement"), which was thereafter revised to include a new non-compete provision. Pursuant to the terms of the Agreement, Defendant agreed that he would give Plaintiff ninety days notice of termination, during which time he would remain an employee of Plaintiff and would continue to receive his base salary. The Agreement further stated that if Defendant terminated employment prior to the end of the notice period, he would not work for a competitor anywhere in the United States for ninety days or for the unfulfilled balance of the notice period.

Needless to day, Defendant resigned abruptly without notice to begin working for a direct competitor, claiming that the ninety-day notice and non-compete provision were not reasonable and hence unenforceable. Defendant also claimed that the revised agreement was presented to him on a "take it or leave it basis" - that if he did not sign it, he would be fired. He characterized the Agreement as "onerous" and "unfair" because it denied him the ability to pursue his chosen profession and did not provide for adequate compensation during the notice period.

Under New York law, a restrictive covenant not to compete is enforceable by way of an injunction if the covenant is reasonable in time and geographic area. A restrictive covenant is enforceable only if it: (1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public. Thus, courts must weigh the need to protect the employer's legitimate business interests against the employee's concern regarding the possible loss of livelihood, a result strongly disfavored by public policy in New York.

Here, the United States District Court for the Northern District of New York (New York federal court) found that the ninety-day period was well within what has been found to be a reasonable time frame for non-compete provisions. The Court found that the geographic scope of the covenant (throughout the United States) was also reasonable. Furthermore, the Court found that the non-compete provision did not impose an undue hardship on Defendant, since it entitled Defendant to continue to receive his salary during the reasonable notice period. Lastly, the Court held that the fact that the Agreement was executed during Defendant's employment, and was thus a condition of his continued employment, did not suffice to show that the Agreement was unenforceable.

In sum, the Court granted Plaintiff's preliminary injunction precluding Defendant from working for a competitor for ninety days, and also directed Plaintiff to continue paying Defendant's salary for the ninety-day period. It's also worth noting that this case reinforces the principle that an employer's threat of termination for refusing to sign a non-compete agreement does not constitute duress or coercion.

As a New York employment attorney, I was recently reviewing cases that dealt with the calculation of back pay. There was one opinion that I came across that especially sparked my interest - Serricchio v. Wachovia Securities, LLC, 606 F. Supp. 2d 256 (D. Conn. 2009).

Before I discuss the case, it is important to understand that the largest portion of damages awarded for an unlawful discharge is usually back pay. This amount is calculated by subtracting what the plaintiff earned since that discharge from the amount that would have been paid had the plaintiff not been discharged. The plaintiff always has a duty to mitigate damages by making reasonable efforts to find suitable alternative employment. When the plaintiff fails to make a reasonable effort to find comparable employment, the amount subtracted will be what s/he could have earned through reasonable diligence.

In Serricchio, a jury found that the plaintiff had been constructively discharged from his employment as a financial advisor in violation of the Uniform Services Employment and Reemployment Rights Act, 38 U.S.C.A. § 4301, et seq. ("USERRA"). After he was terminated, the plaintiff went into the start-up tanning salon business with his wife instead of finding another job in the financial field. When calculating damages, the employer argued that the plaintiff should be barred from recovery because he failed to mitigate his damages when he made the decision to pursue self-employment instead of finding another job in the financial field.

However, the court rejected the employer's argument and instead concluded that "pursuing [self-employment], rather than . . . seeking other employment in the finance sector was consistent with [the plaintiff's] duty to mitigate his losses."

This case makes clear that the decision to become self-employed, alone, does not indicate a lack of reasonable diligence. Reasonable diligence should be evaluated in light of the individual characteristics of the plaintiff and the job market. When self-employment is undertaken in good faith as a reasonable alternative to seeking other comparable employment, the plaintiff has satisfied the duty. Whether or not the business immediately succeeds is not very relevant. What counts is how much effort the plaintiff put into making that business a success. In other words, mitigation will be measured by effort, not results.