7th Circuit: Overbroad Non-compete Was Unenforceable
By Chris Arbery and Angela Mahdi

The 7th U.S. Circuit Court of Appeals upheld a district court’s ruling that a former employee of Cintas Corp. did not violate the terms of his non-compete agreement because the agreement itself was overbroad and, therefore, unenforceable. The appeals court further held that the district court properly refused to correct the problems in the agreement and properly awarded the defendant attorneys’ fees for prevailing in the matter.

The 7th U.S. Circuit Court of Appeals upheld a district court’s ruling that a former employee of Cintas Corp. did not violate the terms of his non-compete agreement because the agreement itself was overbroad and, therefore, unenforceable. The appeals court further held that the district court properly refused to correct the problems in the agreement and properly awarded the defendant attorneys’ fees for prevailing in the matter.

When Daniel Perry began working for Cintas in 1993 as a sales representative, he signed an employment agreement containing various restrictive covenants: non-competition, non-solicitation of employees and nondisclosure of confidential information. Although Perry was promoted to national account manager for Illinois and Indiana in 2000, he resigned in 2003.

Perry then started working for a large competitor of Cintas’ as vice president of sales for the western region. Perry provided his new employer a copy of Cintas’ employment agreement. Thereafter, Perry accompanied a fellow employee to a sales meeting with a Cintas customer, but Perry remained in the car during the meeting. He also conducted a telephone interview with an applicant, but ended the interview after learning that the applicant formerly worked for Cintas. Perry’s new employer did not hire the applicant. Perry also brought with him two computer disks containing forms he obtained from Cintas.

Cintas filed a breach of contract suit in Illinois federal court, alleging that Perry violated his employment agreement. Cintas also requested injunctive relief. Applying Ohio law, the district court denied injunctive relief and granted Perry’s motion for summary judgment. The district court found that the non-compete provision was overly broad and declined to use its authority to modify the provision and make the agreement enforceable. The district court further held that there was insufficient evidence to create a triable issue on the alleged violations. Lastly, the court ordered Cintas to pay Perry’s attorneys’ fees and costs.

On appeal, the 7th Circuit found that the only evidence that Perry violated the employment agreement was the fact that he went to work for a competitor. The appeals court held that Cintas’ contention that the district court should modify the non-compete provision to render it reasonable was “an implicit concession that the provision was overbroad and unenforceable as written.” Further, the court held that the power to modify an agreement is “discretionary, not mandatory” and that the district court did not abuse its discretion in declining to exercise its discretionary power.

The 7th Circuit further held that, even if the non-compete provision was reasonable, there was no evidence that a breach occurred. Indeed, the court held that remaining in the car while another employee conducts a sales meeting “does not amount to solicitation” of a Cintas customer. In addition, Perry’s decision not to hire a former Cintas employee “does not amount to solicitation of a Cintas employee.” The court also held that the information on the computer disks was “dated” and that Cintas had “not demonstrated how the information on the disks might provide an advantage to competitors within the meaning of the nondisclosure provision in the agreement.”

Finally, the 7th Circuit upheld the award of attorneys’ fees in Perry’s favor, even though his new employer had paid them. The court remarked that the agreement, while perhaps ambiguous, did not expressly require the employee to directly incur the fees in order to receive an award and that the ambiguity should be construed against Cintas as the drafter of the agreement.
Cintas Corp v. Perry, 7th Cir., No. 06-1958 & 06-2844 and 07-1216 & 07-1365 (Feb. 20, 2008).

Professional Pointer: Many courts are loathe to enforce non-competition agreements. This case demonstrates the importance of ensuring that such an agreement is narrowly tailored and enforceable under applicable law as written. Although a court may have the power to “blue pencil” or modify an unenforceable agreement to make it enforceable, it may choose not to do so.

HR Discussion – A Plus Benefits, Inc.
Most courts will not enforce a non-compete that prevents a former employee from working in the industry that has supported the former employee and his family. To expect that a former employee cannot continue to work in the industry would essentially require that the individual re-train in another industry. This would most certainly lead to a marked decrease in the person’s income for several years.

Randall Barker is the VP of Human Resources for A Plus Benefits, Inc.

Let Your Managers/Supervisors Ask These Questions – You’ll Get One.

1) I think you’re depressed. Shouldn’t you see somebody?

Comments like this may be made with the best of intentions, but they can have disastrous repercussions. That’s because questions about medical conditions and disabilities put you on record as “regarding” or having the perception of the employee as having a disability. And that can lead to ADA and other compliance dilemmas.

In these situations, focus on the job requirements and how a person is failing to meet them. Don’t make clinical judgments. It is OK to ask “What can I do to help?”

2) You’re going to take 5 weeks off to “bond”? I don’t think so.

The rules regarding leave-including the Family and Medical Leave Act, the Americans with Disabilities Act, workers’ compensation laws, and myriad state regulations-are treacherous territory. Tell untrained managers and supervisors they need a guide to go there … have them call the HR Dept at A Plus Benefits – you’ll never get a bill for talking to us and you’ll greatly decrease your chances of getting a huge bill from the court, your lawyer and your employee’s lawyer because a manager/supervisor said the wrong thing.

Make your rule a simple one-when people ask for time off, talk to HR.

3) You’re giving 2 weeks’ notice? Why don’t we just make today your last day. You’re fired!

Nice work-you’ve just turned a voluntary resignation with little potential for a lawsuit into a termination with every likelihood of legal action. If you must have a terminated employee leave immediately, pay the 2 weeks anyway. It’s cheap insurance.

Get resignations in writing, if the departing employee won’t give you a written notice of resignation within 24 hours of announcing their plan to leave and your request for written confirmation, send the employee an e-mail or memo that specifies that you understand that their employment is going to end on “X day”, you accept their resignation and that their departure is voluntary.

4) Are you married, and what are your plans for a family?

This is a typical interview question, and a dangerous one. Marriage and family questions are out, right along with, “Are you pregnant?” and “Do you have childcare responsibilities?”

Questions along these lines always suggest a discriminatory motive. The employee may sue, charging discrimination, and you will have to explain why you asked the question.

New managers and supervisors are the ones most likely to blurt out inappropriate questions-because they are inexperienced and nervous interviewing others. Train people before you allow them to interview. Give those who are conducting an interview a script with clear instructions that the interviewer is never to stray from the written script.

Remember, curiosity killed the cat, instruct managers and supervisors to ask only those questions that are associated with the job. Marital status and children have nothing to do with being qualified to do a job.

5) Oh, what a lovely accent-where are you from?

Any racial, ethnic, and religious questions and comments are out of bounds. Way out of bounds.
Once again it’s the curiosity thing and more feline casualties. You can wait until the person has actually started work to ask about that lovely accent. If you discuss a person’s ethnic origin during an interview and that person is not hired for the job, it’s very simple for the applicant to complain that she wasn’t hired because you knew she was not a local (after all the question pertaining to origin was asked) and you ended up hiring some one who was born and raised just over the hill.
Having knowledge that the applicant is from Greece, Spain, Holland or the Moon has nothing to do with whether or not the applicant is qualified for the position.

6) Do you really want to transfer to a job that has so much travel with those young children?

This is what we call a “patronizing” question. It’s going to be held to be discriminatory, especially if only asked of women.

If the employee is qualified to do the job childcare is the employee’s problem. Failure to transfer an employee because you had a discussion about child care issues is rather indefensible when the employee isn’t picked for the job and a complaint is made to your state or federal anti-discrimination office.

7) You’re fired, and I don’t have to give you any reason because your employment is “at will.”

In many states and situations, this statement is probably true. But, as they say, just because you can do it doesn’t mean you should do it. When you give no reason, you leave the door open for discrimination lawsuits. “You fired me because I am (insert: race, sex, age, disabled).” Trying to lean on your “at-will” defense in court will leave you looking quite vulnerable.

Giving a false reason isn’t much better. The popular “It’s because of performance” sounds good, until you’re in court defending years of “good” ratings, while “sorry, we eliminated your job” sounds good until a plaintiff lawyer asks you why you filled the same job the next week. Once the court concludes that you lied, discrimination will be the logical conclusion.

A 90 day introductory period is the time that is set for your determination as to whether of not the new employee is going to “make the grade.” Once you have passed the 90 day introductory period it is best to have documented reasons for ending employment. A best practice is to require that the employee submit to a couple of days of decision making leave. A termination subsequent to decision making leave is a powerful tool for the employer in avoiding charges of discrimination.

Send an e-mail if you’d like more information concerning decision making leave.

Randall Barker is the VP of Human Resources for A Plus Benefits, Inc.

EEO - Religious Discrimination

Worker’s Religious Needs Were Accommodated, Court Decides
Firestone Fibers and Textiles Co. reasonably accommodated a laboratory employee’s religious observances in compliance with Title VII of the 1964 Civil Rights Act by providing several options for him not to work during his weekly Sabbath and religious holidays, the U.S. Court of Appeals for the Fourth Circuit ruled Feb. 11 2008 (EEOC v. Firestone Fibers & Textiles Co., 4th Cir., No. 06-2203, 2/11/08).

Affirming a lower court’s dismissal of the case, the appeals court rejected the Equal Employment Opportunity Commission’s argument that a reasonable accommodation must totally eliminate the conflict between the employee’s religious practice and a work requirement. The appeals court said that it is appropriate to consider the impact on the employer and co-workers when determining whether an accommodation is reasonable.

Shift Changed After Layoffs
Beginning in December 1994, David Wise worked in a testing laboratory for tire cord fabric at Firestone Fibers’ two facilities in Gastonia and Kings Mountain, N.C. Each laboratory requires four employees per shift.

In 2001, Wise joined the Living Church of God. His religion prohibits him from working on the Sabbath, which runs from sundown Friday to sundown Saturday, and on about 20 days of religious holidays per year.

Wise initially did not have a problem because he worked from 7 a.m. to 3 p.m. Monday through Friday, and used annual leave for religious holidays falling on weekdays.

However, following a series of layoffs and restructurings, in February 2002 he was assigned to work from 3 to 11 p.m., Monday through Friday as well as on most Saturdays. The bargaining contract with the United Steelworkers provides a seniority-based system for employees to bid on shifts. Other employees with more seniority had taken all the available day shift jobs.

The contract also provided Wise with 15 days of annual leave and three floating holidays per year, allowed employees to swap shifts twice per quarter for a maximum of eight times per year, and allowed them to take up to 60 hours of unpaid leave, some of it in half-day increments along with half days of annual leave. Employees who took more than 60 hours of unpaid leave would be terminated.

From February to September 2002, Wise used annual leave, floating holidays, and unpaid leave to avoid working on the Sabbath or religious holidays.

After exhausting all his leave, Wise requested unpaid leave for 11 days of religious holidays in September. Firestone Fibers denied the request, explaining that it had granted similar requests by other employees only if they were for nonrecurring events. Wise did not report for work on the religious holidays and was fired once he exceeded 60 hours of unpaid leave.

After Wise filed an EEOC charge alleging failure to accommodate his religious observances in violation of Title VII, the commission sued Firestone Fibers on his behalf. The U.S. District Court for the Western District of North Carolina dismissed the case.

Upholding the lower court, the appeals court said that religion in the workplace “coexists” with “intensely secular arrangements such as collective bargaining agreements and with the intensely secular pressures of the marketplace.”

Firestone Fibers provided reasonable accommodation through the provision of annual leave, floating holidays, and unpaid leave and the allowance of shift swaps, the appeals court said.

EEOC argued that Firestone Fibers should have excused Wise from the 60-hour limit on unpaid leave. But the appeals court found that “Title VII does not require an employer to violate the terms of a collective bargaining agreement” or “to adversely impact or infringe on the rights of other employees when accommodating religious observances.” The court observed that whenever Wise took leave, a co-worker “would typically have to work overtime to cover his shift.”

Randall Barker is the VP of Human Resources for A Plus Benefits, Inc.