Many of these cases have focused on travel, hospitality and financial services companies. However, here in Texas, there has been a micro trend of these web site accessibility cases naming dentists and physicians.
One of the ironies in the business world is that the foresight and planning that goes into a creative work is often left behind when it comes to the subsequent protection of these efforts. Copyright protection is a concept that many are familiar with on a superficial level. But a lot of confusion exists as to what copyright protects and how you go about obtaining that protection. Copyright protects original works of authorship including literary, dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer software, and websites. Copyright does not protect facts, ideas, systems, or methods of operation, although it may protect the way these things are expressed. In other words, if there is only one way to express an idea then it is not eligible for copyright protection. Although the bar for creativity is not set particularly high, there must be at least some modicum of original thought in the final work product.
So what is the proper way of obtaining copyright protection? It may surprise many people that copyright protection exists the moment a work is created. In fact, as soon as your work is complete, you have the right to include the © symbol on it. Aside from the cachet associated with any “legal” declaration of rights, the © symbol also serves as a deterrent to would-be infringers. But despite the ease with which an author can obtain instant copyright protection, enforcing these rights is another story. In order to be able to sue someone for copyright infringement, you have to first obtain a copyright registration. This entails submitting your work specimen along with an application to the U.S. Copyright Office. The cost of filing such an application is modest, and it pales in comparison to what it will cost if this crucial step is not undertaken. Without the ability to sue in federal court, you can never be compensated or receive money damages when someone copies your work. More important, you cannot stop someone from continuing to use your work. Further, if you register your copyright within three months of publication you may be entitled to attorney’s fees and statutory damages. Statutory damages are a powerful remedy in that you do not have to prove lost profits in order to receive them. Plaintiffs who can show willful infringement may be entitled to statutory damages up to $150,000 per work. So what is the moral of the story? If something is worth your time to create, it is worth your time to protect.
I get questions all the time about the enforceability of noncompetes in Texas. I have to respond in the most-irritating lawyer-like way possible: I say that the enforceability of any particular noncompete all depends on the language of the noncompete and the facts of the case. That response predictably results in a long period of silence.
There is ample Texas case law enforcing noncompetes against former employees to prevent former employees from competing. In these cases the employers successfully have demonstrated that there is a threat to the employers’ business interests through the disclosure of confidential information or damage to company good will. There also is a lot of seemingly irreconcilable Texas case law where the courts have refused to enforce noncompetes to prevent former employees from competing where the employers offered proof that former employees had confidential information and were in a position to use the confidential information to the employers’ detriment.
Legally speaking, Texas has a statute that allows an employer to enforce a noncompete when what would otherwise be a restraint on trade is necessary to protect a legitimate interest of the employer. In Texas, a legitimate interest of the employer could be (1) preventing the disclosure of confidential or proprietary information; or (2) protecting company good will. Contrary to what a lot of people believe, the enforceability of a noncompete is not dependent on the employer paying the employee compensation that is tied to the noncompete, and is independent from the reason that the employee’s relationship with the employer ended.
In my practical experience I have found that judges in general do not like noncompetes. They do not like the idea of putting a person out of work, unless the facts particularly justify the extraordinary step of entering a injunction. You can get a sense of the courts’ uneasiness with noncompetes in the Dallas Court of Appeals recent decision affirming a trial court’s denial of the employer’s request for a temporary injunction in BM Medical Management Service, LLC v. Turner.
Turner had a one-year noncompete that prohibited him from working in a competing business, soliciting BM Medical’s clients, recruiting or hiring BM Medical’s employees, or disclosing BM Medical’s confidential information. BM Medical fired Turner, and a month later he went to work for a competitor. Despite having access to BM Medical’s client list of over 1600 customers, the trial court denied BM Medical’s request for a temporary injunction to prevent Turner from soliciting BM Medical’s clients. The court found that BM Medical failed to prove that Turner “possessed, used or disclosed any confidential information and if failed to prove that Turner was soliciting its clients.” One BM Medical client did follow Turner to his new employer, but the Dallas Court of Appeals noted that this single client was a “good friend of Turner’s whom Turner had known before he went to work for BM Medical.”
Notably, BM Medical only sought to prevent Turner from contacting BM Medical’s clients (and not enforcement of the outright ban on any competition), and from disclosing BM Medical’s confidential information. But even limiting its request for relief was not enough to satisfy the court. Presumably the result would have been different if BM Medical had established that Turner actually solicited BM Medical’s clients, or if BM Medical had shown that the information that Turner had was particularly sensitive to BM Medical’s business interests.
Based on the court’s conclusion, I get the impression that neither the trial court nor the court of appeals thought that Turner was a threat to BM Medical’s business interests. So if you want to enforce a noncompete in Texas, here are some important considerations to maximize your chances of having the judge agree with you:
- Spell out for the judge the actual threat that the former employee poses to the business interests of the employer. The degree to which an employer wants to restrict a former employee from competing is directly related to the actual threat that the former employee poses to the business’s legitimate business interests. For example, a sales employee who is terminated for poor performance probably does not pose an actual threat to the employer’s existing sales.
- Explain to the judge what relief you need to address the actual threat posed by the former employee. The restrictions that the employer seeks to enforce against a former employee must be tied closely to the actual threat to the employer’s legitimate business interests. An employer’s desire to restrain all competition is not a legitimate business interest, and an outright ban on all competition everywhere rarely is closely tied to the actual threat posed by the former employee to the employer’s legitimate business interests.
- Judges do not like noncompetes. When asking for temporary relief, give the judge way to overcome this dislike of noncompetes by asking for the bare minimum of what you need to address the actual threat. If you can ask for relief that allows the former employee to continue to work, even better. As an example, courts seem more willing to restrict a former employee from soliciting actual clients with whom the former employee had contact as a result of the employer, but not so willing to restrict a former employee from soliciting any and all of the company’s customers regardless of whether the former employee knew about the customers.
And if you ask me if noncompetes are enforceable in Texas, I will probably say “It depends…”
When starting a new business, it is easy to get caught up in the excitement of putting all of your creative energy into the development of the goods and services that will serve as the backbone of your enterprise. Unfortunately, it is also easy to put important and fundamental components of the business plan on the backburner. One such component is the business name and associated brand. Business owners sometimes assume that the business name they intend to go by will always be there for the using. Those who strive to be somewhat conscientious on this issue will go to domain registrars such as GoDaddy and reserve a domain name that includes the intended business name. However, registering a domain that contains your business name does nothing in the way of the intended trademark protection that a business owner seeks. After all, a trademark is how you go about protecting the brand that you worked hard to create.
While such efforts can be commended for their foresight, they are incomplete without the follow up efforts required for true business name protection. This false sense of security sometimes begins at the corporate formation stage, where business owners often mistakenly believe that the corporate name that the Secretary of State told them was “available” is akin to a formal protection of the business name. However, the only thing the Secretary of State was representing was that the name had not yet been used for purposes of a corporate formation.
The only true way to protect your business name is through state (and where appropriate) federal trademark registration. Unless your business will truly be relegated to your local community, a federal trademark registration is preferred since it provides the broadest scope of protection across the country. The process is not as daunting and costly as you may think. An experienced trademark attorney can assist you in preparing the application and getting it on file with the United States Patent and Trademark Office within a matter of days. Although the process of obtaining a trademark registration may take several months, there are protections in place that preserve your business name rights as of the date of your filing, and in some cases, the date of first use. It is important to tackle business name matters on the front end, as it can be a costly mistake to invest money on a name only to later have to abandon its use because someone else has superior trademark rights.
When I was a kid I watched Sesame Street and The Electric Company. One of the shows had this bit where there would be four items on the screen. Three were alike, and one was not. The point was to identify which of the four was not like the others. There was a catchy jingle that went along with the images, and if you have ever heard it, you very well know the definition of an ear worm.
I love craft beer. I love craft breweries. And my love of craft beer and craft breweries makes me ponder my own adult version of “one of these things is not like the other.” So keeping with the memories of my childhood, imagine you have four images before you: a winery, a distillery, a brew pub and a brewery. One of these things is not like other, at least under existing Texas law when it comes to on-site purchases for off-site consumption.
All four allow a consumer to purchase alcohol onsite for onsite consumption. But under existing Texas law, I can go to a winery, a distillery, or a brew pub and buy the alcohol produced by these three entities and take the alcohol home. A brewery is not like the other three. I cannot go to a brewery and buy beer to take home and drink.
There is a lawsuit challenging the distinction pending in the Western District of Texas. The case is Deep Ellum Brewing Company, LLC v. Texas Alcoholic Beverage Commission, Civil Action No. 1:15-cv-00821, Honorable Robert Pitman presiding. Deep Ellum Brewing contends that there is no rational basis for distinguishing a brewery from a winery, distillery, or a brew pub. Therefore, the distinction does not past muster under the Equal Protection Clause or the Due Process Clause. TABC, predictably, contends that there is a rational basis for treating breweries differently from wineries, distilleries, and brew pubs. Both sides have moved for summary judgment.
This is the second legal challenge mounted by craft breweries to address a few holes left by the 2013 legislative session that otherwise favored the Texas craft beer industry. The first legal challenge was over the prohibition against craft breweries receiving compensation from distributors for the rights to distribute craft beer in Texas. Three craft breweries (Live Oak Brewing in Austin, Peticolas Brewing and Revolver Brewing in Dallas-Fort Worth), argued that they should be able to sell distribution rights and use the capital raised to grow their businesses. In August 2016 a state judge ruled that prohibiting craft breweries from receiving compensation from distributors was unconstitutional.
I personally don’t understand why breweries should be treated differently from wineries, distilleries, and brew pubs. But every time I think about it, that song pops back into my head. Please, Judge Pitman, I need some relief.
Over the weekend the Washington Post reported that France has enacted a new law that allows employees to ignore work emails outside typical working hours. According to the Washington Post, the purpose behind the new French law is to reduce the impact of the stress of work on people’s personal time. While the new French law received a lot of attention over the weekend, how to handle after hours emails is not a new issue.
In the United States employees are either exempt or nonexempt. Nonexempt employees are entitled to overtime and minimum wage for all hours worked. The Wall Street Journal reported here back in 2015 that there have been several lawsuits across the United States over whether nonexempt employees under the Fair Labor Standards Act who are answering emails or texts after working hours are entitled to compensation under the FLSA, including overtime in the appropriate circumstances. Under the FLSA, compensable time is any time that the employee is “permitted” to work by the employer. This means that if a nonexempt employee is answering emails after hours and the employer does nothing to stop it, then the nonexempt employee is working and entitled to compensation. According to the Department of Labor, “time spent doing work not requested by the employer, but still allowed, is generally hours worked, since the employer knows or has reason to believe that the employees are continuing to work and the employer is benefiting from the work being done.”
The implications of allowing nonexempt employees to answer emails or texts after hours is that the employees have the right to expect to receive compensation for “all hours worked” at the applicable minimum wage, and to have the time spent answering emails or texts after hours included in the weekly total to determine whether the employees are entitled to overtime. The practical problems for the employer with allowing employees to answer emails or texts after hours is that the time spent by employees is difficult to document and monitor.
As for all the exempt employees under the FLSA, these employees still may have to answer after hours emails and texts, or face whatever consequences may arise from not answering after hours emails or texts. But even exempt employees may benefit from the DOL’s position on after hours emails when it comes to calculating compensation and deducting full days missed for personal reasons. As a general rule, if an exempt employee performs any work during the workweek, he or she must be paid the full weekly salary amount. Under the DOL’s position, an exempt employee answering emails could transform unpaid leave into paid leave.
France’s approach is to give the employees the right to ignore after hours emails. In the United States nonexempt employees might be able to demand payment for the time spent answering after hours emails, and exempt employees might be able to claim that they were working to avoid a full day deduction.
If employers do not want to get caught up into whether answering after hours emails and texts constitutes work, they should implement very clear rules prohibiting employees from answering after hours emails and texts, and then strictly enforce those rules to avoid “permitting” nonexempt employees to work after hours.
Texas case law is clear. Employment is at will, terminable at any time by either party, with or without cause, absent an express agreement to the contrary. Fed. Exp. Corp. v. Dutschmann, 846 S.W.2d 282, 283 (Tex. 1993). This means that unless there is an agreement limiting an employer’s right to terminate, an employer in Texas can fire an employee for good reason, bad reason, or no reason at all, provided that the employer is not violating a specific statutory or common law exception to the at-will employment doctrine. The statutory exceptions are the federal statutes and state law equivalents that protect against discrimination and retaliation. In Texas, there is only one common law exception, and it is that an employer cannot fire an employee because the employee refuses to engage in an illegal act.
But what about handbooks and offer letters? The Dallas Court of Appeals issued an opinion this week discussing the interplay between the employment at-will doctrine and contradictory statements in the employer’s handbook and disability policies. The opinion makes it clear that if an employer has a handbook, the employer needs to make sure that the handbook contains a disclaimer that negates any implication that a personnel-procedures manual places any restrictions on the employment-at-will relationship.
If you are interested in maintaining the employment at-will relationship, and you have a set of employment policies and procedures, then it makes sense to bundle them up into a single handbook, bound with a disclaimer that nothing in the handbook alters or restricts the employment at-will doctrine. If you already have a handbook, then you need to review the handbook to make sure that the handbook contains the same disclaimer. Finally, when you draft an offer letter or memorandum of employment, you need to include language in the letter or memorandum that nothing in the letter or memorandum is intended to modify the employment at-will relationship.
I have been writing on this blog about how Dallas County juries have shifted over the years from pro-defense to pro-plaintiff, or at least to a point where most prospective jurors in Dallas County don’t necessarily consider lawsuits a bad thing. In the era of tort reform, this attitude among prospective jurors in Dallas County is very interesting. My previous posts are here, here, and here.
But why do we care about juries anyway? There are the constitutional reasons, and the traditions in our legal system that are tied inextricably to the jury trial process. There are the defenders of the jury trial as the last line of defense against oppression. And these are good reasons to care about the juries.
But my focus on why juries matter is more practical. In Texas, juries matter because once a jury renders a verdict it is extraordinarily rare for the jury’s verdict to be overturned. It happens, but not very often. This is because legal and factual sufficiency challenges to a jury verdict are judged against very high standards.
The Dallas Court of Appeals just released a decision in Adams v. Bellas affirming a jury verdict where the court went through the standards for legal and factual sufficiency challenges to a jury verdict.
To overturn a jury verdict on legal sufficiency grounds, the court must first credit any evidence favoring the jury verdict if reasonable jurors could disregard contrary evidence if reasonable jurors could not. If more than a scintilla of evidence supports the jury’s verdict, then the court has to uphold the verdict. There is no weighing of the evidence on one side or the other. The court simply looks at whether there is some evidence that would “enable reasonable and fair-minded people to reach the verdict under review.”
To overturn a jury verdict on factual sufficiency grounds, the jury’s verdict must be against the great weigh and preponderance of the evidence. This means that the jury verdict will be set aside “only if it is so contrary to the overwhelming weigh of the evidence as to be clearly wrong and manifestly unjust.”
Taken together, the high standards for legal and factual sufficiency protect the philosophical value that we place on the role of the jury in our legal system. We have assigned the jury the role of weighing the evidence and resolving any conflicts or inconsistencies in the evidence. We then shield the jury’s verdict from second-guessing by creating high standards for overturning the jury’s verdict.
So why do juries matter? Because under our system, once the jury delivers its verdict it is procedurally and practically very difficult to overturn the verdict. Oh, and also for all those constitutional reasons and tightly-held traditions long associated with our legal system.
Late last month a federal judge in Texas issued a nationwide injunction against implementation of the Obama Administration’s new overtime rules under the Fair Labor Standards Act. The new rules were supposed to go into effect on December 1, 2016, and would have resulted in substantially more employees becoming eligible for overtime under the FLSA. Recently the United States Court of Appeals for the Fifth Circuit declined to interfere with the trial court’s injunction.
I previously wrote about the new rules here. The new rules would have raised the salary threshold for the professional, administrative, and executive exemptions from $455 per week to $913 per week ($47,476 annually). The new threshold would have been indexed so that it likely would have gone up every three years. In my prior post, I speculated that the Texas federal judge would not enter an injunction. I got that part wrong.
For six months I have been working with clients to evaluate how best to approach the new overtime rules. The problem was that some positions at some workplaces have been entrenched for years. Some decided to redefine job positions with new responsibilities. Others decided to accept the new rules and prepare for paying employees by the hour who previously were paid a weekly salary. Some were unsure of how to proceed. Even with the injunction in place, there is uncertainty about what will happen next.
The injunction does not invalidate the Obama Administration’s overtime rules. It merely puts a hold on the implementation of the new overtime rules until the court reaches a final decision on the legality of the new rules. The court has requested briefing on the issue and could render a final decision as early as January 2017. If the court concludes that the Obama Administration acted appropriately in formulating the new overtime rules, then the effective date of the new overtime rules could roll back to December 1, 2016. Yikes. This would result in reclassification of employees as exempt or nonexempt, and make the classification retroactive to December 1, 2016. Employees reclassified as nonexempt could be entitled to overtime dating back to December 1, 2016. Double yikes.
And also in January, the new administration takes over and Congress is back in session. With Republicans occupying the White House and having the majority the House of Representatives and the Senate, Congress or the new administration could step in to make changes to the new overtime rules. Given the rhetoric of the election season, I don’t know where the new overtime rules are on the Republicans’ list of things to undo from Obama’s Administration.
So we will watch and see if the Texas federal judge issues a final ruling. Or whether the new administration and Congress steps in to act. Stay tuned…
Previously I posted about Dallas County juries here and here. Last week a federal jury ordered Johnson & Johnson to pay $1.041 billion to six plaintiffs who received defectively-designed hip implants. Of the total verdict, $32 million was for compensatory damages, and the rest was for punitive damages. The federal jury that ordered Johnson & Johnson to pay a billion dollars was made up of jurors from the Northern District of Texas, which includes more than just Dallas County. But Dallas County is the largest county in the Northern District of Texas, and I believe that the jury’s verdict is further proof that Dallas County jurors believe that civil lawsuits are an appropriate way to monitor and police large corporations.
When I first started practicing law in Dallas in the early 1990s, the prevailing sense around the campfire was that Dallas County was a pro-defense venue. Over the years there have been some huge verdicts out of Dallas County in business disputes and commercial matters, but it seemed to most observers that personal injury plaintiffs did not fair as well in Dallas County. In my earlier posts I gave my two-cent opinion that Dallas County was no longer pro-defense, or even neutral, because of the increasing frequency of eye-popping verdicts in personal injury cases. In September, Bloom Strategic Consulting published a report of a survey that it conducted of 1000 prospective Dallas County jurors. I wrote about the survey’s results in my first post about Dallas County jurors, and I believe that this report should be required reading for any lawyer with a case pending in Dallas County. Based on what I have been seeing lately, I think that Dallas County is pro-plaintiff.
For Johnson & Johnson, I expect that the federal judge will reduce the punitive damages award to confirm with Texas’ cap on punitive damages, especially considering that the award of compensatory damages ($32 million) is approximately three percent of the overall verdict. However, the fact that Johnson & Johnson may never have to pay a billion dollars to the plaintiffs from last week’s verdict should not be confused with the message that the jury seemed to send to Johnson & Johnson, and what that message says about Dallas County juries.