Recent Court Decisions Concerning Employment Agreements.
Recent court decisions in New Jersey courts underscore the importance of having properly prepared employment agreements, and employee policies and handbooks that can protect your business from potential damages caused by the actions of former employees. Cases decided in the last couple of weeks addressed two very important issues: when and to what extent an employer can move to keep a former employee from working for a competitor and from using confidential business information to steal away business. The third case demonstrates how important comprehensive language can be when it comes to defending an established employment agreement.
Chubb INA Holdings v. Chang- The Importance of a Non-Compete Clause
In January, the New Jersey Federal District Court decided the case of Chubb INA Holdings, Inc. v. Chang. In this case, the Court denied Chubb’s (the business) request for a preliminary injunction to keep a former employee (Chang) from using confidential business information he obtained while working for Chubb to help a competing business. The reason for the court’s denial was Chubb had not proven by a “clear showing” that it would suffer immediate irreparable injury, which is a legal standard for obtaining an injunction. The court further ruled that Chubb could continue to pursue the former employee in litigation for money damages, but could not stop him from working for Chubb’s competitor and pursuing Chubb’s clients with the information Chang obtained. What this case demonstrates is that boilerplate “policies” are no substitute for a well drafted employment agreement with a non-compete clause specifically designed to protect the employer’s confidential business information.
ADP v. Lynch- The Importance of a Properly Drafted Agreement
The second case, ADP v. Lynch, was decided by the Third Circuit Court of Appeals in February, and it’s important for two reasons: First, the court ruled that a properly drafted click-through employment agreement on a company website can be enforceable. In this case, the court ruled that employees of ADP who clicked a box on a company website after reading terms of the company’s stock award program are bound by those terms, which included a non-compete clause. Next, the Court upheld the Federal District Court’s grant of a partial preliminary injunction which prohibits the former employees from using ADP’s confidential business information to solicit ADP clients, but, in the end, the employees were still permitted to keep their jobs with the competition.
Noren v. Heartland Payment Systems- The Importance of Specific and Comprehensive Language
The next case, decided by the New Jersey Appellate Division, known as Noren v. Heartland Payment Systems, involved a provision in an employment agreement in which the employee waives the right to a jury trial if they bring their employer to court. In this case, Heartland Payment Systems argued that the provision applied to all employee claims, but the employee disagreed. While the employee agreed that the jury-waiver provision in his employment contract applied to his breach of contract claim against his employer, he argued it did not apply to his claim that Heartland violated the Conscientious Employee Protection Act (CEPA), which is a statutory based claim.
In this case, the employment contract stated the parties “irrevocably waive any right to trial by jury in any suit, action or proceeding under, in connection with or to enforce this Agreement.” There was no specific reference in the entirety of the employment agreement to rights or to causes of action granted to the employee from New Jersey statutes. As a result, the Appellate Division concluded the jury-waiver provision failed to clearly and unambiguously explain that the right to a jury trial was waived for a CEPA claim and required a jury trial on that issue.
How Can Business Owners Protect Themselves When Changes Happen?
These cases reveal how judicial decisions can quickly change the law and the interpretation of established employment agreements and written policies. To ensure your business is covered under your current employment agreements, it is important to consult an attorney to regularly review and initially prepare your contracts. Forms obtained from the internet are no substitute for legal counsel whose job it is to keep up to date on recent and specific changes to the law. Your business attorney should understand your goals and appreciate how hard you work to protect your business.
You can rely on Askin & Hooker, LLC to be a valuable resource and ally for your business. We provide strategic guidance and practical results-oriented legal counsel. Call 973-729-7711 to schedule a consultation today.