IF THE SHOE FITS: DOL ISSUES NEW PROPOSED RULES TO CLASSIFY INDEPENDENT CONTRACTORS AND EMPLOYEES

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Every first year law student learns about the International Shoe case, the 1945 decision of the United States Supreme Court establishing the “minimum contacts” standard for personal jurisdiction.  I was reminded of this case recently because my wife has just started law school after many years of teaching, tutoring and political activity. What sparked my interest were the underlying facts of the dispute, which have a modern day equivalent in the debate over the employment status of workers in the gig economy.  Let me explain.  International Shoe Co. manufactured shoes (of course) and was headquartered in St. Louis, Missouri.  It had manufacturing and distribution facilities in several states but not in the state of Washington.  The company sold shoes in the state of Washington through the efforts of thirteen salesmen (they were all men) who resided in that state.  It supplied the salesmen with sample shoes (one shoe per style only), which they displayed to prospective customers.  The salesmen were reimbursed for certain expenses and were paid on commission.  They could take orders but could not negotiate price or terms, all of which were controlled by International Shoe.  The salesmen had no authority to enter into contracts or collect payment. The State of Washington contended that the salesmen were International Shoe's employees and assessed the company for unpaid contributions due to its unemployment compensation fund.  The company challenged the assessment for two reasons.  First, International Shoe argued that it wasn’t doing business in Washington, so it was not subject to the...
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Venturing Into to the World of Pennsylvania’s Wage Payment and Collection Law: Employees Can Recover Prejudgment Interest and Liquidated Damages

The Pennsylvania Supreme Court recently refused to hear an appeal from a venture capital group that had been disappointed by the Superior Court’s en banc decision that a former employee was owed liquidated damages in addition to the $1.26 million already awarded in a compensation dispute.  The case is Andrews v. Cross Atl. Capital Partners, and it is an important case for employers and employees whose compensation packages are tied to equity or otherwise subject to a contract.  Before Andrews, there was an open question in Pennsylvania whether a prevailing employee could recover a 25% liquidated damages penalty under Pennsylvania’s Wage Payment and Collection Law (“WPCL”) and prejudgment interest on the amount of unpaid compensation.  Andrews answered that question in favor of the employee, ruling that in a breach of contract case, an employee can recover both.  Nicholas Andrews worked for Cross Atlantic Capital Partners, Inc. (“Cross Atlantic”) from 1999 to 2000.  Andrews was hired to find, negotiate, and manage investments for Cross Atlantic.  The ultimate goal for Cross Atlantic was to sell the investments at a price that was sufficient to repay its investors and to allow both the investors and Cross Atlantic to realize a profit.  Compensation for Andrews was deferred until the investment funds became sufficiently profitable to make distributions.  Andrews did not have a written employment agreement and his employment ended before the funds he was involved with were sold.  Upon his departure, Andrews entered into a separation agreement with Cross Atlantic. In the separation agreement, Cross...
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IS IT BECOMING FASHIONABLE TO CHALLENGE NON-COMPETE AGREEMENTS?

Non-compete agreements are a common way employers seek to prevent key employees from leaving and taking away business.  Employees naturally chafe at the restrictions, but courts have stayed on trend in generally enforcing agreements if the terms are clear and the scope and duration are reasonable.  So, an employer can relax and not worry about litigation, right?  Not so fast.  A recent dispute in the fashion industry shows that an employer seeking to enforce even a well-tailored non-compete agreement may find its own conduct subject to scrutiny.  In February 2016, designer Laura Kim and a co-designer joined the Carolina Herrera fashion house following a twelve-year career with Oscar de la Renta (“ODLR”).  Herrera and ODLR are fierce rivals, so it must have been a coup for Herrera to have Kim join the team.  Kim’s employment contract with Herrera included a six-month non-compete agreement.  Here’s the key language: During your employment, and for six months after leaving the employment of the Company for any reason, you will be required not to engage in, directly or indirectly, any business in competition with the business carried on by the Company.  If the Company elects to enforce this provision and you have not received or will not otherwise receive severance payment from the Company, the Company will pay you during the six-month period of this provision a monthly payment at the rate of 50% of your monthly base salary as of the date of your termination. According to Herrera, Carolina Herrera (the person) specifically told...
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