How the Washington Attorney General Is Changing Franchise Agreements Nationwide and What It May Mean For You

Co-authored by Kathy Van Voorhees and Matt Goodman

The state of Washington has a reputation as a worker-friendly state with some of the highest minimum wages in the country. So it’s no surprise that Washington Attorney General Robert Ferguson has been aggressively pursuing large corporate franchisors that include no-poach clauses in their franchise agreements. What is surprising is that he’s affecting franchise agreements across the U.S.  (A “no-poach clause” is language in the franchise agreement that prevents a franchisee from hiring current and former employees of another franchisee or its franchisor.)

Businesses are always trying to gain competitive advantages by pushing the boundaries of regulations that promote fair competition. For example, many workers have non-compete clauses in their take-it-or-leave-it employment agreements. These clauses prevent a  competitive labor market which creates a wage-fixing affect and triggers anti-trust laws. As a result, many courts have determined that non-compete clauses for employees without knowledge of trade secrets and with little ability to sway customers to follow them are unenforceable. Courts have refused to enforce non-competes for yoga instructors, camp counselors, and fast food employees.

Many franchisors include “no-poach” clauses in their franchise agreements. The terms restrict franchisees from poaching each other’s employees by allowing the franchisor to terminate the franchise of any franchisee who hires a worker employed by another franchisee or its franchisor. No-poach agreements and non-compete agreements both discourage employees from leaving their current employer. Continue reading »

DOL Final Overtime Rule Published – Effective 1/1/20, Minimum Exemption Threshold Set at $35,568 Annually

The U.S. Department of Labor (DOL) has finally issued its long-awaited final rule updating its regulations defining exemptions for executive, administrative, and professional employees.

Some of the key take-aways from the new regulation are:

1. The “standard salary level” to qualify for the exemption has been raised from $455 per week to $684 per week ($35,568 annually). Employees paid less than this amount after January 1, 2020 will not qualify for the exemption and will have to be paid overtime for working more than 40 hours per week.
2. The total annual minimum compensation level for “highly compensated employees” (“HCE”) has been increased from $100,000 to $107,432 annually.
3. Employers may use nondiscretionary bonuses and incentive pay (including commissions) that are paid at least annually to satisfy up to 10% of the standard salary level.
4. There are special provisions for workers in U.S. territories and in the motion picture industry.

Continue reading »

Buckle Up, Buttercup: Missouri Governor Signs Law Enhancing Failure to Wear Seatbelt Defense

Co-authored by Laura Gerdes Long & Katherine M. Flett

Failure to wear a seatbelt will be admissible in product liability cases in Missouri beginning January 1, 2020. Governor Mike Parson signed Senate Bill 30 into law on July 10, 2019, amending Section 307.178 RSMo to provide that a plaintiff’s failure to wear a seatbelt shall be admissible as evidence of comparative negligence or fault, causation, absence of a defect or hazard, and failure to mitigate damages in product liability lawsuits involving an automobile.  Previously, such evidence was only allowed to be admitted before the jury to mitigate damages up to 1% of the damages after any reductions for comparative negligence.

Dan Hegeman, the bill’s sponsor, said that Senate Bill 30 “serves the dual purpose of both creating fairer court procedures in which a jury is able to come to a broader understanding of the causes of a plaintiff’s injuries, and encouraging general seat belt safety.”

Continue reading »

New Benefits for Those in Financial Difficulty: The Small Business Reorganization Act of 2019

If you own a small business (defined as one owing less than $2,725,625 in total debt) and are in or nearing financial difficulties, you should contact your attorney to learn more about The Small Business Reorganization Act of 2019 (the Act).

Effective in February 2020, this new addition to Chapter 11 of the U.S. Bankruptcy Code provides the benefits of a traditional Chapter 11 case, but with fewer burdens and more flexibility.

For instance:

• There will be no creditors’ committee to deal with (unless the court orders otherwise).
• A trustee will be appointed instead. This may be a mixed benefit.
  • On one hand, a good trustee might be able to help keep the case moving, negotiate a consensual plan of reorganization, object to claims, and take other burdens off the debtor.
  • On the other hand, a bad trustee might misuse his/her powers and make things worse for the debtor.
  • In either case, the debtor will pay the trustee on a percentage basis, generally under 5% of debtor’s quarterly revenues.
• A status conference must be held within 60 days after the commencement of the case to further a prompt and economical resolution of the various issues involved.
• No disclosure statement will be required, saving both time and attorney fees in the process.
• Only the debtor may file a plan; creditors may not.
• It is somewhat easier to “cram down” the terms of the plan on objecting creditors.
• The Absolute Priority Rule is essentially eliminated, making it easier for owners to retain their ownership in the debtor.
• Confirmation standards are relaxed, making it easier to get your reorganization approved.

Continue reading »

Freight Brokers Granted Some Limitations to Plaintiffs’ Vicarious Liability and Negligence Theories

Since the Sperl v. C.H. Robinson Worldwide, Inc. decision in 2011, freight brokers have been battling vicarious liability claims for the actions of motor carriers and their truck drivers.

In Sperl, truck driver DeAn Henry was involved in a multi-vehicle collision, resulting in several deaths. Henry owned the tractor she was driving and leased it to Dragonfly, a motor carrier. When the collision occurred, she was delivering a load for CHR, a freight broker. Dragonfly and CHR entered into a contract carrier agreement, which described the relationship between the parties as follows:

“The parties understand and agree that the relationship of [Dragonfly] to [CHR] hereunder is solely that of an independent contract and that [Dragonfly] shall and does, employ, retain or lease on its own behalf all persons operating motor vehicles transporting commodities under this Contract.”

Nonetheless, Dragonfly gave Henry permission to use its carrier authority to book and deliver loads on her own. If Henry booked a load, she would be permitted to keep all the profit. If Dragonfly dispatched Henry, Dragonfly would be entitled to five percent. Suit was filed against CHR, among other defendants, for wrongful deaths and personal injuries.

trucking on scenic highway, sunset and clouds

At trial, Henry testified that Dragonfly did not dispatch her for the load she was transporting for CHR when the collision occurred, but instead Henry called CHR and requested the load herself.  Evidence revealed that CHR required Henry to have a refrigerated trailer of a specified length and CHR dictated special instructions concerning the load, including requirements that she pick up the load at a specified time, make daily check calls, and stay in constant communication with the CHR dispatchers. If Henry did not comply with the special instructions, she was subject to CHR’s system of fines.

At the close of trial, CHR moved for a directed verdict as to the agency issue, which was denied. The jury concluded that CHR was vicariously liable based on agency and entered judgment in favor of the plaintiffs in the amount of $23.8 million. The trial court denied CHR’s motion for a judgment notwithstanding the verdict and motion for new trial. Continue reading »

To Discipline or Not to Discipline: What to Do With Illinois’ New Pot Law?

Authored by Ruth A. Binger with assistance from Mackenzie N. Allan

Employers in Illinois will face a conundrum come January 1, 2020. Illinois legislature recently passed some of the most expansive marijuana laws that the United States has seen to date. The Cannabis Regulation and Tax Act (the “Act”) legalizes marijuana, making it a “lawful product” under the Illinois Right to Privacy in the Workplace Act which prohibits discrimination against employees for using lawful products. It raises the question of when disciplining an employee for marijuana use is acceptable compared to when the discipline may cross the line into prohibited discrimination.

The Act explicitly grants employers the right to maintain a drug-free workplace. Section 10-50 states in part:

• Employers may adopt reasonable zero tolerance or drug free workplace policies (the Act allows employers to define the extent of the “workplace” while providing guidelines of what shall standardly be considered part of the workplace).
• Employers are not required to allow an employee to use marijuana at work or while on call (the Act defines “on call” as when an employee is scheduled with at least 24 hours’ notice to be on standby or otherwise responsible for performing work-related tasks).
• Employers may adopt employment policies concerning drug testing, smoking, consumption, storage, or use of cannabis in the workplace or while on call. These employment policies may not be applied in a way that discriminates against employees for their use of marijuana outside the workplace.
• Employers may discipline their employees for using marijuana at work, possessing marijuana at work, or being under the influence of marijuana at work.

Continue reading »

Re-evaluating Standards for Admissibility of Photographs of Vehicular Collisions

Authored by Laura Gerdes Long with assistance from Mackenzie N. Allan

In Illinois, historically, two predominating schools of thought regarding the admissibility of photographs of vehicular collisions have existed. The first school of thought, Baraniak v. Krauby, holds that when using photos to correlate vehicular damage to injuries, expert testimony is always necessary. The second school of thought, Fronabarger v. Burns, holds that vehicular collision photographs are admissible if the jury can properly relate the vehicular damage depicted in the photos to the injuries without the aid of an expert. In 2008, the Fronabarger court declined to follow the rigid rule from Baraniak.

In the 2019 case of Peach v. McGovern, the 5^th Circuit Court of Appeals in Illinois addressed this contentious issue once again. Here, the plaintiff and the defendant were involved in a car accident where the defendant rear-ended the plaintiff. The defendant claims that she was at a full stop behind the plaintiff, and she rolled into the plaintiff, “tapping” his truck, when she accidentally let her foot off the brake. The plaintiff contends that the defendant “plowed” into him at a speed of 20-30 miles per hour. After the accident, the plaintiff began experiencing severe neck issues, incurring over $23,000 in medical expenses.

At trial, plaintiff presented his pain management specialist as an expert witness, who opined that the plaintiff’s neck injuries were consistent with having been rear-ended in a motor vehicle collision, and even a very low speed collision could have caused this damage. Though the plaintiff had a degenerative disc condition, the expert testified that the plaintiff’s injuries were consistent with a sudden impact rather than the degenerative condition. The defendant did not present any expert witnesses, instead using the photographs depicting minimal damage to both vehicles in her closing arguments to argue that the plaintiff exaggerated the impact of the collision in order to relate his injuries to the collision. Continue reading »

#SocialMediaAsEvidence

Authored by Laura Gerdes Long with assistance from Jessica A. Gottsacker

Social media has officially taken over our lives. The statistics only confirm this fact. There are 2.3 billion active social media users across the world. Any given internet user has an average of five social media accounts. Facebook has over 1.71 billion users, YouTube has over 1 billion users, and WhatsApp has 900 million users. Every day, there are 60 billion messages sent through Facebook messenger and Whats-App. Three hundred hours of videos are uploaded on YouTube every minute. Snapchat users watch 6 billion videos on average a day.

It is clear that an individual’s accounts contain a plethora of intimate, personal details meant to be shared exclusively with friends or a fan base. But this begs the question, with this personal nature of social media, what can be excluded from court? The answer: potentially none of it. Continue reading »

UPDATE: Salaries Speak Louder than Words

co-authored by Katherine M. Flett and Jessica A. Gottsacker

Equal Pay Day was celebrated this month on April 2, 2019. This date symbolizes how far into the year women must work to earn what men earned in the previous year. Thankfully, this date is not stationary. In fact, the date occurs seventeen days earlier than it did in 2005. While there is a lot to celebrate with that achievement, there is still a long way to go to completely close the gender wage gap.

In fact, the Supreme Court recently faced the opportunity to potentially close this wage gap even further when it granted cert to Rizo v. Yovino. See Katherine Flett’s blog post titled “Salaries Speak Louder than Words” for more discussion on the case. In Rizo, the Ninth Circuit sitting en banc found that the use of salary history to establish a starting salary violated the Equal Pay Act, as it perpetuated the discriminatory nature of women historically being underpaid in almost all sectors of employment. Thus, reliance on prior pay could no longer be considered as an affirmative defense under the Act’s fourth catchall exception, “any other factor other than sex.” Continue reading »

Mandatory Arbitration in the Transportation Industry Takes a Blow from The United States Supreme Court

New Prime, Inc. v. Oliveira

On January 15, 2019, the United States Supreme Court ruled unanimously in favor of Dominic Oliveira, a purported Independent Contracted driver (“owner-operator”) for New Prime, Inc., an interstate trucking company, holding that Oliveira’s dispute need not be compelled to arbitration.

The case hinged largely on the Federal Arbitration Act (FAA), a 1926 law that requires courts to move cases involving interstate commerce disputes to arbitration.  However, the FAA includes an exception in Section 1 for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

Oliveira filed a class action lawsuit, alleging that New Prime deprived its driver of legal wages.  New Prime sought to resolve the dispute via arbitration pursuant to Oliveira’s owner-operator agreement, which included a mandatory arbitration provision.

The first issue that the Court considered was whether a court or an arbitrator should decide whether the Section 1 exception applied.  In a unanimous opinion written by Justice Neil Gorsuch, the Court held that “a court should decide for itself whether Section 1’s ‘contracts of employment’ exclusion applies before ordering arbitration. After all, to invoke its statutory powers . . . to stay litigation and compel arbitration according to a contract’s terms, a court must first know whether the contract itself falls within or beyond the boundaries of §§1 and 2 [of the FAA].” Continue reading »