The Grawe Gazette – General Counsel
Labor & Employment Quick Hits
By The Grawe Group, LLC, July 2021
A few quick hits from the labor & employment front for trucking and logistics companies…
Independent Contractor Status:
- The AB5 fight continues. Cal Cartage and the California Trucking Association are each challenging California’s AB5 to the U.S. Supreme Court. We teamed up with Mike Glover and the Lommen Abdo team to submit a brief in support of Cal Cartage on behalf of the Minnesota Trucking Association, and we will submit an additional brief on behalf of the MTA to the U.S. Supreme Court to support the CTA as well. SCOTUS takes very few cases, and even when they do, they often decide cases on very technical grounds that are not always what either side wants, but the goal we are fighting for is a ruling from SCOTUS that federal law (called F4A) pre-empts California’s AB5 because of AB5’s gutting of the traditional owner operator model in CA.
- Last week President Biden signed a whale-sized executive order that, among other things, pushes the Federal Trade Commission to find ways to curtail non-compete agreements and other restrictions on workers. We cannot say for certain exactly what rules may come, but even without federal action, in today’s labor environment you will be better served limiting your use of non-competes.
- Keep in mind, non-competes are different from non-solicitation and confidentiality agreements. Agreements that restrict poaching customers and employees, and agreements that require employees to respect your confidential information and trade secrets are generally enforceable and reasonable to use. Non-competes are frowned upon because at their worst they keep workers from furthering their career in any reasonable way.
- A few tips on non-competes and non-solicitations:
- Non-competes should only be used with the highest levels. It is reasonable to have a limited non-compete for C-suite employees, but it is not reasonable to have non-competes for drivers, technicians, account reps, sales managers, etc.
- Non-competes and non-solicitations should be limited in time and scope. A non-solicitation agreement for 5-years probably will not be enforceable. Typically, one-to-two-year agreements are okay. A prohibition on contacting any customer you ever had is too broad. A prohibition on contacting current and recent customers is usually okay.
- These agreements need consideration to be enforceable. Put job offers in writing with the non-solicitation provisions. Do not spring the restrictions on the candidate after the job offer or after the start date. If you do, you will need to give them extra consideration (e.g., bonus, promotion, etc.) to make the agreement enforceable.
- Considering how difficult staffing issues are today, we offer some suggestions in our Grawe Pod. We are in the middle of a three-part series in the Grawe Pod on ways to recruit and retain your office talent. Part two features a discussion on recruiting and retaining experienced employees. If you have any questions about your people pipeline challenges, or if you need interim help while you look for a permanent staff solution, call us. We are here to help.
- Common sense had a good day at the U.S. Supreme Court recently. In a lawsuit about what information credit reporting agencies have on individuals the Supreme Court ruled if a business violates a technical rule in the Fair Credit Reporting Act, but the violation does not actually harm anyone, then the business cannot be forced to pay fines to individuals. (Keep in mind the government could still fine the business, so this is not a get-out-of-jail free decision.) This is important in our industry because our industry runs a lot of background checks in our recruiting efforts. The Fair Credit Reporting Act is one of the laws that forces employers to follow specific processes and timelines when running background checks and credit checks on recruits. Miss a timeline, fail to notify a recruit of their rights in a specific way, do step 3 before step 2, and so on, and the FCRA imposes harsh fines. This Supreme Court decision means if your mistake did not actually harm the recruit, then the recruit cannot recover damages from you. Common sense, right?
The Grawe Group, LLC is a professional services firm focused on the transportation and logistics industry. With a team of experienced executives, we provide general counsel services, business consulting, and managed professional services for the industry. From legal and risk management matters, to operational, financial, and executive challenges, the Grawe Group has the consulting, management, and legal expertise in trucking and logistics to help you build sustainable success. www.thegrawegroup.com.
Check out the Grawe Pod, transportation’s general counsel podcast, for discussions on challenges industry leaders face in their business and how to address them.