Top Five Hazards of Economy-driven Employment Decisions
By Michael C. Schmidt Partner, Cozen O'Connor | August 07, 2010
Times are tough. Employers in the hotel and hospitality industries are not immune from the impact that the weakened economy has on their personnel issues. In order to minimize the legal tsunami that can result from economy-driven employment decisions that are made, it is critical for hotel and hospitality employers to take appropriate steps to minimize potential legal exposure.
1) The Trade Secret and Unfair Competition Dilemma
Hotel management and other key employees may leave in increasing numbers during an economic downturn, either voluntarily or involuntarily. Among the critical issues to be addressed is the fear that such former employees might unfairly compete or disclose trade secrets to the outside world, such as programs in development or hotel expansion forecasts. Employers should consider whether to seek the enforcement of non-compete and non-disclosure agreements, or, alternatively, whether to request that employees who remain with the company sign such agreements. On the flip side, in the event an individual who is hired has recently left another hotel, a prospective employer should determine whether the new hire is subject to any restrictive covenants with his or her former employer, and perhaps ask the new hire to certify in writing that no restrictions exist.
In many states, restraints on an employee's ability to compete remain disfavored except in certain circumstances when enforcement would prevent unfair competition. In a smaller group of states, restrictive covenants are statutorily prohibited. Before determining whether to bind an employee to a restrictive covenant, or to seek the enforcement of an already-existing agreement, an employer should:
- understand that restrictions generally will not be enforced against an employee involuntarily terminated without cause;
- make sure that all trade secrets are treated as such internally;
- tailor any restrictions to the particular position of the employee, demonstrating that a business need exists which justifies restrictions being placed on that particular position, rather than using a boilerplate agreement for clerical employees and senior hotel executives alike;
- include time and geographic restrictions that are reasonable and necessary to the hotel industry based on competitive concerns; and
- consider "safeguards" such as additional severance to be paid during the restriction period.
2) The Medical Leave Dilemma