Drafting Problems: Noncompetes that Enlarge a Plaintiff’s Damages

Rick Seymour

Rick Seymour

Employers draft noncompetes for several reasons, but I suspect rarely draft noncompetes so they will have to pay a lot more for a retaliatory or discriminatory termination.

Enter from stage left Republic Services of Virginia, LLC, an employer that has just learned that the law of  unintended consequences is one of the most frequently enforced laws in the universe, even though there are no enforcement staff.

An employee, Jennifer Taylor, made a number of claims against Republic.  A number were dismissed by summary judgment, but a hostile work environment claim and a retaliatory discharge claim remained.  After a five-day nonjury trial, the U.S. District Court in Alexandria, Virginia, rejected the hostile work environment claim.  Ms. Taylor’s retaliation claim remained, however, because the court ruled that she had had a reasonable, good-faith belief the company had violated Title VII of the Civil Rights Act of 1964 by allowing a hostile work environment.  The court held that Ms. Taylor’s firing was in fact retaliatory, so it had to determine the amount of back pay and front pay she wold receive.

Enter from stage right the noncompete agreement Republic has had Ms. Taylor sign.  The agreement apparently had a significant effect in depressing Ms. Taylor’s post-Republic earnings, and thus in increasing her back pay and front pay.  The full details are in Taylor v. Republic Services, Inc., __ F.Supp.2d __, 2013 WL 5178452 (E.D.Va. Sept. 16, 2013) (N0. 1:12-CV-00523-GBL).  For purposes of this blog, a few excerpts tell the story:

          Ms. Taylor acknowledged that her post-termination job search was difficult due to the non-compete agreement she signed after the Allied–Republic merger. Ms. Taylor was not able to find a job in the waste management industry.

Id. at p. *13.  U.S. District Judge Lee relied on the difficulties caused by the noncompete in his ruling:

          The Court finds that Ms. Taylor is entitled to be made whole due to Republic Inc.’s unlawful retaliatory discharge. The evidence at trial demonstrates that Ms. Taylor made reasonable efforts to mitigate her damages. Due to Ms. Taylor’s non-compete agreement, she was precluded from applying for positions in the field in which she had gained a great deal of experience. Ms. Taylor testified that applied for more than one-hundred (100) positions, but she only received one job offer. She began employment with Vector Disease Control as a sales representative on July 9, 2012.

Id. at p. *27.  The court awarded Ms. Taylor $377,734 in back pay through the first day of trial, id. at 28, and awarded $804,791 for five years of front pay.  Id. at 30.

Nor is this all.  Ms. Taylor sought compensatory damages for emotional distress, and at trial relied in part on her anxiety caused by the added difficulty in finding a replacement job caused by her noncompete agreement.  “All of a sudden, Ms. Taylor faced the reality that she was forced out of her position at Republic and the waste management industry as a result of the non-compete agreement she signed when Allied and Republic merged.”  Id. at p. *31.  The court awarded her the full $50,000 allowed under the statutory damages cap applicable to an employer of Republic’s size.

So far, the noncompete has helped drive Ms. Taylor’s damages up to $1,232,525.  Is this finally the end?

Nah. Attorneys’ fees and costs for Ms. Taylor’s attorneys still have to be awarded in the future and, as we all know, one of the important factors in determining the proper amount of attorneys’ fees is the degree of success obtained.

As a humble worker in the trenches of employment law, it seems to me that employers should think more carefully about the wisdom of drafting onerous noncompete agreements.  Employers may not care initially about the effect of the noncompetes in limiting the future job prospects of the employees they fire, but I expect Republic now cares deeply, to the tune of almost one and a quarter million dollars so far and a fee award to come.  As I pointed out in another post, clauses an employer inserts for its own perceived protection can come back to bite it big-time.  As this case also shows, there are reasons other than enforceability for employers to be cautious in drafting broad agreements.

Attorneys on both sides of the fence should take the lessons of this case to heart and, if there is a potential claim related to the termination, modify a pre-existing noncompete agreement so that the plaintiff does not find himself or herself in the position of Ms. Taylor, and the employer does not find itself in the position of Republic.  Agreements are written on paper, not etched in stone, and reasonable people normally fare better than less reasonable people.

Richard T. Seymour
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