Articles by Our Attorneys

In December 2023, the Delaware Chancery Court tees up a potentially major shift in non-compete disputes, Disney, Miramax and others try to distance themselves from Harvey Weinstein, and the 10^th Circuit sets limits to “reasonable” under ADA accommodation law.  See what happened at the close of the year below.

Delaware Chancery Court Urges Swift Appeal in Noncompete Dispute, Asserting “Unsustainable” Trend of Using Delaware Courts for Legal Disputes

The Delaware Chancery Court has recommended a midcase appeal to the state’s highest court in the dispute between Sunder Energy LLC and former executive Tyler Jackson. The court cites the need for guidance on “substantial” legal questions and expresses concern about the “problematic and unsustainable” trend of companies using Delaware’s legal system to bypass other states’ laws in noncompete disputes. Vice Chancellor J. Travis Laster ruled in favor of allowing Sunder to appeal the denial of a preliminary injunction to the Delaware Supreme Court, emphasizing the “substantial issue of material importance” involved. The dispute revolves around noncompete covenants in Delaware LLC agreements and highlights the growing reluctance of the Chancery Court to modify such clauses. The case raises questions about whether the nearly 2 million businesses chartered in Delaware can rely on the state’s courts to enforce restrictive provisions. The court acknowledges the conflict between Delaware’s interests and the individual interests of clients and their lawyers in using Delaware’s legal regime for resolving disputes.

The case is Sunder Energy LLC v. Tyler Jackson et al., case number 2023-0988, in the Court of Chancery of the State of Delaware.

Disney and others Move to Dismiss Negligent Supervision Case relating to Harvey Weinstein Assault

In a legal battle related to Harvey Weinstein’s alleged sexual assault on actress Julia Ormond in 1995, The Walt Disney Co., Creative Artists Agency (CAA), and Miramax are jointly seeking dismissal of the lawsuit. Weinstein, the former co-chairman of Miramax, is serving a prison sentence for sexual assault convictions. Ormond claims that Disney, CAA, and Miramax did not protect her from Weinstein’s abuse.

The defendants argue that they are not responsible for the alleged assault, with Disney asserting that Ormond failed to demonstrate that Weinstein was a Disney employee or that the company had direct control over him. Disney contends that Miramax and Disney were separate entities, emphasizing the critical distinction between them.

Ormond, a well-known actress in the 1990s, asserts that she signed a production deal with Miramax without being warned about Weinstein’s predatory behavior. She alleges that her agents and CAA were aware of previous settlements but did not inform her. The lawsuit, filed under New York’s Adult Survivors Act, includes claims of battery against Weinstein, negligent supervision and retention against Miramax and Disney, and negligence and breach of fiduciary duty against CAA.

Disney argues that it cannot be held liable for Weinstein’s actions as he was not its employee, and it was unaware of his past misconduct. Miramax and CAA also challenge the sufficiency of the allegations against them, denying negligence and arguing that they had no knowledge of Weinstein’s history before the assault. The legal battle underscores the complex issues surrounding corporate responsibility and accountability in cases of sexual misconduct.

The suit is Julia Ormond v. Harvey Weinstein et al., case number 952107/2023, in the Supreme Court of the State of New York, County of New York.

Request for “Open-ended” leave Too Unreasonable for ADA Protection

In a recent decision, the Tenth Circuit upheld the dismissal of a former casino worker’s Americans with Disabilities Act (ADA) lawsuit, stating her accommodation request for managing asthma attacks was “unreasonable.” Danielle Davis, a table-games dealer, sought accommodations allowing her to miss work during asthma flare-ups and to erase attendance points accumulated due to previous health-related absences. The court rejected her claim, deeming the request for “open-ended” leave incompatible with the essential job function of regular attendance. Davis argued against the importance of attendance in her role, but the court cited the casino’s vice president of human resources, emphasizing its critical role in the core gambling service. The decision highlights the need for employees to demonstrate that attendance expectations are non-essential by proving inconsistent enforcement or lack of business necessity, which Davis failed to do. Additionally, the court rejected Davis’s plea to erase attendance points, stating that ADA does not mandate disciplinary record resets predating accommodation requests. The panel also declined to revive her disability bias claim, emphasizing her termination’s alignment with company policies rather than prejudice.

The case is Davis v. PHK Staffing, case number 22-3246, in the U.S. Court of Appeals for the Tenth Circuit.

Jeff Burke is an attorney at MacElree Harvey, Ltd., working in the firm’s Employment and Litigation practice groups. Jeff counsels businesses and individuals on employment practices and policies, executive compensation, employee hiring and separation issues, non-competition and other restrictive covenants, wage and hour disputes, and other employment-related matters. Jeff represents businesses and individuals in employment litigation such as employment contract disputes, workforce classification audits, and discrimination claims based upon age, sex, race, religion, disability, sexual harassment, and hostile work environment.  Jeff also practices in commercial litigation as well as counsels business on commercial contract matters.

Employee severance agreements are becoming increasingly common in the modern workplace. With the ever-changing business landscape, companies often find themselves having to restructure, downsize, or lay off employees.  Employers often find themselves in situations where they have to navigate separating from problematic employees.  Conversely, employees sometimes find themselves victims of problematic and potentially unlawful employment practices and have to part ways with their employer.  In such situations, severance agreements can help protect the interests of both the employer and the employee.

Drafting an effective severance agreement requires a thorough understanding of the relevant laws and legal issues. Unfortunately, I have seen numerous instances where employers have failed to properly draft these agreements, leaving them vulnerable to legal challenges; or, employees have signed questionable severance agreements that lack the proper benefits or legal protections.  In this article, I will provide 4 things to know when facing an employee severance situation.

1. Consideration: The agreement must provide adequate consideration to the employee. This typically takes the form of a lump sum payment or salary continuation for a specified period, but can also include other forms of compensation such as continued health insurance coverage, outplacement services or other benefits.  If the agreement only provides benefits to which the employee is already entitled, it lacks consideration and will not be enforceable.
2. Non-compete, non-solicitation, and non-disclosure clauses: Non-compete, non-solicitation, and non-disclosure clauses can be included in severance agreements to protect the company’s clients, trade secrets, and proprietary information. However, such clauses must be carefully crafted to ensure that they are reasonable in terms of scope and duration.  In addition, non-disclosure clauses must comply with state and federal laws, including the National Labor Relations Act, which protects employees’ rights to engage in protected concerted activity.
3. Waivers of rights and releases of claims: The agreement typically also includes a release of claims against the company along with waivers of the employee’s rights to bring legal action against the company. This means that the employee is giving up his or her right to sue the company for any claims arising out of their employment.  However, there are limits to what can be released, and certain claims such as workers’ compensation or unemployment benefits cannot be waived.  Waivers must be drafted in a clear and specific manner, and must comply with state and federal laws.
4. Proper execution: The agreement must provide the employee with adequate time to review and execute the agreement.  For certain severance agreements, allowing up to 21 or even 45 days is required.  In addition, certain severance agreements must allow the employee a 7-day window to revoke the agreement after he or she signs it.

Drafting an effective employee severance agreement requires a thorough understanding of the relevant facts and legal issues. The agreement should be tailored to the specific needs of the company and the employee, and should be drafted in compliance with state and federal laws.  The best way to ensure these goals are accomplished is to consult with a qualified attorney.

Jeff Burke is an attorney at MacElree Harvey, Ltd., working in the firm’s Employment and Litigation practice groups. Jeff counsels businesses and individuals on employment practices and policies, executive compensation, employee hiring and separation issues, non-competition and other restrictive covenants, wage and hour disputes, and other employment-related matters. Jeff represents businesses and individuals in employment litigation such as employment contract disputes, workforce classification audits, and discrimination claims based upon age, sex, race, religion, disability, sexual harassment, and hostile work environment.  Jeff also practices in commercial litigation as well as counsels business on commercial contract matters.

In October 2023, labor law and workers’ rights were front and center, as the National Labor Relations Board took actions to expand collective bargaining rights and went after a prominent social media company, while California joined a short list of progressive jurisdictions to expand employee leave rights into the area of reproductive loss.  More below.

NLRB Finalizes Broader Joint Employer Rule

The National Labor Relations Board (NLRB) has issued a significant and highly anticipated revision to the joint employer rule.  If two entities are joint employers under the National Labor Relations Act (NLRA), both must bargain with the union that represents the jointly employed workers, both are potentially liable for unfair labor practices committed by the other, and both are subject to union picketing or other economic pressure if there is a labor dispute. The revision to the rule is expected to impact the ability of employees working for franchisees and staffing agencies to collectively bargain with these entities as their “joint” employers.

The new rule replaces a 2020 policy that required workers to demonstrate “direct and immediate control” over key job terms for their employer to be considered a joint employer. The NLRB’s latest revision expands the scope, now allowing a franchisor or user firm to be classified as a joint employer if they have control over aspects such as pay, benefits, or other vital job conditions, regardless of whether that control is exercised directly or indirectly. This includes control exercised through third-party entities like staffing firms.

The rule is a response to concerns that some employers were avoiding responsibility under the National Labor Relations Act by claiming not to have direct control over their workers. Critics of the Rule, such Republican NLRB member Marvin Kaplan, have described it as “unprecedented and unwarranted expansion of the board’s joint-employer doctrine.”  The Rule is scheduled to take effect 60 days after publication.

California joins List of States Requiring Bereavement Leave for Miscarriages and Other Reproductive Loss

California Governor Gavin Newsom has signed a bill, S.B. 848, ensuring that workers in the state are granted up to five days of leave within three months of a reproductive loss, which includes miscarriage, stillbirth, failed adoptions, surrogacy, and assisted reproduction. The law, effective immediately, applies to all employers with five or more workers and aims to support employees during these challenging times.  California joins a small group of states and local governments, including Utah and Illinois, that have expanded bereavement leave requirements in this area.

Under this new legislation, employees must have worked for at least 30 days to be eligible for reproductive loss leave. While the leave can be unpaid if no existing policy covers it, employees can utilize accrued vacation or sick leave for compensation. Notably, this leave does not need to be taken consecutively. Furthermore, if an employee experiences more than one reproductive loss, employers are mandated to grant up to 20 days of leave in a 12-month period.  The law also prohibits employers from retaliating against employees who request or use reproductive loss leave.

In the majority of states that do not require these protections, employers may provide expanded bereavement leave but have no specific obligation to do so. 

NLRB picks fight with X Corp (f/k/a Twitter) over Alleged Retaliatory Firing of Employee who criticized Elon Musk’s Return to Work Announcement

X Corp., formerly known as Twitter, is facing legal action after the National Labor Relations Board (NLRB) prosecutors filed a complaint against the company for allegedly violating federal labor laws. The case revolves around the termination of former employee Yao Yue, who was fired after urging colleagues to challenge the company’s return from remote work policy, initiated by Elon Musk’s directive that “if you can physically make it to an office and you don’t show up, resignation accepted”.

Following Musk’s statement, Yue encouraged her coworkers not to resign, but instead to allow themselves to be terminated, citing the lack of any benefit in resigning. The NLRB prosecutors assert that X Corp. terminated Yue unlawfully, aiming to deter other employees from engaging in similar protected activities.  Yue’s actions were allegedly protected, concerted activity under the National Labor Relations Act.

The complaint seeks compensation for Yue’s direct and foreseeable monetary harm, as well as other consequential damages resulting from the company’s actions. A hearing is scheduled for January 30, 2024. The situation underscores the risk to employers for potentially infringing on employees’ rights to engage in concerted activities without fear of retaliation.

The case is X Corp.. f/k/a Twitter, Inc. and Yao Yue, case number 20-CA-313470, before the National Labor Relations Board Region 20.

Jeff Burke is an attorney at MacElree Harvey, Ltd., working in the firm’s Employment and Litigation practice groups. Jeff counsels businesses and individuals on employment practices and policies, executive compensation, employee hiring and separation issues, non-competition and other restrictive covenants, wage and hour disputes, and other employment-related matters. Jeff represents businesses and individuals in employment litigation such as employment contract disputes, workforce classification audits, and discrimination claims based upon age, sex, race, religion, disability, sexual harassment, and hostile work environment.  Jeff also practices in commercial litigation as well as counsels business on commercial contract matters.