Legal Trickery – Eric A. Parzianello

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Archive for the ‘Business Litigation’ Category

Audit Your Contractors – They May Cause You To Be Liable for Their Employees

Posted by Eric Parzianello on June 2, 2015

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Once a company is found to be a joint employer with its contractor, it is jointly liable for any wage violations committed by the contractor. In a May 28, 2015, Florida federal court decision, a company was held liable as a “joint employer” for improper payments its contractor required from its employees.  The essential question at issue in the case was whether the workers are dependent on the company as an economic reality.

In Garcia-Celestino vs. Citrus Consolidated, the plaintiffs alleged that a citrus grower’s contractor demanded that they pay back a portion of their wages in exchange for not reporting them as illegal immigrants and having them deported to Mexico. The workers said the contractor forced about 200 workers to pay over $100,000 during three harvest seasons.

The United States District Court of the Middle District of Florida balanced several factors in making a determination as to whether the grower was a joint employer.  If a company makes decisions such as: (1) for whom and how many employees to hire; (2) how to design the employees’ management structure; (3) when the work day begins; (4) when the laborers shall start and stop their work throughout the day; and (5) whether a laborer should be disciplined or retained, it is likely a joint employer.

Joint employer status can also be found if the company supervises workers regardless of whether orders are communicated directly to the worker or indirectly through the contractor.  The authority to hire, fire, or modify the employment conditions of the workers and the extent of the company’s involvement in the payroll procedures and wage payments is also considered.

The court found that the workers provided an integral service for the grower, indirectly but extensively supervised the workers and was also directly involved in payroll practices thereby affecting Plaintiffs’ pay.  The grower therefore will be liable in an amount to be determined for the adverse effect on the workers’ wages and possible Fair Labor Standards Act (“FLSA”) violations.  A full copy of the decision can be found at my firm’s website:   Garcia-Celestino vs. Citrus Consolidated.

Lesson for companies working with contractors:  audit their employment practices or ensure that you don’t cross decisional control lines and risk being considered a joint employer.

Eric Parzianello
eparzianello@hspplc.com
313-672-7300

Posted in Business Litigation, General Employment Law, Wage and Hour Law | Leave a Comment »

How Can An Employer Limit Its Litigation Risk?

Posted by Eric Parzianello on December 3, 2014

An employee’s post-termination lawsuit can be very costly for an employer regardless of whether the claims have any merit.  A complaint alleging discrimination based on sexual harassment or age, race or gender discrimination can result in significant litigation and/or settlement cost.  One way for an employer to limit the risk of such claims is to shorten the time by which an employee must file any suit against the employer.

In the case of Posselius v. Springer Pub. Co., Inc., the plaintiff began working for her employer in 2000. In 2005, she received a revised employee handbook and signed a form acknowledging her receipt of the book.  That form in part stated:

“I agree that in consideration for my employment or continued employment that any claim or lawsuit arising out of my employment with, or my application for employment with, the Company or any of its principals or subsidiaries must be filed no more than six (6) months after the day of the employment action that is the subject of the claim or lawsuit. While I understand that the statute of limitations for claims arising out of an employment action may be longer than six (6) months, I agree to be bound by the six (6) month period of limitations set forth herein, and I WAIVE ANY STATUTE OF LIMITATIONS TO THE CONTRARY.”

The plaintiff was terminated in July of 2008 and she filed suit a year later in July of 2009 for gender discrimination. The employer argued that the plaintiff’s action was barred by the six-month contractual limitations period in the signed acknowledgment.  The Michigan Court of Appeals agreed and dismissed the lawsuit.  It found that “because the acknowledgement form created an enforceable agreement and was not ambiguous, plaintiff was bound by the provision requiring claims to be brought within six months.”

This is one of many ways an employer can reduce the likelihood of litigation.  A regular review by an employer of its policies and procedures is highly recommended.

Eric Parzianello
eparzianello@hspplc.com
313-672-7300

Posted in Business Litigation, General Employment Law | Tagged: , , | Leave a Comment »

Do You Have a Written Post-Termination Commission Agreement? If Not, It Could Be Costly

Posted by Eric Parzianello on September 18, 2014

When commission based employees terminate their employment, do they get commissions for sales made after they leave?  If no contract exists regarding post-termination commissions and the salesperson procured the sales, the employer must pay commissions even after termination of the employee under the procuring cause doctrine.  We recently obtained a significant victory for our client in Oakland County (MI) Circuit Court in large part because his former employer failed to have any written agreement with him regarding commissions.

What is the procuring cause doctrine?  The procuring-cause doctrine applies when the parties have a contract regarding the payment of sales commissions, but the contract is silent regarding the payment of post-termination commissions. The procuring-cause doctrine acts as a default rule for interpreting a contract that is silent with respect to commissions on sales generated by a salesperson before, but consummated after, termination of the relationship between the salesperson and the principal.

An salesperson is entitled to recover a commission whether or not he has personally concluded and completed the sale as long as  his efforts were the procuring cause of the sale.

How is “procuring cause” defined? A procuring cause has been defined by Michigan courts as the “chief means” by which a sale was finally effected. Whether a salesperson was a procuring cause generally turns on the facts of each case making written agreements critical in order to avoid litigating those facts.

Employers and salespersons both should minimize their litigation risk by having written agreements in place before any termination occurs.

Eric Parzianello
eparzianello@hspplc.com
313-672-7300

Posted in Business Litigation, General Employment Law | Tagged: , , , | Leave a Comment »

How The Employee You Terminated 20 Years Ago Can Still Be a Shareholder in Your Company

Posted by Eric Parzianello on July 16, 2014

Is it possible that the employee you terminated 20 years ago retains an ownership interest in your company?

In the recent case of Turner v. J&J Slavik Inc., a Michigan corporation’s former employee claimed that his shares in the company were not redeemed pursuant to the procedures in the parties’ stock restriction and redemption agreement when his employment terminated in January 1992.  He therefore contended that he holds the same ownership interest today.  The Michigan Court of Appeals agreed.

The agreement provided, in part, that: “[i]n the event the employment . . . of [plaintiff] . . . terminates, . . . [defendant] shall purchase, and [plaintiff] . . . shall sell, all of the shares of common stock in [defendant] then owned by such terminated employee.”  The purchase price was to be “the fair market value thereof as of . . . the last day of the month immediately preceding the termination of employment . . ..” “Fair market value” meant “the amount of [defendant’s] assets less the amount of its liabilities (book value) on the [v]aluation [d]ate divided by the number of shares outstanding . . . .”  However, no valuation occurred.  Instead, the company simply represented to the employee that the shares were worthless.  Additionally, despite the agreement’s deadline for the closing of the redemption of the stock, no such closing took place.

The Court found that the agreement contained no exemption from the valuation and closing procedure for allegedly worthless shares.  The Court ruled that because the redemption procedure was not followed, the employee’s stock was not canceled, and the employee did not lose his status as a shareholder.

Here, an employer’s prudence in having a well-drafted agreement with its employees was negated by the failure to follow its own procedures.

Eric Parzianello
eparzianello@hspplc.com
313-672-7300

Posted in Business Litigation, General Employment Law | Leave a Comment »

How To Breach An Employment Agreement and Still Enforce Your Former Employee’s Non-Compete

Posted by Eric Parzianello on April 10, 2014

Can non-compete agreements still be enforceable when an employer fails to pay the employee amounts due under the same contract?  A Florida court found that answer to be ‘yes’.

A typical defense of an employee accused of violating a non-competition agreement is that the employer breached some agreement either by failing to pay amounts due under the contract or in some other manner. While this is usually a valid defense which could undermine an injunction enforcing the non-competition provision, careful drafting by the employer can make its prior breach irrelevant.

In the recent Florida case of Richland Towers v. Denton, the trial court found that the employer had not paid bonuses to the employee as required under the employment agreements. The court accepted the argument that this was a prior breach rendering the non-competition covenants unenforceable. The 2nd District Court of Appeals, however, reversed this decision. It found that to “reach this conclusion, the circuit court necessarily had to determine that the parties’ obligations under the contracts were dependent covenants. When a dependent covenant has been breached, the entire contract is virtually destroyed.”

The agreement however had an explicit provision which “trumped” the general rule that covenants are considered dependent.  The agreement provided as follows:

“Covenants Independent. Each restrictive covenant on the part of the Employee set forth in this Agreement shall be construed as a covenant independent of any other covenant or provisions of this Agreement or any other agreement which the Corporation and the Employee may have, fully performed and not executory, and the existence of any claim or cause of action by the Employee against the Corporation, whether predicated upon another covenant or provision of the Agreement or otherwise, shall not constitute a defense to the enforcement by the Corporation of any other covenant.”

Because the covenants were independent, the employer’s prior breach of the agreement was irrelevant to the enforcement of the non-competition provision.

On a separate issue, the Court of Appeals also found that the discontinuation of business by the corporation which signed the agreements was irrelevant: another provision in the agreements provided that the corporation’s affiliates could enforce the non-competition provisions:

“Corporation (and each of the Affiliates comprising the Corporation) shall be deemed to be third party beneficiaries under this Agreement with the right to seek enforcement hereof and make claims hereunder, including but not limited to claims arising under this Section 10.”

The Court of Appeals therefore reversed the denial of the temporary injunction.  This decision is another example that the likelihood of success on a request for an injunction enforcing a non-compete provision depends in large part on the language of the contract.

Eric A. Parzianello
eparzianello@hspplc.com
313-672-7300

 

Posted in Business Litigation, General Employment Law, Non-Compete Law | Tagged: , , , | Leave a Comment »

Tiger Woods Finds Florida’s Deceptive Trade Act Costly

Posted by Eric Parzianello on March 18, 2014

Your business contract has been breached in Florida and litigation can be costly.  However, as Tiger Woods will likely soon find out, Florida’s Deceptive Trade Practices Act (“DTPA”) provides a powerful tool for the collection of attorney’s fees.

Florida’s DTPA prohibits “unfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce.”  Under the DTPA, the prevailing party may receive his or her reasonable attorney’s fees and costs from the nonprevailing party.  Therefore, even if your contract doesn’t provide for attorney’s fees in the event of breach, adding this cause of action may be beneficial if you can prevail on it.

In the recent case of Gotta Have It Golf Inc. vs. ETW Corp., owned by pro golfer Tiger Woods, the plaintiff had an exclusive arrangement requiring Woods’ company to provide memorabilia. It accused Woods of violating a 2001 licensing agreement after his company did not provide it the agreed amount of autographs and photographs for the plaintiff to sell.  Gotta Have It Golf alleged that Woods provided only 550 of 1,300 agreed autographs and denied the use of numerous photographs.

Although Woods testified at trial, a six woman jury was apparently unimpressed.  After deliberating for two hours on March 12, 2014, the jury found that Woods’ company breached its contract, violated its duty of good faith and fair dealing, and, importantly, engaged in deceptive and unfair trade practices under the DTPA.  A copy of the jury verdict can be found here.

The jury awarded $668,346.00 in damages to Gotta Have It Golf. Because of interest to be added to the judgment, the total amount owed could exceed $1.3 million.  Additionally, because the jury found liability under the DTPA, the plaintiff’s attorneys will seek attorney’s fees which could approximate $1 million.  Without making a claim under the DTPA, the plaintiff would likely have not had any ability to recover its attorney’s fees.

Lesson:  litigation creativity can result in cost effective representation.

Posted in Business Litigation | Leave a Comment »