Private Resolution of Public Disputes: Employment, Arbitration, and the Statutory Cause of Action

In this Article, I argue that arbitration agreements fall somewhere along the middle of the rights/contract continuum. My understanding of the nature of arbitration agreements relies on a previously existing area of employment law. There is a particular aspect of the employment relationship that, while open to contract, remains subject to constraints imposed by the law. A noncompete agreement permits an employee to contract with his employer to not work for a competitor following the termination of the employment relationship. This right to contract away the right to compete is, however, narrowly construed by the court system. A court may not enforce a noncompete agreement unless the agreement meets a standard of reasonableness. I propose that this same analysis be applied to arbitration agreements. It is my position that a predispute, mandatory arbitration agreement should not be enforced unless it meets certain requirements that together make the agreement reasonable. This standard of reasonableness will protect the interests of all parties: the employer, the employee, and society as a whole. In Part II of this Article, I discuss the problems created by the use of mandatory arbitration clauses in employment agreements. Part III examines the fallacy behind applying general contract principles to arbitration agreements in the employment context. In Part IV, I outline a proposal to constrain the use of mandatory arbitration as a means of resolving employment disputes. My proposed legislative solution is designed to address the concerns raised by the continued use of mandatory arbitration clauses in employment agreements

Preserving Human Capital: Using the Noncompete Agreement to Achieve Competitive Advantage

Organizations today face numerous challenges: worldwide competitors, changes in information technology, increased reliance on knowledge workers, and a shifting economic environment. Faced with the difficulty of securing advantage by traditional means, management has increasingly focused on employees as a key asset and driver of productivity. Many organizations have adopted the human capital theory, which holds that employees form an asset of the organization. Organizations will seek to maximize their human capital as a differentiator. Presumably, an organization that invests in its human capital will find itself rewarded with increased productivity and higher returns. But here is where the problem develops. Although it makes theoretical sense to label human capital as an asset, employees differ from other forms of assets. The organization has no ownership interest in the employees and the human capital that they represent. Instead, only the employment relationship secures the retention of human capital. Investment by an organization in its human capital, in its employees, leads to a paradox. And to date, proponents of the human capital theory, in their eagerness to create a new strategic role for the human resources department, have not addressed this paradox. A company that invests in its employees, providing those employees with new skills and knowledge, will find that it has increased the employee\u27s value. This added value, however, does not necessarily correspond to increased value for the employer. Instead, gained skills and knowledge and experience will enhance the employee\u27s mobility, permitting her to transfer the benefits of the organization\u27s investment to a competitor. A company that invests in human capital without taking the steps to secure that capital will find its investment flowing to its competition. The employment relationship, the relationship that binds human capital to the organization, is an odd beast. For the most part, the employment relationship is governed not by contract, but by a complicated mix of common law and statutes, both state and federal. To preserve its investment in human capital, management needs to understand this peculiar area of the law. The law provides several tools to manage the employment relationship. The best tool to solve the problem of preservation and retention of the organization\u27s human capital is the noncompete agreement. I conclude the article by discussing the drafting of an enforceable noncompete agreement. The noncompete agreement, carefully drafted and tailored to the employee\u27s situation, will help firms to retain the benefit of investment in their workforce. Employees governed by a noncompete agreement are less likely to leave the company. Furthermore, in the event that the employee decides to leave, the noncompete agreement will prevent the employee from immediately taking his new skills and experience to a competitor

Enforcement of Noncompetition Agreements: Protecting Public Interests through an Entrepreneurial Approach.

Abstract Forthcoming

Enforcement of Noncompetition Agreements: Protecting Public Interests through an Entrepreneurial Approach.

Abstract Forthcoming

Comment Re: Non-Compete Clause Rulemaking, Matter No. P201200

Within signed law professors and law students submitted this letter to the Federal Trade Commission, writing in their individual capacities, not as agents of their affiliated institutions, in support of the Federal Trade Commission’s proposed rule to ban most non-compete clauses (the “Proposal”) as an unfair method of competition. This letter offers comments in response to areas where the FTC has requested public comment. To make our views clear, this letter contains the following sections: I. Summary of the Proposal; II. The Commission Should Consider Expanding Its Definition of Non-Compete Clauses to Prevent Employers from Requiring Workers to Quit Before Seeking Alternative Employment; III. Non-Compete Clauses Are Unfair Methods of Competition; IV. Non-Compete Clauses Negatively Impact Workers and Their Families; V. The Proposed Rule Protects Small Businesses and Entrepreneurs; and VI. The Commission Should Consider a Factor Test for Its Unfairness Analysis for Senior Executive

Putting the Blue Pencil Down: An Argument for Specificity in Noncompete Agreements

Perhaps no contractual clause invites as little respect as the noncompete agreement. In a few states, the agreement is void and unenforceable. In the remaining states, a noncompete agreement scarcely rises to the level of a legally enforceable contract. The traditional elements of contract formation are not found in a noncompete agreement. One often finds neither a bargained-for exchange nor a meeting of the minds in these agreements. Too often, the parties to a noncompete agreement do not believe that the agreement will be enforced according to its terms. Similarly, courts give little credence to the agreement as it is actually written. Often, in those states that permit enforcement of noncompete agreements, the language of the agreement represents a mere starting point. In most jurisdictions, courts routinely blue pencil or reform covenants that are not reasonable, as determined by a multipart test. The blue pencil doctrine gives courts the authority to either (1) strike unreasonable clauses from a noncompete agreement, leaving the rest to be enforced, or (2) actually modify the agreement to reflect the terms that the parties could have-and probably should have-agreed to. This Article proposes that courts put an end to the blue pencil doctrine. The blue pencil doctrine violates basic contractual principles and has been used to alter nonconcompete agreements in two ways. First, some courts intrude into what should be negotiated agreements between the parties by substituting the courts\u27 own contract terms for those found in the agreements. Second, other courts have altered noncompete agreements by striking unreasonable clauses and leaving the rest of the agreement as written. Both scenarios essentially turn courts into attorneys after the fact. Worse yet, the blue pencil doctrine, because it creates an agreement that the parties did not actually agree to, does nothing to address the underlying problems of noncompete agreements. Several states already follow this no-modification rule. Wisconsin has even mandated the no-modification approach by statute.1 Moreover, eliminating the blue pencil doctrine comports with recent trends as courts have indicated a greater willingness to refuse to reform agreements that are not reasonable on their face. 2 As will be seen herein, several recent decisions indicate that judges have grown increasingly leery of reforming unenforceable restrictive covenants and have been unwilling to aid employers who overreach. With this in mind, courts everywhere should seize this opportunity to end to the practice. It is time to put the blue pencil down

Rethinking the Worker Classification Test: Employees, Entrepreneurship, and Empowerment

The structure of the American workplace depends on the ability to distinguish between employees and independent contractors. Unfortunately, the law provides little to guide employers in classifying workers. The legal tests to determine worker status are confusing, yield inconsistent results, and are not suited to the evolving employment relationship. Traditionally, courts examine the amount of control exerted over the putative employee by the employer: The more control exerted by the employer over the work, the more likely it is that the worker will be considered an employee. Control, however, is not the only factor to examine in determining worker status. Several appellate courts have suggested that another factor--the entrepreneurial opportunity for profit or loss--should play a greater role in classification decisions. In this article, I propose an employee-centric classification test based on the presence of genuine entrepreneurial opportunity. I examine the common elements of entrepreneurship and create a revised worker classification test that accurately reflects the difference between employee and independent contractor

Opposite Sides of the Same Coin: Worker Classification in the New Economy

Massive changes have disrupted the institution of employment. The growth of the service sector, technological advancements, and developments in the finance market have created a demand for new employment models. Employers have responded by increasingly utilizing independent contractors to fill positions traditionally held by employees. Designating a worker as either employee or independent contractor determines the degree to which employment law applies to the worker. An independent contractor falls outside many of the benefits and protections that the law provides employees. Currently, courts, states, and administrative agencies use a confusing array of employment tests, created for different purposes and different eras, to classify workers as either employees or independent contractors. In this article, I propose a new legal test for employee status focused on the presence of factors indicating entrepreneurship. Entrepreneurship represents the essence of independent contractor status. To determine the presence of entrepreneurship, I look to the academic study of the field, examine the various definitions, and create a workable legal test

Comment Re: Non-Compete Clause Rulemaking, Matter No. P201200

Within signed law professors and law students submitted this letter to the Federal Trade Commission, writing in their individual capacities, not as agents of their affiliated institutions, in support of the Federal Trade Commission’s proposed rule to ban most non-compete clauses (the “Proposal”) as an unfair method of competition. This letter offers comments in response to areas where the FTC has requested public comment. To make our views clear, this letter contains the following sections: I. Summary of the Proposal; II. The Commission Should Consider Expanding Its Definition of Non-Compete Clauses to Prevent Employers from Requiring Workers to Quit Before Seeking Alternative Employment; III. Non-Compete Clauses Are Unfair Methods of Competition; IV. Non-Compete Clauses Negatively Impact Workers and Their Families; V. The Proposed Rule Protects Small Businesses and Entrepreneurs; and VI. The Commission Should Consider a Factor Test for Its Unfairness Analysis for Senior Executive