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This article is the second part of the discussion of employer’s defense against overtime wage claims based on the commission sales overtime wage exemption, set forth in 18 U.S.C. § 207(i). exemption that allows certain businesses to not pay the employees paid mostly with commissions an overtime premium.  Peter Mavrick is a Fort Lauderdale employment lawyer who defends Florida businesses and their owners against lawsuits seeking overtime and other wages.

As discussed in further detail herein, many federal courts have rejected United States Department of Labor regulations interpreting this exemption.  The regulations often do not make sense either because they are contradictory or are outdated in light of the modern economy.  Many of the regulations were issued before globalization and the transition of the American economy from a manufacturing to a service economy.

Consequently, federal courts have recognized that Department of Labor regulations applying the commission-sales exemption are arbitrary and not deserving deference.  Some of the regulations are either contradictory or make no sense.  For example, one regulation (29 C.F.R. § 779.319) states that a refrigerator repair shop has a retail concept even if orders are taken over the telephone and work is done in the home, but another regulation (21 C.F.R. 779.317) somehow states that air conditioning contractors do not have a retail concept. These two businesses perform the exact same job, on essentially the same equipment, for the exact same customers and are distinguishable only by the scale and degree of cooling that are provided by the machines being repaired.  There is no apparent reason for distinguishing these two businesses.  Successful defense of a business when the regulations lack apparent rational basis can lead federal courts to rule in favor of the business despite clear violation of the Department of Labor’s regulation.

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Non-compete agreements often prohibit competition with other companies that are “similar to” or “competitive with” their own company. The wording of a non-compete covenant, however, can sometimes be understood to refer to the method of the business as opposed to the products or services being sold.  Under Florida law, a non-compete agreement that prohibits doing business with direct sales companies (such as door-to-door sales, home party sales, etc.) may be enforceable to protect a legitimate business interest. Peter Mavrick is a Miami non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

An example of this circumstance occurred in the federal court case PartyLite Gifts, Inc. v. MacMillan, 895 F.Supp.2d 1213 (M.D. Fla. 2012), where Plaintiff, PartyLite, Inc. (“PartyLite”), filed a lawsuit against Defendant, Tarie MacMillan (“MacMillan”), claiming breach of the parties’ non-compete, non-solicitation, and non-disclosure agreements.  PartyLite sold candles and related home products to consumers through the “home party plan” method of direct sales. Independent contractors known as “Consultants” demonstrated products and accepted orders for PartyLite’s products. All PartyLite Consultants, including MacMillan, signed a form Consultant Agreement which incorporated by reference certain policies and procedures contained in the PartyLite’s Policies and Procedures. PartyLite’s Policies and Procedures included terms and conditions wherein the Consultant agreed: 1) not to promote or sell other products or services or recruit for other companies or other business activities at PartyLite Shows, meetings or other events, 2) if the Consultant represented another company or participated in other business activities outside PartyLite, that any information, printed materials or other items obtained through association with PartyLite be kept separate and not used to solicit, promote, market or sell at or for any non-PartyLite activity, and 3) to keep PartyLite information confidential.

MacMillan advanced to the highest-level recognized by PartyLite, specifically that of “Senior Regional Vice President.” After her promotion to “Senior Regional Vice President,” PartyLite and MacMillan entered into a Leader Commitment Agreement (the “Leader Agreement”). The Leader agreement expanded the terms of the Consultant Agreement and included a provision wherein MacMillan agreed that during the term of the Leader Agreement and after the term ends and thereafter, she would not solicit or otherwise attempt to persuade any PartyLite Consultant or Leader to sell, resell or promote products of any other direct sales company, or to cease to be a Consultant or Leader of the Company. The Leader Agreement allowed MacMillan to accept employment and participate in other activities without PartyLite’s approval provided those activities do not violate the Leader Agreement and did not involve “selling, reselling, promoting products, or actively representing other direct sales companies that are similar to or competitive with the Company.” MacMillan worked as a Leader for PartyLite for several years after executing the Leader Agreement.

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This article is part one of a two-part series on the commission-based employee overtime wage exemption under the Fair Labor Standards Act (FLSA).  The FLSA, at 18 U.S.C. § 207, generally requires employees to be paid one and a half times their normally hourly rate when working more than forty hours in a week.  However, this federal statute contains some nuances and exceptions that allow employers to avoid the requirement to pay overtime premium compensation.  One of these exceptions is for commission-based employees who work for “retail or service establishments.”  Peter Mavrick is a Fort Lauderdale employment attorney who defends Florida businesses and their owners against claims for overtime wages.

The FLSA (at 18 U.S.C. § 207(i)) explains the commission-based employee exemption:

No employer shall be deemed to have violated [overtime law] by employing any employee of a retail or service establishment for a workweek in excess of the applicable workweek specified therein, if (1) the regular rate of pay of such employee is in excess of one and one-half times the minimum hourly rate applicable to him under [federal minimum wage law], and (2) more than half his compensation for a representative period (not less than one month) represents commissions on goods or services. In determining the proportion of compensation representing commissions, all earnings resulting from the application of a bona fide commission rate shall be deemed commissions on goods or services without regard to whether the computed commissions exceed the draw or guarantee.

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For a trade secret to be protectable under Florida law, a business must protect that information as confidential.  Disclosure of trade secret information to parties without an understanding that the information must be protected as confidential can cause that information to no longer be a protectable trade secret.  In the absence of an express confidentiality agreement, that information may still be protected if the business has an implied confidential relationship with the receiving party by making clear the intention to keep that information protected.  However, that implied confidential relationship may have to be shown by something more than a mere oral understanding, such as a stamp or watermark placed on the documents indicating they are confidential.  Peter Mavrick is a Fort Lauderdale trade secret attorney who represents businesses in trade secret litigation, non-competition agreement litigation, and other business litigation.

Whether information constitutes a trade secret can also make a material difference to the scope of a non-compete agreement.  Under Florida Statute section 542.335(b)2), a trade secret can be a “legitimate business interest” allowing a non-compete covenant and can justify a legal presumption for a more lengthy non-compete obligation.  Under Florida statute section 542.335(e), where trade secrets are proven, “a court shall presume reasonable in time any restraint 5 years or less and shall presume unreasonable in time any restraint of more than 10 years.  All such presumptions shall be rebuttable presumptions.”

It is well established that a business must protect the secrecy of business information for that information to be protected as a trade secret under the Florida Uniform Trade Secret Act (“FUTSA”).  Section 688.002(4)(b), Florida Statutes, describes that a trade secret, by definition, must be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

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Florida employers seeking an injunction to stop their former employees from engaging in competition in violation of a non-compete agreement must demonstrate specific criteria to a court or tribunal.  Under Section 542.335, Florida Statutes, an employer must plead and prove several facts to be entitled to a temporary injunction against a former employee breaching a non-compete agreement.  One critical requirement is the employer must show that an injunction is necessary because money damages will not adequately compensate the employer for the damages suffered. Once the employer has made this requisite showing, an employee must overcome the presumption of irreparable harm. Peter Mavrick is a Miami non-compete attorney and business litigation attorney who has substantial experience with non-compete litigation, including injunction proceedings.

An example of this occurred in the recent case of Picture It Sold Photography, LLC v. Bunkelman, 45 Fla. L. Weekly D74 (Fla. 4th DCA Jan. 8, 2020).  In Picture It, the former employee contended that an injunction not to compete was unnecessary because the alleged harm had already occurred.  Some customers who were solicited by the former employee testified that if the former employee was enjoined from competition, they still would not have continued to be customers of the former employer. The trial court found that the former employer was not entitled to an injunction because its damages were calculable, and thus, it had an adequate remedy at law. The former employer appealed.

Picture It held that evidence showing that some customers would not continue to use the employer’s services does not overcome the presumption of irreparable harm once a breach of the non-compete agreement has been proven. The appellate court also found that “[t]he continued breach of a non-compete agreement threatens a former employer’s ‘goodwill and relationships with its customers, and nothing short of an injunction would prevent this loss.’” TransUnion Risk & Alt. Data Sols., Inc. v. Reilly, 181 So. 3d 548, (Fla. 4th DCA 2015). Picture It also found that the employee’s continued competition was sufficient to show that there was no adequate remedy at law.  “Absent an injunction, there is nothing to stop Contractor from soliciting Employer’s current and prospective customers and further competing with Employer in the market.”

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Employers may invoke the legal doctrine of judicial estoppel to prevent employees from suing their employers when those employees fail to disclose that claim in bankruptcy. In the recent case of Smith v. Haynes & Haynes P.C., 940 F.3d 635 (11th Cir. 2019), the United States Court of Appeals for the Eleventh Circuit, which governs Florida federal courts, clarified the test for application of the doctrine of judicial estoppel.  Peter Mavrick is a Fort Lauderdale employment attorney who defends businesses against claims of discrimination and lawsuits seeking wages.

Judicial estoppel is an equitable doctrine that precludes a party from “asserting a claim in a legal proceeding that is inconsistent with a claim taken by that party in a previous proceeding.” Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282 (11th Cir.2002). The purpose of judicial estoppel is “to protect the integrity of the judicial process by prohibiting parties from changing positions according to the exigencies of the moment.” New Hampshire v. Maine, 532 U.S. 742 (2001).

This doctrine has been upheld in the context of statements made to the bankruptcy court. A debtor seeking shelter under the bankruptcy laws must disclose all assets, or potential assets, to the bankruptcy court. 11 U.S.C. §§ 521(1), and 541(a)(7). A pending lawsuit seeking monetary compensation qualifies as an asset. Parker v. Wendy’s Intern., Inc., 365 F.3d 1268 (11th Cir. 2004). The debtor must swear to, “any pending civil claims, and identifying any lawsuits he has filed against others.” Slater v. United States Steel Corp., 871 F.3d 1174 (11th Cir. 2017).

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When a guarantor is sued based on an absolute guarantee of a debt, the guarantor may either challenge the validity of the guarantee or show that the guaranteed debt is not owed.  Under Florida law, the guarantor can be held liable only when a court determines the guaranty is lawful and the alleged debt is actually owed.  In other words, a guarantor may not escape liability if the absolute guarantee is lawful and the party owing the underlying debt is liable under that debt.  Peter Mavrick is a Fort Lauderdale business litigation attorney with extensive experience in defending and prosecuting the interests of businesses in court proceedings and arbitration.

As discussed in the recent decision by Florida’s Fourth District Court of Appeal in Gulfstream Park Racing Ass’n, Inc. v. MI-V1, Inc., 286 So. 3d 315 (Fla. 4th DCA 2019), guarantors are limited in the defenses they may bring in a breach of contract action concerning a guaranteed debt.  In Gulfstream, the appellate court reviewed the propriety of a jury verdict holding the tenant liable but not, however, the guarantor of the tenant’s debt.  The plaintiff was a commercial landlord.  The landlord claimed that the tenant had not paid required monthly rent, and therefore locked the entrance to the tenant’s nightclub.  The landlord’s action was an apparent violation of § 83.05, Florida Statutes, which prohibits commercial landlords from undertaking “self-help” that inhibits tenant use over the leased property unless either the landlord won a judgment of eviction, the tenant surrendered the property, or the tenant abandoned the property.

The Gulfstream landlord sued the tenant and the guarantor for the tenant’s liability for a breach of the lease.  The tenant and the guarantor claimed they were not required to pay rent because the landlord’s self-help violated § 83.05, Florida Statutes.

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Florida law prohibits retaliation against an employee seeking worker compensation benefits.  A recent Florida appellate decision allowed a worker compensation retaliation claim even though the employee never actually filed a worker compensation claim before termination of his employment.  Peter Mavrick is a Fort Lauderdale employment attorney who defends businesses and business owners against claims of employment discrimination and retaliation and demands for wages.

Florida Statutes Section 440.205 states in pertinent part that: “[n]o employer shall discharge, threaten to discharge, intimidate, or coerce any employee by reason of such employee’s valid claim for compensation or attempt to claim compensation under the Workers’ Compensation Law.”  The Florida Supreme Court’s precedent in Koren v. Sch. Bd. of Miami-Dade County, 97 So. 3d 215 (Fla. 2012), explained that to establish a claim for worker compensation retaliation an employee must prove the following elements:

1) the [employee] was engaged in protected activity;

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Florida and New York’s non-compete laws are protective of business interests in customer relationships and goodwill.  Due to the mobility of workers as well as the frequent overbreadth of non-compete covenants in today’s economy, there are often cases when the non-compete laws of more than one state may be implicated  In the context of employment law, the Florida law and New York law differ differ in their concern for the burdens created by non-compete agreements on employees. Florida courts have found that businesses have a legitimate business interest in protecting customer relationships and goodwill from competition by former employees who gained substantial knowledge of its customers, their purchasing history, needs and preferences.  Conversely, New York courts have held that the enforcement of a non-compete clause based merely upon the employee’s knowledge of the former employer’s customers is generally not protectable. Peter Mavrick is a Fort Lauderdale non-compete lawyer who has substantial experience with agreements restricting employment, solicitation, and other forms of competition.

Both states’ laws have a similar standard for evaluating the necessity of the protection intended for non-compete agreements. Under Florida law, the validity of non-compete clauses under Florida Statute 542.335 requires: “the employer to plead and prove (1) the existence of one or more legitimate business interests justifying the restrictive covenant and (2) that the contractually specified restraint is reasonably necessary to protect the established interests of the employer.” North American Products Corp. v. Moore, 196 F.Supp.2d 1217 (M.D. Fla. 2002) (emphasis added). Florida law allows a non-compete clause to be enforced as long as it is “reasonably necessary” to protect the established interests of the employer.

Under New York law, a non-compete agreement “will only be subject to specific enforcement to the extent that it is reasonable in time and area, necessary to protect the employer’s legitimate interests, not harmful to the general public and not unreasonably burdensome to the employee.” BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999). The common law rule adopted by New York law holds that “[a] restraint is reasonable only if it: (1) is no greater than is required for the protection of the legitimate interest of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public.” BDO Seidman v. Hirshberg, 93 N.Y.2d at 392–93 (emphasis added).

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An employee bringing a hostile work environment claim must show that the complained of conduct is sufficiently severe to claim unlawful discrimination under Title VII of the Civil Rights Act and the Florida Civil Rights Act.  Generally, courts consider factors that include whether the incidents are frequent, severe, physically threatening or humiliating, and interfere with work.  Peter Mavrick is a Fort Lauderdale employment attorney who has extensive experience with defending businesses and business owners against claims of sexual harassment.

It is unlawful under Title VII of the Civil Rights Act of 1964 and the Florida Civil Rights Act of 1992 for covered employers (i.e., employers who have at least 15 employees) to discriminate in the workplace on the basis of sex, race, color, national origin, and religion.  The United States Supreme Court’s precedent in Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57 (1986), first recognized that hostile work environment claims qualify as discrimination under Title VII in the seminal case.  The Supreme Court explained that, “[f]or sexual harassment to be actionable, it must be sufficiently severe or pervasive ‘to alter the conditions of [the victim’s] employment and create an abusive working environment.’”  Jurisprudence has since clarified what sorts of conduct is considered to be severe enough to qualify as a hostile work environment.  While Title VII does not contain any requirement that discrimination be sufficiently severe to be actionable, the courts have interpreted this as an implicit requirement.  The Supreme Court explained in the case of Faragher v. City of Boca Raton, 524 U.S. 775 (1998), that “simple teasing, offhand comments, and isolated incidents” do not qualify as a hostile work environment actionable under Title VII.

The United States Eleventh Circuit Court of Appeals, which is the federal appellate court governing federal cases arising in the State of Florida, discussed the degree of harassment which is necessary to sustain a claim of a hostile work environment its recent decision in Ortiz v. Sch. Bd. of Broward County, Florida, 780 Fed. Appx. 780 (11th Cir. 2019).  The employee in Ortiz claimed that his supervisor harassed him concerning his race and national origin. The employee’s supervisor purportedly used racial slurs such as “spic” and “wetback” and openly made disparaging remarks concerning the work ethic of Puerto Ricans and racial minorities.  The trial court entered summary judgment against the employee, finding that the supervisor’s comments about the employee’s ethnicity or national origin “were not frequent, sever, or threatening and did not affect [employee’s] job performance.”   The employee appealed.

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