Tuesday, July 18th, 2023
This article appeared in the Summer 2023 issue of the VBA Young Lawyers Division’s Opening Statement. By Jared A. Tuck[1]
The COVID-19 pandemic forced law firms around the world to transition their practices online.[2] Now, although courts have largely resumed their regular, in person proceedings,[3] many lawyers and firms have kept tools from the pandemic in their toolbox. One such popular practice is the continued use of remote platforms for depositions. Recognizing that remote depositions are here to stay, this article provides an overview of the following: (1) the law on remote depositions, (2) the advantages and disadvantages of remote depositions, and (3) practical tips and advice on conducting remote depositions.
THE LAW ON REMOTE DEPOSITIONS
Federal Law
Default Rule. Federal Rule of Civil Procedure 30(b)(4) states that “[t]he parties may stipulate—or the court may on motion order—that a deposition be taken by telephone or other remote means.” Importantly, under the plain language of Rule 30(b)(4), the default rule in federal court requires in-person depositions. Thus, in federal court, a party needs either a stipulation or court order to take a deposition by remote means.
Breadth of the Rule. Rule 30(b)(4) only specifically enumerates that the court may allow a deposition “by telephone;” however, the phrase “other remote means” creates a catch-all that favors broad judicial and party discretion as to the format for taking remote depositions. The rule’s language suggests that any method of communication on a telephone could be permissible—including Twitter, Facebook, Instagram, Snapchat, or other social media platforms. However, federal courts have defined key factors that would likely prohibit such methods.
Forcing a Remote Deposition. A party seeking to conduct a remote deposition in federal court “should bring a Rule 26(c) motion for a protective order seeking the permission of the court to do so.”[4] When deciding whether to grant leave for a remote deposition, the court must consider “whether use of [remote] means would reasonably ensure accuracy and trustworthiness, and whether the opposing party would be prejudiced.”[5] Generally, federal courts apply a burden-shifting framework in which the party moving for a remote deposition must present a “legitimate reason” for the request before the burden shifts to the nonmoving party to show why the deposition should not be conducted remotely.[6]
In federal court, it is also important to keep in mind Federal Rule of Civil Procedure 1, which states that the federal rules “should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding.” (emphasis added). Ultimately, federal courts favor the use of remote depositions and liberally grant leave to take a deposition remotely.[7]
Virginia Law
Default Rule. Supreme Court of Virginia Rule 4:5(b)(7) states as follows: “Unless the court orders otherwise, a deposition may be taken by telephone, video conferencing, or teleconferencing.” In Virginia, unlike in federal courts, the default rule permits remote depositions unless the court orders otherwise.
Breadth of the Rule. While Rule 4:5(b)(7) purports to provide an exhaustive list of permissible methods for conducting a remote deposition, the Virginia rules are more liberal than they initially appear. Supreme Court of Virginia Rule 4:7A(a) clarifies that the list in Rule 4:5(b)(7) is not actually exhaustive: “Any depositions permitted under these Rules may be taken by audio-visual means including, but not limited to, videoconferencing and teleconferencing . . . .” (emphasis added).
Preventing a Remote Deposition. Under Virginia law, no motion is necessary to take a remote deposition because the rules expressly allow remote depositions unless the court orders otherwise.[8] To prevent opposing counsel from taking a remote deposition, the form of the motion is a motion for a protective order.[9]
Summary: Federal vs. Virginia Courts
Federal courts are the best fora for those seeking to conduct traditional, in-person depositions. However, federal courts still tend to favor remote depositions when parties litigate the issue. Virginia courts are the better fora for those seeking to conduct remote depositions. The limited Virginia case law suggests that parties rarely seek a court order for an in-person deposition.[10]
ADVANTAGES AND DISADVANTAGES OF REMOTE DEPOSITIONS
The primary advantages of remote depositions are lower costs, relative convenience, and increased control over documents and exhibits. Reduced travel costs can be particularly significant for attorneys working on a flat or contingency fee basis. Screen sharing is another advantage of remote platforms because the lawyer has greater control over what part of a document or exhibit the witness reviews.
On the other hand, remote depositions present clear disadvantages, such as difficulty of observing the demeanor of witnesses and opposing attorneys, risk of disadvantage to remote counsel, technology and connection issues, and logistical issues. It can be much harder to observe a witness’s body language remotely, and remote platforms can facilitate malfeasance, such as improper coaching of a witness.
PRACTICAL TIPS AND ADVICE
Attorneys should ensure that any remote depositions they conduct take place efficiently, effectively, and without prejudice to either party. Be sure that all participants know the correct timezone for the deposition. Mute your microphone before and after the deposition and during breaks and be just as careful about your words as in an in-person deposition—even when muted. If defending a deposition, keeping your microphone unmuted may help you timely voice your objections. Ensure that you are well-lit and positioned clearly within your camera’s frame, with no distractions in the background. Test your connection and other key functions before the deposition begins.
Many practitioners advise recording remote depositions.[11] Other precautions are often prudent, such as asking the witness to agree not to communicate with anyone but the attorneys and the court reporter during the deposition and limiting the witness’s means of such communication. When defending a deposition, in-person depositions are preferable due to improved witness comfort and increased ability to manage objections, witness responses, and documents. It is always wise to discuss logistics, such as camera positioning, with opposing counsel prior to any remote deposition.
Love or hate them, remote depositions are a continuing reality for modern lawyers. Virginia practitioners should remain conscious of the law governing remote depositions and differences in relevant federal and state law. Likewise, it is critical to stay informed of best practices for conducting and defending remote depositions to serve one’s clients as effectively as possible.
[1] I would like to thank Teddy B. Paisley, III for his assistance in drafting and editing this article. Teddy is a Summer Associate at Gentry Locke Attorneys and a rising 3L at Liberty University School of Law.
[2] See, e.g., Debra Cassens Weiss, More Big Law Firms Close or Require Remote Work Because of Coronavirus Threat, ABA Journal (March 16, 2020), https://www.abajournal.com/news/article/ more-biglaw-firms-close-or-require-remote-work-because-of-coronavirus-threat.
[3] See, e.g., Kevin Brueninger, Supreme Court Will Resume In-Person Arguments This Fall After Switching to Phones During Covid, CNBC (Sep. 8, 2021), https://www.cnbc.com/2021/09/08/ supreme-court-will-return-to-in-person-arguments-in-the-fall-after-covid-changes.html.
[4] Impulsora De Marcas E Intangibles v. Dos Amigos, No. 6:19-CV-00453-ADA-JCM, 2020 U.S. Dist. LEXIS 145434, at *2 (W.D. Tex. June 26, 2020).
[5] Cressler v. Neuenschwander, 170 F.R.D. 20, 21 (D. Kan. 1996) (emphasis added).
[6] Id.; Jahr v. IU Int’l Corp., 109 F.R.D. 429, 431 (M.D.N.C. 1986).
[7] Brown v. Carr, 253 F.R.D. 410, 412 (S.D. Tex. 2008) (“Generally, leave to take depositions by remote electronic means should be granted liberally.”).
[8] See Va. Sup Ct. R. 4:1; Lemus v. Talbert, 108 Va. Cir. 1, 1 (2021).
[9] See Lemus, 10 Va. Cir. at 1.
[10] Only four Virginia cases cite Rule 4:5(b) (7), and in none did the parties litigate whether a deposition should be in-person or remote. See Gillespie v. Davis, 410 S.E.2d 613 (Va. 1991); Lemus, 108 Va. Cir. at 1; Commonwealth Transp. Comm’r v. Cogil Corp., 67 Va. Cir. 398 (2005); In re Instrumentation Servs. v. Town of Victoria, 60 Va. Cir. 92 (2002).
[11] Both federal and state courts permit recording remote depositions. See Fed. R. Civ. P. 30(b) (3)(A); Va. Sup. Ct. R. 4:7A(d)(1).
Monday, July 10th, 2023
During the 2022 Session, the Virginia General Assembly passed SB 550, which prohibited the application of contingent payment clauses (known as “pay-if-paid” clauses) under most circumstances. The bill also established prompt payment clauses for prime contracts and subcontracts on private projects. Virginia’s Prompt Payment Act was formerly applicable only to public projects.
The legislative process during the 2022 session did not result in a consensus among stakeholders concerning the appropriate statutory language. This is a link to the final language of the bill, which was very different from the original bill, or the first substitute presented in committee. The bill was extensively amended by the House committee, and the Governor proposed a substitute bill that incorporated several changes. In the rush to pass a bill. there were several inconsistencies and problems with the compromise language adopted in 2022.
The final version of the bill included a delayed enactment clause so that the statutory changes in it did not take effect until January 1, 2023. The purpose of this delay was to allow time for stakeholders to work towards agreement on revisions to the new statutory language addressing the bill’s numerous ambiguities and inconsistencies.
SB 550 required that the Department of General Services and the Office of the Attorney General convene a Public Body Procurement Workgroup. In the Summer of 2022, the workgroup met to discuss recommended changes to the language adopted by SB 550. The workgroup voted for recommendations on technical amendments to SB 550 to address inconsistent and confusing language. The workgroup supported the following changes:
- Clarify whether A/E, design, and professional services contracts are covered by the new statutory language.
- Make definitions such as “construction,” “construction contract,” “general contractor,” and “subcontractor” uniform in their application to both public and private projects.
- Create consistency in language related to when a contractor is not liable to pay a subcontractor for noncompliance and breach of contract.
- Use the same language related to notice for nonpayment for both public and private construction contracts.
- Create consistency between the payment timelines in private contracts by copying the terminology in subsection B of § 11-4.6 (payment from owner to GC) and using it in subsection C (payment from GC to subcontractor, subcontractor to subcontractor, etc.).
The workgroup’s recommendations resulted in HB 2500. The changes adopted by the passage of HB 2500 took effect on 7/1/2023. These changes include:
Virginia Code § 2.2-4347
- Added a new definition of “construction contract.”
- Added “general contractor” as a defined term alongside “contractor.”
- Other non-substantive cleanup changes to the definition language.
Virginia Code § 2.2-4354
- Added “in the event that the contractor has not received payment from the state agency or local government for work performed by a subcontractor under such contract” to the first sentence of paragraph 1.
- Also added “and to pay such subcontractor within 60 days of the receipt of an invoice following satisfactory completion of the work for which the subcontractor has invoiced,” to the first sentence of paragraph 1.
- There were several other changes to paragraph 1 intended to provide consistency between Virginia Code § 2.2-4354 and Virginia Code § 11-4.6.
- If the contractor withholds all or part of the payment invoiced, the contractor shall notify the subcontractor within 50 days of receipt of the invoice, in writing, of the intention to withhold and the reason for nonpayment, “specifically identifying the contractual noncompliance, the dollar amount being withheld, and the lower-tier subcontractor responsible for the contractual noncompliance.”
- Added at the end of the paragraph 1 exceptions for retainage and contracts awarded solely for professional services as that term is defined in Virginia Code § 2.2-4301 where the public body is contracting directly with an architectural and engineering firm.
Virginia Code § 11-4.6
- The definitions in paragraph A were modified to match the definition in Virginia Code § 2.2-4347, with the exception from Virginia Code § 2.2-4354 applicable to contracts awarded solely for professional services as that term is defined in Virginia Code § 2.2-4301 where the public body is contracting directly with an architectural and engineering firm.
- The definition of contractor or general contractor was changed to reference the definitions in Virginia Code § 54.1-1100, the contractor licensing statute.
- There is also a separate definition of subcontractor that references the definition in Virginia Code § 2.2-4347.
- New paragraph B(1) (formerly B) concerning prompt payment terms as between an Owner and Contractor was modified to follow the prompt payment terms in new paragraph B(2) (formerly C). The Owner must notify the Contractor within 45 days of the receipt of an invoice of its intention to withhold all or part of the invoice, specifically identifying the contractual noncompliance and the dollar amount being withheld.
- New paragraph B(2) (formerly C) was modified to remove references to higher tier and lower tier contractors and inserting references to the general contractor and subcontract. The 60-day payment window runs from the “receipt of an invoice following satisfactory completion of the portion of the work for which the subcontractor has invoiced.”
- The right to withhold payment now arises from “subcontractor’s noncompliance with the terms of the contract,” rather than “breach of contract.”
- The GC must notify the subcontractor within 50 days of receipt of an invoice, in writing, of its intention to withhold payment, and specifically identifying the contractual noncompliance, the dollar amount being withheld, and the subcontractor responsible for the contractual noncompliance.
- A new line was added to clarify that these prompt payment, notice, and interest provisions flow down to subcontracts between subcontractor and a lower tier subcontractor or supplier, but only if the project is not a single-family residential project, and the value of the project, or an aggregate of projects under such construction contract, is greater than $500,000.
- This is a subtle change that will have a dramatic effect. The original language from SB 550 included the exceptions from the “wage theft” law in Virginia Code § 11-4.6 [formerly subparagraph G, now subparagraph C(4)]. The former language provided an exception from the application of the entire code section if “the construction contract is related to a project other than a single family residential project, and…the value of the project, or an aggregate of projects under one construction contract, is greater than $500,000.”
- Under this new exception language does not apply to lower tier subcontracts if the value of the project is less than $500,000.
- The remaining changes to Virginia Code § 11-4.6 are non-substantive cleanup changes.
The prohibition against pay-if-paid clauses remain in effect, with the limited exceptions from SB 550 (“the party contracting with the contractor is insolvent or a debtor in bankruptcy as defined in [Virginia Code] § 50-73.79”).
The revised language adopted by HB 2500 is an improvement over SB 550, but even this revised language will not solve issues like non-payment for work that is performed subject to a change order rejected due to a dispute over whether the work is an extra or falls within the contract scope. Subcontractors and lower-tier subcontractors still run the risk of non-payment if the owner goes bankrupt or is insolvent, as do lower-tier subcontractors on projects with a value of less than $500,000. With the revised language taking effect this week, now is the time to discuss with your counsel whether your contracts and subcontracts comply with the revised statutory language.
Wednesday, July 5th, 2023
From The Fee Simple. Published July 2023.
Thursday, June 22nd, 2023
Friday, June 16th, 2023
The Clean Water Act[1] (CWA) prohibits the discharge of pollutants into navigable water, which is defined in the CWA as “waters of the United States” (WOTUS). For decades, the definition of WOTUS has been a moving target. On May 25, 2023, the U.S. Supreme Court (SCOTUS) may have settled this debate in its Sackett v. Environmental Protection Agency decision where the Court narrows the U.S. Army Corps of Engineers (USACE) and Environmental Protection Agency’s (EPA) jurisdiction to regulate wetlands under the CWA.[2]
Sackett establishes that in order for the federal agencies to exercise jurisdiction over an adjacent wetland, a party needs to show “first, that the adjacent [body of water constitutes] . . . ‘water[s] of the United States’ (i.e., a relatively permanent body of water connected to traditional interstate navigable waters); and second, that the wetland has a continuous surface connection with that water, making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins.’”[3] The CWA covers “only those wetlands that are as a practical matter indistinguishable from waters of the United States.”[4]
By narrowing the definition of WOTUS, the Court consequently curtails federal jurisdiction to regulate wetlands. In order for a wetland to be regulated, it must have a “continuous surface connection” with covered waters under the CWA. It is not enough that a wetland is located nearby. The Court suggests certain situations where a wetland may or may not be regulated. For instance, the Court admits that there may be interruptions to the “continuous surface connection” in instances of “low tides or dry spells.”[5]
While it is certain that Sackett limits federal authority, we can only speculate the potential impact on USACE jurisdictional determinations, which help determine whether or not a particular development site is subject to USACE regulation under the CWA. USACE is not required to provide a jurisdictional determination, but the agency continues to offer them as a public service.[6] Prior to this decision, USACE found federal jurisdiction 75% of the time in the determinations.[7] Sackett may generate hesitancy for USACE to find that it has jurisdiction over a wetland on a development site because it may be difficult for the agency to determine what qualifies as “continuous surface connection” and where the wetland becomes “indistinguishable” from the covered waters without further regulatory guidance.
This decision may not impact states with more stringent water laws and regulations. Regardless of federal jurisdiction, Virginia has its own repository of water laws, Title 62.1 and associated programs therein, which may or may not rise and fall with the federal case law.
It is unpredictable how the Virginia Department of Environmental Quality (DEQ), federal agencies or the executive and legislative branches may respond to Sackett and what, if any, impact their responses may have on the practical implications of this decision. If this decision makes anything clear, it is that SCOTUS, EPA, and USACE have all previously missed the mark on interpreting the CWA.
Gentry Locke’s environmental team is happy to help you navigate these unchartered waters.
*UPDATE*: At the federal level, in response to the Sackett decision, USACE has paused the jurisdictional determination program, pending issuance of an updated WOTUS rule. We expect USACE and the EPA to issue a new rule that is consistent with the interpretation of WOTUS articulated in Sackett by September 1, 2023.
At the state level, on June 29, 2023, in response to the Sackett decision, Virginia DEQ released a memorandum announcing that DEQ will conduct its own State Surface Water Determinations (SSWDs) to facilitate the processing of Virginia Water Protection permits, without delays associated with the pending issuance of a new WOTUS rule by USACE and EPA. While DEQ had relied on USACE to review jurisdictional determinations, Virginia’s water laws authorize DEQ to issue independent SSWDs. To facilitate this SSWDs issuance process, DEQ will partner with private sector Professional Wetland Delineators, who are certified by the Virginia Department of Professional and Occupational Regulation.
[1] 33 U.S.C. §§ 1251-1389.
[2] Sackett v. Environmental Protection Agency, No. 21-454, slip op. (U.S. May 25, 2023) (to be cited as 598 U.S. ___ (2023)).
[3] Id. at 22.
[4] Id.
[5] Id. at 21.
[6] Id. at 13; see also Corps, Regulatory Guidance Letter No. 16-01, at 2 (2016) [hereinafter RGL 16-01].
[7] RGL 16-01, at 2.
Tuesday, June 6th, 2023
As we have reported over the past five months, read here, the Biden Administration is continuing to orchestrate a frontal assault on noncompete agreements, while at the same time trying to change the rules on a going forward basis. This article provides a short update on the latest federal agency actions, including a new opinion released by the NLRB’s General Counsel and the status of the FTC’s Draft Rule, recent state law changes, and an important reminder that employment relationships are fiduciary in nature and are supposed be based on “integrity and fairness” which is a concept that swings both ways.
NLRB GC Targets Noncompete Agreements
The most recent action by the Biden Administration is the release of an opinion by the General Counsel to the National Labor Relations Board (“GC”) where she asserted her view that her office will begin taking the position that an employer who proposes, maintains, or seeks to enforce a post-employment noncompete agreement, even in a separation agreement, has violated Section 8(a)(1) of the National Labor Relations Act (“Act”), except in very limited circumstances.[1] In the GC’s view, most non-compete provisions are overbroad and they reasonably tend to chill employees in the exercise of their Section 7 rights because the restrictions deny the right to quit or change jobs thereby cutting off access to other opportunities, and this diminishes their bargaining power (i.e., unhappy employees can’t threaten as a group to resign to demand better working conditions because they can’t work elsewhere because of the noncompete provision).[2]
This position announced on May 30, 2023, if applied and upheld, will be available to be asserted by nearly any non-supervisory employee against any employer, even those without a union, because Section 7 rights apply to all employers.[3] The GC’s memo noted the NLRB’s commitment to an interagency approach to this issue, noting the approach taken by the FTC and the Department of Justice in bringing criminal prosecutions based on what the Administration sees as the anticompetitive effects of noncompete provision. The next day, the US Chamber of Commerce issued a statement announcing its intention to use “all available tools to fight this extreme and blatantly unlawful overreach” by the GC.[4]
The GC’s opinion that noncompete agreements “chill” concerted actions seek to go well beyond the NLRB’s traditional reluctance to recognize a Section 7 right for employees to resign en masse,[5] and she openly urged the Board to limit earlier decisions to their facts or to overrule decisions that are not consistent with her “chilling” analysis. She also argues that employees should not be “chilled” from soliciting their co-workers to go to work for a local competitor, ignoring common law fiduciary duty obligations, like those discussed below. Tracking with the same logic used by the FTC in its Draft Rule, the GC argues that employers can protect their legitimate business interests in protecting propriety and trade secret information by narrowly tailored workplace agreements to protect those interests.[6] But she also quickly noted that it will be hard to an employer to make a reasonable argument to impose noncompete provisions on low-wage, or middle-way workers who lack access to trade secrets or other protectible interests, and noted she had just authorized the issuance of a complaint against an employer who sought to impose a two-year noncompete provision on a low wage employee where there is little evidence of a legitimate business reason for the restriction.
The GC’s memo closes with a direction to the NLRB Regional Offices to submit cases involving noncompete provisions that are “arguably unlawful,’ and when appropriate, to “seek make-whole relief for employees” where the agreement caused them to lose out on other employment opportunities, “even absent additional conduct by the employer to enforce the provision.” It is hard to know at this point how much of an impact this new GC directive will have in our Region, especially since Virginia has adopted a ban on noncompete provisions with “low wage.” What does seem likely is that any employer in Virginia who is violating Virginia’s ban on low wage noncompete agreement will also likely now find themselves defending an unfair labor charge with the NLRB and the potential exposure to make-whole relief.
FTC Draft Rules & Other Enforcement Actions
Since the Federal Trade Commission (“FTC”) issued its proposed nationwide ban on post-employment noncompete agreement on January 5, 2023,[7] more than 26,800 comments have been submitted and each of them must be evaluated and addressed before a final rule can be issued. It has been suggested that it will take the FTC until next spring to address all of these comments and issue a final version of the proposed ban.[8]
This hiatus period has not stopped the FTC from taking additional enforcement action to invalidate targeted noncompete agreements. On March 15, 2023, the FTC announced that it had accepted and entered into a new Consent Agreement with a company which, once approved, will invalidate more than 300 noncompete agreements that Anchor Glass has in place with a broad range of employees.[9] The FTC finalized the consent order on May 18, 2023, and Anchor Glass is barred from entering into, maintaining, enforcing or attempting to enforce or threatening to enforce noncompete restrictions, and is also banned from telling other employers that the employee is subject to a noncompete.[10]
This latest case against Anchor Glass tracks the similar law enforcement actions taken against O-I Glass and the Ardagh Group announced on January 4, 2023, where the FTC claimed that the use of non-compete agreements in the glass container industry constituted an unfair method of competition in violation of Section 5 of the FTC Act.[11] The FTC contended in each of these cases that the glass container industry in the US is highly concentrated, and it alleged that Anchor Glass, like O-I Glass and the Ardagh Group, had entered into noncompete agreements with employees many of whom were salaried, but worked with the plants’ furnaces and other forming equipment, as well as in glass production, engineering and quality assurance roles. The FTC found that Anchor’s use of the agreements was unfair and had the tendency or likely effect of harming competition by impeding the entry and expansion of rivals in the industry, by reducing employee mobility, lowering wages, salaries, and benefits, and promoting less favorable working conditions. It also noted that there were less restrictive means available to protect the company’s legitimate business interests by entering into confidentiality agreements that protect trade secrets and confidential information.
Recent State Legislative Actions
It is not just the federal government who is looking to address noncompete agreements. Legislation has been introduced in more than 30 states this year that seek to limit or clarify the use of noncompete agreements in various contexts. In Virginia, the legislature elected not to address the issue in its 2023 session, but the state’s ban on using non-competes with “low wage” employees got its regular annual adjustment as noted below. Keeping up with these issues on a nationwide basis could be a full-time job and there are many other sites that can provide up to date information on the status of legislation in your state. One state was noteworthy for this article.
As of July 1, 2023, Minnesota will become the fourth state to ban the use of most noncompete agreements with employees and independent contractors[12]. The Minnesota law is not retroactive, so it only applies to new agreements entered into on or after July 1, 2023. However, unlike Virginia and a few other jurisdictions, the ban on noncompete provisions is not limited to just “low wage” employees, the law protects individuals regardless of the employee’s compensation level or position in the company.[13] It gives employees and independent contractors the right to void offending provisions and collect attorney fees related to the litigation.
This new law also undermines traditional “choice of law” and “choice of form” provisions for noncompete provisions, as it prohibits an employer from requiring an employee who primarily resides and works in Minnesota from agreeing to a provision that applies the law of another state or requires litigation or arbitration outside Minnesota. Notably, rather than rendering the entire agreement void or unenforceable, the Minnesota law only applies to and invalidates the offending provisions. The rest of the agreement is enforceable.
There are two carve outs for restrictions imposed in connection with the sale of a business or in anticipation of the dissolution of the business. The law does not prohibit an agreement or other requirement that prohibits an employee or an independent contractor from working for a competitor while employed by the company. Moreover, the law expressly allows companies to continue to use nondisclosure agreements to protect trade secrets and confidential information, and non-solicitation restrictions that limit the amount to use client lists and information to solicit business from clients.
Positive Note for Employers to End
In a recent decision, the 4th Circuit Court of Appeals, gave employers some solace when it issued an important reminder that in Virginia an employee’s fiduciary duty of loyalty is not narrowly drawn, and is not dependent on the existence of a noncompete agreement. To the contrary, the 4th Circuit clarified that this fiduciary duty means that an employee must avoid taking steps that compete with one’s employer while employed. The Court said to find the line between merely preparing to leave and direct competition requires a balancing the desire for competition in the marketplace and “the importance of the integrity and fairness” in the employment relationship.
In this case, the 4th Circuit ruled that the employees crossed the line by approaching one of the company’s key customers to let them know of their future plans and when they submitted a bid for future work with this customer in direct competition with their employer while still employed. The 4th Circuit reversed the lower court’s summary judgment ruling[14] and held that in connection with a breach of a fiduciary duty claim there is no requirement for the employer to prove that it had an objective business expectancy in landing the contract in question, as this issue is irrelevant.[15] On remand, it will now be up to a jury to decide the case.
Closing
Employers are certainly on notice that the use of noncompete provisions can make you the target for litigation, even if the company has not attempted to enforce the provision. Nevertheless, businesses must protect their critical assets and Virginia courts have shown a willingness to enforce reasonably drawn noncompete provisions that are tied to the employee’s duties, to the need to protect goodwill with customers, and to safeguard trade secrets and confidential information. Navigating these choppy waters can be a challenge, so if you need assistance in crafting enforceable agreements or assessing an existing agreement, or bringing or defending litigation that involves trade secrets, confidential information, breach of fiduciary duties, or violations of a noncompete, nonsolicitation, or antipiracy provisions, please call a member of Gentry Locke’s Employment Team.
[1] https://www.nlrb.gov/news-outreach/news-story/nlrb-general-counsel-issues-memo-on-non-competes-violating-the-national
[2] This aggressive approach by the NLRB which revisits and broadens the application “concerted activity” is nothing new in the post-Trump era. On February 21, 2023, the NLRB issued McLauren Macomb, 372 NLRB No. 58 (2023), which utilizes a very broad notion of Section 7 rights when it held that an employer had violated the Act by simply offering a severance agreement that contained non-disparagement and confidentiality provisions because NLRB found these provisions “chilled” the employees’ rights to share information and thereby interfered with the rights of both current and former employees to engage in “concerted activity.”
[3] The NLRA applies to most private sector employers, but does not apply to federal, state, or local governments, agricultural workers, and those covered by the Railway Labor Act. It also does apply to independent contractors or to those employees of a company that are found to be supervisors, managers or owners.
[4] https://www.uschamber.com/employment-law/u-s-chamber-opposes-nlrb-general-counsel-memo-on-noncompetes
[5] In Feddeman & Co. v Langan Assoc., 530 S.E.2d 668 (Va. 2000), the Supreme Court of Virginia recognized that when a group of 25 employees (out of a total of 31) met and agreed to resign en masse if their effort to take over the business did not succeed had violated their fiduciary duty to act with integrity and fairness. In reaching this decision the Supreme Court relied on other similar cases from New York, Illinois and Maryland, and this fiduciary duty rule continues to be a significant & issue in Virginia as discussed below.
[6] The GC also notes that some noncompete agreements may not violate the Act because the provision clearly restricted only that individual’s managerial or ownership interest in a competing business, there is a true independent contractor relationship, or there are narrowly tailored restrictions that are justified by “special circumstances.” She was bluntly clear that the desire to avoid competition is not a legitimate business interest that will support a “special circumstance.’ Similarly, the desire to retain employees or protect special investments in training are not “special circumstances” because the GC said there are less restrictive means available to address and protect that interest.
[7] https://www.gentrylocke.com/article/ftcs-proposed-rule-to-ban-noncompete-agreements-initial-reactions/
[8] https://news.bloomberglaw.com/antitrust/ftc-expected-to-vote-in-2024-on-rule-to-ban-noncompete-clauses
[9] https://www.ftc.gov/news-events/news/press-releases/2023/03/ftc-takes-action-against-another-company-imposed-harmful-noncompete-restrictions-its-workers?utm_source=govdelivery
[10] https://www.ftc.gov/news-events/news/press-releases/2023/06/ftc-approves-final-order-requiring-anchor-glass-container-corp-drop-noncompete-restrictions-it
[11] The other FTC consent agreement case announced in January 2023 involved Prudential Security, a private security company who had used noncompete restrictions with its low wage security guards.
[12] The other three states banning post-employment noncompete restrictions are California, Oklahoma, and North Dakota.
[13] Currently DC and 11 states ban the use of noncompete provisions with “low wage” employees. Each jurisdiction defines “low wage” in a different way. In DC, a fixed amount is used – $150,000, except for those who are medical specialists. Virginia uses the “average weekly wage,” which changes annually, currently the “low wage” rule in Virginia applies to anyone who earns up to $69,836 annually. By contrast, Maryland a set hourly rate, which is currently $15/hour, or $31,200/annually, but the Maryland legislature recently increased this pay level to protect those who make $19.88/hour or less. This new Maryland rule become effective October 1, 2023, except for small employers where the amount used to define “low wage” will be $19.20/hour. The other jurisdictions with “low wage” bans are – Colorado, Illinoi, Maine, Massachusetts, Nevada, New Hampshire, Oregon, Rhode Island, and Washington.
[14] Adnet, Inc. v Rohit Soni, 2021 US Dist. LEXIS 177825 (E.D.Va. Sept. 21, 2021)
[15] Adnet, Inc. v. Rohit Soni, et al, 66 F.4th 510, (4th Cir. Apr. 27, 2023) r citing Williams v Dominion Tech. Partners, LLC, 576 S.E.2d 752, 757 (Va. 2003)
Friday, March 17th, 2023
As we enter the second full year of the Biden Administration, nearly every federal agency that regulates employment in the United States have begun to hit their stride and is hard at work with various initiatives and rulings which seek to expand worker protections and reverse guidance, regulations and decisions issued during the Trump era. This article highlights just a few of these developments.
We have previously reported on the “crackdown” actions taken by the Federal Trade Commission (“FTC”) to invalidate the noncompete provisions used by three companies that covered hundreds of employees, not all of whom were “low wage” employees.[1] The consent decrees which required the rescission of all of the noncompete provisions used with many classes of employment have since become final.[2] Likewise, we also discussed the FTC’s announced plan to implement a nationwide ban on the use of noncompete agreements with employees by adopting new regulations that will almost certainly be subject to legal challenge.[3] On March 6, 2023, the FTC announced the public comment period on the proposed regulations has been extended from March 20 to April 19, 2023.[4]
The Department of Labor’s Office of Federal Contract Compliance Program (“OFCCP”) recently announced that as of March 31, 2023, the 2020 Religious Exemption Rule adopted during the Trump era was being rescinded. Under Executive Order 11246, the OFCCP enforces the rules that prohibit a federal contractor (and its subcontractors) from discriminating in employment decisions based on race, color, religion, sex, sexual orientation, gender identity or national origin. This Executive Order contains a religious exemption for religious corporations, associations, educational institutions, and societies with respect to the employment individuals of a particular religion, which is modeled on the religious exemption provided by Title VII of the Civil Rights of 1964. The 2020 Religious Exemption Rule broadened the exemption significantly, and OFCCP is now rolling back this broader rule. This change will not directly impact the pre-existing exemption that applies to religious corporations, associations, educational institutions, and societies. For more information on the Religious Exemption Rule, visit the OFCCP’s website.[5]
On March 7, 2023, the National Labor Relations Board (NLRB) signed a Memorandum of Understanding with the Consumer Financial Protection (“MOU”) to facilitate increased collaboration in order to address employer practices involving surveillance, monitoring, data collection, and employer-driven debt (where a worker goes into debt to their employer for the purchase of equipment, supplies or required training). For more information on this MOU and this initiative see the NLRB’s News Release. [6] Notably, on February 21, the NLRB announced that it had reversed a 2020 decision and ruled in McLaren Macomb that employers may no longer offer severance agreements that require employees to waive certain labor law rights, including provisions that prohibited a separated employee from making disparaging statements about the employer and from disclosing terms of the separation agreement. For more information on this decision, see the NLRB’s news release.[7]
On March 13, 2023, the Department of Labor’s Occupational Safety and Health Administration (“OSHA”) announced that during the period February 1, 2022 – January 31, 2023, it had issued citations to 23 Dollar General stores following inspections in Alabama, Florida and Georgia with a total of nearly $7.5 million in penalties. In addition, in February 2023, OSHA announced it had cited Dollar General with having created an unsafe workplace in several different locations when it reportedly found merchandise obstructing exit routes and fire extinguishers, as well as an automatic sliding door that had been disabled and locked, which exposed workers to fire and entrapment hazards. As a result, OSHA issued five (5) repeat violations and a proposed $710,947 in penalties. This and two other citations issued against stores in Georgia are still subject to contest. For more information on OSHA’s enforcement actions against Dollar General go to OSHA’s website.[8]
Also, on March 13, 2023, the Equal Employment Opportunity Commission (“EEOC”) issued its Annual Performance Report for fiscal year ending September 30, 2022, which also included the Office of General Counsel’s Annual Report (“EEOC GC Report”) which focuses on the EEOC litigation “achievements” during the prior fiscal year. From October 1, 2021, to September 30, 2022, the EEOC filed 91 new employment discrimination lawsuits which included 13 suits claiming systemic discrimination. Notably, 68% of these lawsuits involved claims of alleged Title VII violation. The primary focus of the EEOC’s new litigation last fiscal year fell into four (4) main areas: claims of sexual discrimination (49.5%), retaliation (35.2%), disability (29.7%) and race (18.7%). In addition, the EEOC resolved 96 employment discrimination lawsuits, including ten (10) suits involving allegations of systemic discrimination and it obtained just under $40 million in monetary relief for 1,461 claimants. The EEOC GG Report can be found on its website.[9]
In summary, the federal agencies charged with enforcing the employment laws are hard at work. These development and other actions will be discussed at our firm’s annual Labor & Employment Symposium on May 2, 2023 in Lynchburg and May 9, 2023 in Roanoke. For registration information visit our website here. If issues arise involving a federal investigation or you have other employment law questions, please feel free to contact me or any other member of our Employment Team.
[1] https://www.gentrylocke.com/article/ftc-wastes-no-time-takes-enforcement-action-while-proposing-nationwide-rule-to-invalidate-noncompete-agreements/
[2] https://www.ftc.gov/news-events/news/press-releases/2023/02/ftc-approves-final-orders-requiring-two-glass-container-manufacturers-drop-noncompete-restrictions; https://www.ftc.gov/news-events/news/press-releases/2023/03/ftc-approves-final-order-requiring-michigan-based-security-companies-drop-noncompete-restrictions
[3] https://www.gentrylocke.com/article/ftcs-proposed-rule-to-ban-noncompete-agreements-initial-reactions/
[4] https://www.ftc.gov/news-events/news/press-releases/2023/03/ftc-extends-public-comment-period-its-proposed-rule-ban-noncompete-clauses-until-april-19?utm_source=govdelivery
[5] https://www.dol.gov/agencies/OFCCP/religious-exemption
[6] National Labor Relations Board and Consumer Financial Protection Bureau Announce New Partnership to Address Employer Surveillance, Monitoring, Data Collection, and Financial Practices in the Workplace | National Labor Relations Board (nlrb.gov).
[7] Board Rules that Employers May Not Offer Severance Agreements Requiring Employees to Broadly Waive Labor Law Rights | National Labor Relations Board (nlrb.gov)
[8] https://www.dol.gov/newsroom/releases/osha/osha20230313.
[9] https://www.eeoc.gov/office-general-counsel-fiscal-year-2022-annual-report
Thursday, March 9th, 2023
Wednesday, February 15th, 2023
ROANOKE, Va. — Age is just a number, or so the old saying goes. Even when your law firm turns 100 years old.
Gentry Locke is proud to mark a century of serving clients and being one of the most trusted law firms in Virginia. That kind of longevity is a testament to the firm’s skilled lawyers and staff and their ability to foster close relationships with clients and co-workers to deliver results. Tracing its roots to 1923, Gentry Locke has long been a valuable partner and leader for clients, businesses and the community.
But in 2023, few people care whether your firm won a big insurance case in the 1960s or that you helped close major real estate deals in the 1980s. In today’s dynamic legal and business worlds, where technology, economics and politics collide to produce rapid changes for law firms and companies alike, clients want to know what you can do for them today.
“Clients don’t care if you’re one year old or one hundred years old,” said Brett Marston, new Managing Partner and Gentry Locke lawyer since 1994. “They want to know if you can get the job done.”
While recognizing the significance of its centennial this year, Gentry Locke moves forward in 2023 not fixated on its prestigious past but with eyes instead locked on an exciting future. A series of changes are being implemented to ensure that the firm continues to expand its footprint, remain nimble in a changing world and retain the personal touches that made Gentry Locke a legal leader for 100 years.
The firm has restructured its leadership team in order to oversee a rapidly growing, modern firm. Monica Monday, who as Managing Partner the past 10 years guided much of Gentry Locke’s robust expansion, will transition to a newly created position as Chair of the Executive Board. The board replaces the former Management Committee to help lead the firm’s future growth. Monday will head the Executive Board, and focus on recruitment, retention, professional development and other areas. She will also spend more time on her booming appellate practice, which has seen massive increases in cases since Virginia expanded appeals processes in 2022.
Marston will become Managing Partner, a multi-faceted role that has him overseeing strategic planning and guiding a firm with multiple offices that strives to keep its “one-firm” focus.
“The changes we are making are the result of our success, because we are no longer just a small firm,” said Monday, who joined Gentry Locke in 1993 and became Managing Partner in 2013. “We have achieved a level of complexity and sophistication that has required smart growth with our hiring and smart growth in expanding our footprint.
The firm added offices in Richmond and Lynchburg, and hired former Norfolk Southern chief legal officer, John Scheib, to work in Norfolk. In the last decade, Gentry Locke has grown from 49 lawyers to over 80.
What used to be a Roanoke-based regional firm that focused heavily on insurance and business practices has grown into a moderately sized outfit with a statewide presence.
Most importantly, Marston said, Gentry Locke has grown while still maintaining what he and Monday describe as the firm’s distinctive culture, where senior lawyers and law firm leaders still practice law.
“We have a great tradition at the firm, where we want all our lawyers to practice law,” Monday said, adding that managing recent growth was starting to eat into the time she needed to spend on her active appellate practice.
“When you grow exponentially, just one person cannot do everything unless they gave up their practice,” she said. “Our culture is that we want to practice law and not just be a businessperson at the firm.”
A December 2022 article in Richmond-based Virginia Business magazine called Monday perhaps “the first female managing partner of a Virginia law firm that large.” The magazine noted her unique path to managing partner, citing her work as an appellate attorney rather than as a trial or corporate lawyer.
Marston said that Monday’s background led to more innovation and creativity at Gentry Locke.
“Our clients expect us to think outside the box,” he said. “Under Monica’s leadership, we think about why we do the things we do, and not just do things the way we’ve done them in the past.”
That meant going big when it came to hiring attorneys and adding practice areas.
The firm expanded into Richmond with former Virginia House of Delegates members Greg Habeeb and John “Chip” Dicks working as part of Gentry Locke Consulting, the firm’s lobbying arm in the state capital. It brought in former Virginia Secretary of Veterans and Defense Affairs Carlos Hopkins and counsel to former Gov. Terry McAuliffe Noah Sullivan, enhancing the firm’s skill in navigating state and federal governmental issues.
Gentry Locke has added significant practices to handle issues in emerging legal areas, which include solar and renewable energies, evolving marijuana laws, and whistleblower cases.
“These are things the marketplace is asking for,” Marston said.
The growth has been carefully planned and managed, Monday said. Even as Gentry Locke has added attorneys and offices at a rapid pace in recent years, the firm is still considerably smaller than some in the Commonwealth that employ more than 1,000 lawyers. Often, big firms merge with other giants to form mega-firms. Not Gentry Locke.
“Large firms have been merger-happy, and that has not been our M.O.,” Monday said. “We have a secret sauce for how to open offices. We like to have a relationship with a respected lawyer in a growing region, rely on trust and build the office based on that. We’ve been really successful so far.”
Those kinds of relationships were what brought Scheib on board in Norfolk. In 2019, Marston and Gentry Locke partner Kevin Holt, both University of Virginia grads, traveled together to Minneapolis to watch the Cavaliers men’s basketball team win the NCAA championship, and while there connected with fellow UVa alum Scheib. Friendships were struck, and after Scheib left the corporate world, Holt and Marston talked to him about joining Gentry Locke.
“There is a sense of family here,” Holt said. “We have deep relationships that extend beyond the walls of the office.”
Holt said he even introduced Monday to her husband, his former college housemate, Eric Monday
“There are strong bonds here both personally and professionally,” Holt said. “We have a ‘one-firm mentality’ and we want to keep it.”
Monday said the fact that Gentry Locke staffers enjoy being around each other at work is a reason for the firm’s success and family-like atmosphere. In 2020 during the early days of the pandemic, she said that the firm sent everybody to work from home for three months, then brought people back to the office slowly while adhering to safety guidelines and measures.
“We did it because we enjoy being together and that’s been a reason for a lot of the success we’ve had the last couple of years,” she said. “Some firms haven’t gone back to the office at all, yet.”
Monday and Marston both came to Gentry Locke from outside the Roanoke Valley, drawn to the firm because of its reputation and because of the community.
Monday grew up in Northern Virginia and graduated from William & Mary Law School. While in law school she clerked for retired/senior Virginia Supreme Court Justice Lawrence Koontz, Jr. when he served in Salem as a judge on the Virginia Court of Appeals. After her clerkship ended, she turned down an offer in Washington, D.C. in order to stay in the Roanoke Valley. A colleague urged her to talk to representatives with Gentry Locke.
“I did, and I loved it,” said Monday, who marks her 30th anniversary at the firm this year.
Marston grew up in the rural Appomattox County community of Red House, where his family ran a grocery store and raised cattle and tobacco. He graduated from the University of Virginia and George Mason University’s law school before clerking for a federal judge in Norfolk and arriving in Roanoke in 1994.
Now, with leaders who each have nearly three decades of experience at Gentry Locke, the firm eyes the future while remaining the family-like firm that has lasted a century.
“It’s been run almost like a family business the last 100 years,” Marston said. “We have strong bonds and open doors. We have a complex structure that means we’re not just a family business anymore, but we still have that family feel. We don’t want to lose that.”
Wednesday, February 8th, 2023
From Bloomberg Law. Published February 7, 2023. Click here to read this article on bloomberglaw.com.
