Path to Excellence

PathToExcellence

You’re Invited!

The Daily Record and Top 100 Women Patricia McHugh Lambert, Kimberly Neal, Donna Wilson, Lisa Hayes, Diana Bell-Mckoy, and Pat Stout invite you to attend The Daily Record’s Path to Excellence networking series in Baltimore County.

Meet and learn from other successful business women and help give back to the community. The nonprofit partner is The Y in Central Maryland Baltimore County Head Start Program. The program is in need of developmentally appropriate board games and puzzles for preschoolers and interactive toys and activity mats for infants and toddlers. Click here for more information.

RSVP

 

Event:

Wednesday, March 2, 2016
5:00 – 7:30 p.m.

Pessin Katz Law Cafe
901 Dulaney Valley Road 4th Floor
Towson, MD, 21204

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Series Sponsor

GBMC

Reception Sponsor

TheArc

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For event information email
events@thedailyrecord.com or call 443-524-8100

For sponsorship or advertising opportunities email advertising@thedailyrecord.com or call 443-524-8139

 

Drawing the Line: Drafting Non-Compete Agreements in the Government Contracting Sector that Protects Business Interests while not Running Afoul of Public Policy

By:  Adam Konstas, Esquire and Alex Kelly                                

            Non-compete agreements are traditionally disfavored as unlawful restraints on an employee’s ability to seek future employment. However, courts in Maryland, Virginia, and Washington, D.C. have long recognized that these agreements are important in order for businesses to protect their commercial viability.[1] Having a valid non-compete agreement thus becomes a line-drawing exercise, forcing companies, employees, and ultimately the courts to determine when a non-compete goes beyond protecting a reasonable economic interest and impermissibly denies the departing employee the opportunity to secure future employment. Beyond those considerations, there are several policy concerns that overlay non-compete agreements that are unique to government contracting in the intelligence community. This article will explain the tension between overly broad and overly narrow non-compete agreements as well as explore the policy considerations that present particular difficulties faced by companies competing for government contracts.[2]

PART I: EXAMINING THE NON-COMPETE AGREEMENT

            Courts generally look to three factors when considering the validity, or lack thereof, of a non-compete agreement: scope, duration, and geography. In doing so, the court does not give determinative weight to any one factor.[3] However, prior to doing so, the court must address the threshold matter of whether or not the employer seeking to enforce the non-compete agreement has a valuable, protectable, economic interest.[4] Separately, the court will also determine if the agreement runs afoul of public policy.  Certain non-compete agreements in the medical field offer a useful comparison to the government contracting and specifically, the intelligence community.[5]

            In examining each of the three factors of duration, scope, and geography, the courts traditionally apply a ‘rule of reason’, that is —does the agreement tailor each of these factors to meet the employers needs to protect a valid interest while still allowing the former employee to reasonably be able to seek employment?[6] Again, no one factor is determinative, so an agreement that is broad in geographic scope may still be valid if it is a short duration, or if the geographic scope is reasonable in the circumstances.[7] However, in the context of government contracting, the non-compete agreement invokes public policy considerations that are not central to similar agreements in other contexts.[8]

PART II: GOVERNMENT CONTRACTING IN THE INTELLIGENCE COMMUNITY AND MEDICAL PROFESSION – AN ANALOGOUS SITUATION

            Since most employees working for an employer’s contract with a government agency spend most, if not all, of their time on the agency’s site, not being able to move to successor contracts with that same agency could hinder that agency’s ability to have a continuity of service. In this regard, there is a public policy consideration when the outgoing employer holding the government contract hinders their employee’s ability to travel to the next employer that receives the contract as it makes it difficult for the agency to continue its work.[9]  Likewise, it is self-evident that government contracting work with particular agencies may implicate national security concerns.

This situation is analogous to the assessment of non-compete agreements in the medical field due to the concern of limiting patient choice from a policy perspective.[10] While, at least in Maryland, public policy is not an automatic bar to the validity of non-compete agreements in health care, the argument that they can impermissibly limit patient choice is still applicable, especially in certain contexts.[11] The limitation on patient choice is similar to the limitation non-compete agreements could place on client –a.k.a. government agency – choice in the government contracting context and be a hindrance to the continuity of government services and the ability to provide essential services for the maintenance of national security.[12]

However, courts have yet to let this argument win the day when such non-compete agreements have been challenged.[13] In one particular case in Virginia, the court upheld a non-compete agreement as reasonably tailored to protect the employer’s interest and did not determine that it ran afoul of public policy.[14] Because the agreement was so narrowly drawn as to only have bearing on one particular project, a project that was since abandoned by the agency, the court held that it was not broad enough to be entitled to invalidation.[15] However, this case was litigated between a government contractor and its subcontractor, not a contractor and its former employee.[16]

Other contexts may be more susceptible to a policy argument based on continuity of government service, for instance, when an employee is subject to a non-compete with an employer that lost its contract and cannot work for the winning contractor at that same agency. For example, in Ecology Services, Inc. v. Clym Environmental Services, the Court of Special Appeals of Maryland invalidated a non-competition agreement on the basis of public policy in a toxic waste removal context stating that it would “reduce the number of eligible candidates for employment positions within a federal government contract.”[17]

Some analysts believe that non-competes controlling government contracted employees in the intelligence community cannot be enforced at all.[18] There is a strong government interest in being able to keep an employee, who nominally works for a private sector company, in his or her chair at the agency even if the private sector employer loses its contract.[19] If, however, that employee has signed a non-compete agreement with the private sector company that prohibits him working for a successor contractor (another private sector company), that agency would likely be disrupted by having to retrain and clear a new employee from the successor contractor.[20] This would invalidate all non-competes structured in this way because of the “continuity of services” provision in the Federal Acquisition Regulation (“FAR”).[21] This provision prohibits the restriction on employees being able to work for certain agencies if that restriction inhibits the agency’s ability to carry out its mandate.[22] Cases involving situations that deal with national security and information technology in particular could be susceptible to this argument because of the constantly changing landscape of the field would require greater resources to retrain and educate a new employee.[23] Thus, a strong government interest exists in keeping the old employee, regardless of his or her private sector employment situation, in his or her chair at the agency.

PART III: CONCLUSION

Overall, courts have not directly addressed a non-compete argument in the government contracting space from a policy perspective. However, this does not indicate that such contracts are immune from these considerations and certain contexts could present for stronger policy arguments than others. When drafting non-competition agreements, it is important to consider which industry the contract will govern, the mobility of agencies and employees in that field, the scope, duration, and the geography the agreement covers. As more cases are tried, there will be a clearer roadmap, but for now, it should be noted that there is a looming policy argument against non-compete agreements in the government contracting field, especially the intelligence community, due to continuity of government service concerns and potential national security concerns that overlay the traditional litigation factors of duration, scope, and geography.

Adam E. Konstas is an attorney in PK Law’s Labor and Employment Group and Education Law Group.  He represents local school boards, superintendents, private schools, and private sector employers before federal and state courts, and federal and state civil rights agencies on a variety of matters, including employment discrimination litigation, teacher and student discipline, collective bargaining, and sexual harassment. Mr. Konstas can be contacted at 410-339-5786 or akonstas@pklaw.com

 

 



[1] See Tom Harrington and R. Scott Oswald, The Best Defense is a Good Offense: Invalidating Non-Compete Agreements When Leaving a Company, Westlaw Journal Government Contract, 28 No. 8 Westlaw Journal Government Contract 1 Aug. 18, 2014 (hereinafter “Harrington and Oswald”)

[2] See infra Section I-III.

[3] See Harrington and Oswald, supra, note 1.

[4] Michael A. Hordell, et al., Employment Law for Government Contractors: A Primer, Procurement Lawyer, 39 WTR Procurement Law 3, Winter 2004; see also Robert R. Niccolini and Kevin F. Arthur, Covenants not to Compete in Health Care, Maryland Bar Journal, 42-DEC Md. B.J. 32, November/December 2009.

[5] Id.

[6] See Harrington and Oswald, supra, note 1.

[7] See id.

[8] See id.

[9] Jill R. Aitoro, Noncompete agreements are commonplace in federal contracting. So what’s wrong with that? They can’t really be enforced. Washington Business Journal. November 25, 2011 (hereinafter “Aitoro”).

[10] See Harrington and Oswald, supra, note 1.

[11] Such as situations where there are very few physicians in a given market, or the physician performs a hard to come by service.

[12] See Aitoro, supra, note 9.

[13] See Preferred Systems Solutions v. GP Consulting, 732 S.E.2d 676 (2012).

[14] Id.

[15] Id. at 681-82.

[16] Id.

[17] 181 Md. App. 1, 25 (2008). But see Bowhead Information Technology Services, v. Catapult Technology Ltd., 377 F. Supp.2d 166 (2005)(where the court chose not to address a continuity of service argument to invalidate a non-competition agreement on an government IT contract because the succeeding contractor did not have standing).

[18] See Aitoro, supra, note 9.

[19] Id.

[20] Id.

[21] 48 C.F.R. 137.110.

[22] See Aitoro, supra, note 9.

[23] See Harrington and Oswald, supra, note 1.

PK Law Attorney Kimberly Neal Joins the Community Resource Board for the Junior League of Baltimore

Pessin Katz Law, P.A. (PK Law) Attorney Kimberly Neal was voted to join the The Junior League of Baltimore’s Community Resource Board (CRB). The Junior League of Baltimore, Inc. (JLB) is an organization of women committed to promoting voluntarism, developing the potential of women, and improving communities through the effective action and leadership of trained volunteers. Its purpose is exclusively educational and charitable.

The Association of Junior Leagues International considers the CRB to be “a formally designated group of community representatives on whom a League can call for assistance and advice on its overall program and/or on specific tasks or functions.” The purpose of the CRB is to advise the League on community related issues as well as to act as ambassadors for the Junior League of Baltimore to the community at large.

Ms. Neal, an Attorney in PK Law’s General Litigation Group, focuses her practice on business litigation, including general commercial litigation, the defense of employment-related claims, construction law, and insurance defense. A member of the National Association of Catering and Events and Legal Advisor for the Baltimore Fashion Alliance, she enjoys presenting on and assisting clients with business law matters, particularly within the event planning, catering, hospitality and retail industries.

The daughter of an educator, Ms. Neal advocates the importance of quality education. She feels that the JLB is especially poised to assist young women in recognizing their educational and career potential while also supporting them in their familial roles.  Women have special influence over their children, grandchildren, siblings, and friends, and any opportunity to empower and encourage these women is crucial to Baltimore’s future success. Ms. Neal looks forward to assisting the JLB with programs geared towards domestic violence prevention, scholarship and financial aid application assistance, career fairs, and targeted- fundraising to help with these educational initiatives.

PK Law Managing Director Honored with the J. Earle Plumbhoff Professionalism Award

On January 28, 2016 at the annual Baltimore County Bar Association Banquet, Pessin Katz Law, P.A. (PK Law) Managing Director, Drake Zaharris was awarded the prestigious J. Earle Plumhoff Professionalism Award. This award was given to Mr. Zaharris for his demonstration and practice of the utmost professionalism in the practice of law.  

Recipients of this award must be a member of the Baltimore County Bar Association for at least five years, have made professional contributions to Baltimore County Bar Association activities, have made contributions of time and resources that have gone largely unnoticed and have high mark for dignity, integrity and civility.

Mr. Zaharris was appointed to the Trial Courts Judicial Nominating Commission for Baltimore County by Governor Ehrlich July 2003-2005 and was reappointed to the Commission by Governor O’Malley July 2007-2011 and July 2011-2015.  He was Vice-Chair of the Baltimore County Bar Association Bench Bar Committee 2012-2013 and Chairman of the Baltimore County Bar Association Bench Bar Committee 2013-2014.  Mr. Zaharris has been the Managing Director of PK Law since 2006.

Prevent the Itch! Hospitality Industry Tips to Avoid or Manage the Risk of Bed Bugs

By:  Kimberly Neal, Esquire                                                               kneal@pklaw.com

It’s hard not to love travel.  The Dalai Lama suggests “Once a year, go somewhere you have never been before,” and Audrey Hepburn proclaimed that “Paris is always a good idea.”  But with bed bugs on the rise, travelers may be wise to proceed with caution and hotels must be vigilant in risk management efforts.

Indeed, bed bug infestations, which are especially prevalent in the summer months, have increased significantly in the last fifteen years with hotels and motels serving as the third most popular location to find bed bugs, according to recent surveys of pest control professionals.  Once in a hotel room, bed bugs can spread quickly and easily to other rooms and common areas through pipes, wall sockets, vacuum cleaners, clothing, and many other means.  While they are most often found on mattresses and box springs, bed bugs can live on any soft surface, as well as less obvious “homes” such as wallpaper and lampshades. A single bed bug is virtually invisible to the naked eye, but multiple bed bugs – or their droppings – can be detected and resemble black dirt or ground pepper.  A savvy traveler should put her luggage in the bathroom or even in the bath tub, because bed bugs have a hard time clinging to the slippery surface.  She can also inspect the room upon arrival by removing the bed sheets to look for black or reddish “dirt” stains, which could be bed bugs, around the mattress piping. 

Unfortunately, most travelers don’t know or think to look for bed bugs.  Those who find themselves in an infested room may be bitten and develop an itchy rash.  While the rash itself will not usually require treatment and should subside once the traveler has rid herself of the bedbugs, many who have been bitten suggest that the experience is terrifying at best and life-changing at worse.  Accordingly, if the traveler elects to sue the hotel where she was allegedly exposed, her lawyer will amplify the damages for “pain and suffering,” including mental distress and loss of consortium for married couples, rather than rely on actual medical damages.  Property damages may also be recovered, if the bitten traveler is forced to destroy luggage, clothes, or other items in order to eradicate the bed bugs.  In rare cases where an allergic reaction has occurred, damages can run into six figures.  Indeed, Maryland juries have awarded as much as $800,000 in damages resulting from bed bugs!  Hotel owners are justifiably concerned about bed bug prevention, and their insurance carriers are taking the legal claims more seriously.  Theories of liability include negligence and even battery.

It is virtually impossible for a hotel owner to completely prevent the possibility of a bed bug infestation.  However, regular inspections, heat treatments, and monitoring devices may help detect an infestation early.  Additionally, hotel owners should proactively limit areas where bed bugs can hide by sealing cracks and removing clutter and through proper use of mattress and pillow covers.  If bed bugs are present, re-inspections and additional treatments should be scheduled over at least six months or longer.   

It is crucial for hotels to (a) anticipate that any guest could introduce bed bugs into the facility, and (b) adopt a written plan to address bedbug infestations upon discovery, particularly to limit the risk of a large infestation. Eradication typically requires treatment of the affected room and adjacent rooms by a licensed pest control professional; indeed, some states require licenses and certifications to address the bed bug infestation.  The guest should be provided with a new room and the hotel should offer to clean the guest’s clothing and belongings that were exposed to the bed bugs.  Facts relating to the infestation and the guest’s exposure should be documented, and employees should be trained to prepare a thorough report.  Should the guest sue, the hotel will need to show that it exercised reasonable care to prevent bedbug infestation and in reporting any infestation in order to limit damages.

Kimberly Neal is an attorney with the law firm Pessin Katz Law, P.A. and a member of the firm’s General Litigation and Retail and Hospitality Groups. She is a Member of the Maryland and District of Columbia Bars and focuses her practice on business litigation, including general commercial litigation, the defense of employment-related claims, construction law and insurance defense.  A member of the National Association of Catering and Events and Legal Advisor for the Baltimore Fashion Alliance, she enjoys presenting on and assisting clients with business law matters, particularly within the event planning, catering, hospitality and retail industries. Ms. Neal can be reached at 410-339-5791or kneal@pklaw.com.

 

Sources:       “Bed Bugs in Hotel Rooms Are On the Rise (Yuck),” Katherine LaGrave, Conde Nast Traveler, February 10, 2016.

“Bed Bug Lawsuits on the Increase,” Andrea Siegel, The Baltimore Sun, May 31, 2013.

“Take the Bit Out of Bed Bug Litigation,” Roger E. Gold, Ph.D., Retired  Professor and Endowed Chair for Urban and Structural Entomology, Texas A&M University, presented to DRI – Strictly Hospitality on September 22, 2011.