THE LABOR LAWYER - CiteSeerX

THELABORLAWYERVolume 17 • Number 1Summer 2001

CONTENTSEDITORIAL POLICY AND INFORMATION FOR AUTHORS ........................ ii

THE EDITOR’S PAGE ..................................................................... vRobert J. Rabin

THE PRACTICE OF INTERNATIONAL LABOR & EMPLOYMENT LAW:ESCORT YOUR LABOR/EMPLOYMENT CLIENTS INTO THE GLOBALMILLENNIUM ............................................................................... 1

Donald C. Dowling Jr.

JUMPING SHIP: LEGAL ISSUES RELATING TO EMPLOYEE MOBILITYIN HIGH TECHNOLOGY INDUSTRIES ................................................ 25

William Lynch Schaller

HOW THE AMERICANS WITH DISABILITIES ACT’S PROHIBITION ONPRE-EMPLOYMENT-OFFER DISABILITY-RELATED QUESTIONS VIOLATESTHE FIRST AMENDMENT ................................................................ 107

Tung Yin

ACCOMMODATING THE EMPLOYMENT DISABLED ............................... 143Douglas L. Leslie

RETAIL INDUSTRY PICKETING AND HANDBILLING: ACCESS RIGHTS OFNON-EMPLOYEE UNION REPRESENTATIVES, STRIKING, AND OFF-DUTYEMPLOYEES TO SHOPPING MALLS, PARKING FIELDS, STORES, ANDOTHER PRIVATE PROPERTY ........................................................... 153

Laurie Nicole Robinson and Evan J. Spelfogel

ORGANIZING CONTINGENCY WORKERS: COMMUNITY OF INTEREST V.CONSENT .................................................................................... 167

Nancy Schiffer

WHEN IS A MULTIEMPLOYER BARGAINING UNIT A “MULTIEMPLOYERBARGAINING UNIT”? ..................................................................... 183

Robert W. Tollen

EPILEPSY FOUNDATION OF NORTHEAST OHIO AND THE RECOGNITIONOF WEINGARTEN RIGHTS IN THE NON-ORGANIZED WORKPLACE:A MANIFESTLY CORRECT DECISION AND A SEED FOR FURTHERPROGRESS ................................................................................... 201

Sam Heldman, Hilary E. Ball, and Frederick T. Kuykendall III

EPILEPSY FOUNDATION OF NORTHEAST OHIO: A CASEOF QUESTIONABLE REASONING AND CONSEQUENCES ........................ 221

M. Jefferson Starling III

Section ofLabor and Employment Law

American Bar AssociationCopyright 2001 American Bar Association http://www.bna.com/bnabooks/ababna/laborlawyer/17.1.pdf

EDITORIAL STATEMENT: The Labor Lawyer is a journal of ideas and developments inthe field of labor and employment law. Its objectives are to provide practitioners, judges,administrators, and the interested public with balanced discussions of developments inall areas of labor and employment law. The Labor Lawyer is geared to the practical needsof those who work in this area and seek to share their insights and viewpoints. The Editorencourages discussion of the broader policy issues that underlie these developments. TheLabor Lawyer may be cited as follows, by volume and page: 17 LAB. LAW. (2001).

EDITORIAL GUIDELINES FOR AUTHORS: The Labor Lawyer welcomes contributionsfrom all interested persons. Articles should be submitted to Professor Robert J. Rabin,Editor, The Labor Lawyer, Syracuse University College of Law, E.I. White Hall,Syracuse, NY 13244-1030; phone: 315/443-3681; fax: 315/443-4141. In general, articlesshould be informal and direct. Endnotes should be confined to useful documentation.Only one copy, double-spaced, should be submitted. Endnotes must be double-spaced andplaced at the end of the article. In preparing both text and endnotes, authors should referto the following works for style: The Bluebook: A Uniform System of Citation (16th ed.)(Harvard Law Review Association, Cambridge, Mass.), and for matters of literary stylenot covered by this manual, The Chicago Manual of Style (14th ed.) (The University ofChicago Press, Chicago, Ill.), or The Elements of Style by William Strunk, Jr., and E.B.White (3rd ed.). Absent appropriate disclosure in connection with the article submission,The Labor Lawyer will rely on the author’s belief that the article’s subject matter has notbeen preempted.

PERMISSIONS: Request to reproduce portions of this publication should be addressedto Director, Copyrights and Contracts, American Bar Association, 750 N. LakeShore Drive, Chicago, IL 60611; phone: 312/988-6101; fax: 312/988-6030; e-mail:[email protected].

DISCLAIMER: The material contained herein represents the opinions of the authorsand does not express the views or the positions of the American Bar Association or theSection of Labor and Employment Law, unless adopted pursuant to the bylaws of theAssociation and the Section are so indicated.

� 2001 American Bar Association. All rights reserved. Printed in the United Statesof America. Produced by ABA Publishing.

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on acid-free paper.

Copyright 2001 American Bar Association http://www.bna.com/bnabooks/ababna/laborlawyer/17.1.pdf

The Labor LawyerA Journal of Ideas and Developments in

Labor and Employment Law

EDITOR

Professor Robert J. RabinSyracuse University College of Law

Syracuse, New York 13244-1030

EDITORIAL BOARD

William L. Keller, ChairLaurence E. Baccini Howard LesnickMichael H. Beck David M. SilbermanAllan L. Bioff Evan J. SpelfogelRobert M. Dohrmann Marley S. Weiss

STUDENT EDITORIAL BOARD

2000–2001Syracuse University College of Law

EDITOR-IN-CHIEF

Dana F. Proyect

ARTICLES EDITORS

Shelly MuiKathleen M. O’Brien

SENIOR ASSOCIATE EDITORS

Luke T. Cooper Courtland D. RaeJames C. De Francisco James A. Tacci

ASSOCIATE EDITORS

Nicolle M. Allen Mirlen A. Martinez Ruchi ThakerElizabeth Kazarinoff Marissa Ross Kevin Whittaker

Benjamin A. Scales


v

Editor’s Page

Worker Participation in the Nonunion WorkplaceThe issue that comes out around this time of the year usually in-

cludes one or two sets of articles that were presented at the midwintermeeting of our Section’s Committee on the Development of Law underthe NLRA. This is an opportunity to present strongly held positionsfrom opposite sides of the spectrum.

Two of the articles included in this issue set the stage for this Ed-itor’s Page. Sam Heldman, Hilary E. Ball, and Frederick T. KuykendallIII, on the union side, and M. Jefferson Starling III, on the employerside, discuss the applicability of Weingarten rights to workers in a non-union workplace under the National Labor Relations Board’s recentEpilepsy Foundation decision. Weingarten, you might recall, is a Su-preme Court decision holding that under section 7 of the National La-bor Relations Act, a worker has the right to have her union represen-tative present if she is called for an interview in which she is the subjectof possible disciplinary action. Weingarten makes clear that the com-pany does not have to accede to the worker’s request but may chooseinstead to forego the interview altogether. What the company may notdo is discipline an employee for her refusal to be interviewed withouther union representative. This doctrine appears to work well in aunionized workplace. As a practical matter, its acceptance may stemfrom the reality that in the unionized workplace the worker can chal-lenge her discipline through arbitration. One of the elements of justcause may be the opportunity of the worker to tell her side of the storyin the presence of a union representative. Some collective bargainingagreements expressly provide for such representation in the investi-gative stage.

Toward the end of its tenure, the Clinton NLRB applied Weingartento the nonunion workplace in Epilepsy Foundation. The case marked areturn to a position the board had held several decades ago but laterrejected for an intervening period. The Heldman et al. piece argues thatEpilepsy Foundation is an unexceptional application of a worker’s sec-tion 7 rights. The Supreme Court’s Washington Aluminum case (inwhich workers walked off the job to protest an unreasonably cold workarea) held that section 7 rights applied to workers in a nonunion work-place. On the other hand, the Starling piece suggests that the key stat-utory provision is section 9, which requires an employer to deal withthe designated representative of its employees. If the employer dealswith a worker and the person who represents her in the investigationof the disciplinary matter in a nonunion setting, this may violate sec-


tion 8(a)(2) of the NLRA. The management position also stresses themore practical consideration that the acquisition of Weingarten rightsmay be a pyrrhic victory for the employee because the employer willsimply choose to conduct the investigation without talking to the targetat all, and in an at-will situation, this lessens the targeted employee’schances of prevailing.

What I find most interesting about Epilepsy Foundation is its ac-knowledgment that the NLRA has some application to the nonunionworkplace. When academics teach and prepare materials for a tradi-tional labor law course, which concentrates on the unionized workplace,they often wonder whether there are any useful doctrines that apply tothe nearly ninety percent of American workers who are not represented.

The recent and very short-lived OSHA standard on ergonomicsraises a similar question. You might recall that, during the Clintonyears, OSHA tried to put together a standard that would address theproblems of repetitive motion injuries—a syndrome that was taking agreat toll in the workplace. For a few years, as part of Congress’s ap-propriations process for the agency, it had forbidden OSHA to eventhink about such a standard. OSHA ultimately succeeded in promul-gating an ergonomics standard, but Congress killed it under a fasttrack procedure for review of administrative regulations. Many in Con-gress were undoubtedly opposed to any form of regulation in this area,while others were critical of the specifics of the regulation.

On the assumption that the new ergonomics standard would holdup, I put together a symposium on ergonomics at the College of Law,which was held this spring. It was unique in that it had only one lawyeras a speaker. The others, including two doctors, were specialists in occu-pational safety and medicine. I invited OSHA representatives as wellas a union representative who specialized in health and safety. Therewas a surprising consensus that with a little bit of thought and usuallywithout too much money, a company will reduce the incidence and costsof excessive absenteeism, turnover and workers’ compensation claimsthat result from employee injury due to repetitive motion. Most of thespeakers thought the OSHA regulations were a positive contributiontoward fixing this problem.

The standard relied heavily on worker participation. Workers weresupposed to report injuries and were to be consulted about proposedimprovements in ergonomics. In the flurry of litigation challenges (allrendered moot by Congress’s action) were claims that the OSHA pro-visions for worker participation violate section 8(a)(2) of the NLRA.Workers report and have input, which may result in dialogue. If theemployer effectuates the recommended changes, this could be dealingwith an employee representative in violation of section 8(a)(2).

The union movement and many academics contend that section8(a)(2) is a good thing, for it prevents an employer from hoodwinking


its employees into thinking that they have an effective form of repre-sentation through informal worker participation, when in reality theyhave nothing. Nevertheless, I continue to wonder about that otherninety percent and whether they really are not better off having someform of worker participation than nothing at all. It seems to me thatfar from chilling vigorous unionism, the experience of dealing withmanagement in the ergonomics setting could teach workers a big lessonabout the value of the right to bargain and could serve as a platformfor union organizing. Epilepsy Foundation and the failed ergonomicsstandard combine to question whether it is not a good idea to affordsome participatory rights under the NLRA to workers who do not enjoythe benefit of union representation.

A second pair of excellent articles presented at the midwinter meet-ing address the timely issue of the organizing of contingent workers inlight of the NLRB’s recent Sturgis decision. I thank the Chairs of thiscommittee for allowing the use of these excellent papers. Space doesnot permit a summary of the remaining articles in this issue, but aglance at the table of contents reveals that they raise a wide variety ofimportant issues.

The Student EditorsI had the pleasure of working with another marvelous group of

student editors during this past year. Shelly Mui and Kathleen M.O’Brien were superb as they took on a large share of the work asarticles editors. Our wonderful editor-in-chief, Dana F. Proyect, wasprobably the most timely editor in our history. We met all our dead-lines handily, and just as I would heave a sigh of relief when one issuewas done, Dana would be at my door or in my e-mail, asking thewhereabouts of the copy for an upcoming issue. Our other senioreditors, Luke T. Cooper, James C. De Francisco, Courtland Rae, andDr. Jim Tacci go back with me to our first-year classes or other collab-orative situations, and I enjoyed working with all of them during theirlaw school careers.

Robert J. Rabin,Editor


The Labor Lawyer2002 Student Writing Competition

The annual student writing competition is open to studentsat all ABA-accredited law schools. Papers may be written on anytopic in the field of labor and employment law and will be reviewedby The Labor Lawyer staff and a committee of the editorial board.One prize, $500, will be awarded to the finest writing sample re-ceived, and the paper will be published in The Labor Lawyer.Runner-up papers might also be published.

Papers must be postmarked by the submission deadline:August 31, 2002. Send all papers to Professor Robert J. Rabin,Editor, The Labor Lawyer, Syracuse University College of Law,E.I. White Hall, Syracuse, NY 13244–1030.

Note: Papers must not exceed forty double-spaced pages (includ-ing double-spaced endnotes). Papers must follow the format de-tailed in the Editorial Guidelines on page ii.


1

The Practice of InternationalLabor & Employment Law: EscortYour Labor/Employment Clientsinto the Global Millennium*

Donald C. Dowling Jr.**

I. IntroductionInternational labor and employment law, as a practice area, is still

just a tiny corner of labor and employment law practice, but its impor-tance in the new millennium is exploding. Traditionally, internationalemployment practice barely even existed because every individual jobis based out of some one single place of employment and because humanresources policies never spanned borders. Of course, lawyers who spe-cialize in international business transactions have always run intoplenty of employment issues in their deals, and domestic labor-and-employment lawyers, every once in a while, have brushed up againstthe odd international issue. Lawyers who concentrate their practiceson international labor and employment law traditionally have beenvery few.

Yet now, in the new millennium, international labor and employ-ment law, as a discrete law-practice concentration, is mushrooming be-cause of enormous pent-up demand. The demand chiefly comes frommultinationals scrambling to become (and claiming to be) global. Goingglobal—as opposed to remaining a mere multinational—is a hot busi-ness trend, akin to what total quality was years ago. Of course, theglobalization trend has a profound effect on labor unions and manyindividual employees.

* This article is derived from the author’s chapter titled International Labor & Em-ployment Law in the INTERNATIONAL LAWYER’S DESKBOOK, 2d ed. (L. Low, P. Norton, andD. Drory, eds., American Bar Association, 2001). Consistent with the format of that book,the article does not contain footnotes, but a bibliography follows at the end.

** Global legal consultant at Hewitt Associates LLC, Lincolnshire, Illinois; officerand council member of the ABA Section of International Law and Practice [SILP]; pastchair of SILP International Employment Law Committee. Chair of the Chicago Bar As-sociation’s International & Foreign Law Committee; past chair of Cincinnati Bar Asso-ciation’s International Law Committee. Adjunct faculty law professor teaching EuropeanUnion Law (formerly at the University of Cincinnati College of Law and now at HamlineUniversity School of Law’s summer abroad program in Modena, Italy). University ofChicago (A.B. 1982); University of Florida College of Law (J.D. 1985). Member of the Ohioand Illinois bars. Mr. Dowling thanks the Hewitt Associates’ research practice for assis-tance in compiling the bibliography.


2 17 THE LABOR LAWYER 1 (2001)

Regardless of which definition of going global a multinationalchooses, globalization necessarily has to include the idea that a busi-ness’s own people—the employees who make it up—get organizedaccording to some system other than geography. Ignore multination-als’ claims and puffery: No company is global until its people are.However, globally structuring a multinational workforce is impossiblewithout plenty of guidance on the many legal issues involved. So aslong as going global remains a top priority among multinational em-ployers, the outlook will be rosy for international employment-lawpractitioners—whether they represent employers, labor unions, or in-dividual employees.

Back in the protectionist trade era, even giant international com-panies structured their personnel functions as mere collections of silos,granting independence and autonomy in human resources to each localoperation where they did business. Now, WTO-fueled free trade com-pels multinationals to integrate their manufacturing, distribution, andsales—and, therefore, their talent operations—worldwide. Technologyaccelerates the trend: Look at any multinational and you will see thate-mail, cell phones, computers, and transportation now thrust intodaily contact co-workers who happen to live in different countries. Notsurprisingly, it makes less and less practical sense for a multinationalto discriminate among its own co-workers, as to their employmentterms, based only on the nation each happens to hail from. Add to themix the fact that in the high-tech age, talent is being touted as busi-nesses’ chief asset and competitive advantage (taking the place thatcapital held in the industrial age), and it is no wonder that multina-tionals are coming to demand sophisticated expertise in internationalemployment matters and in the legal issues involved.

This just looks at the employer side. Simultaneously, globalizationreaches employees—and their lawyers. International used to be littlemore than a word in the names of U.S.-based labor unions. Today, how-ever, the AFL-CIO staffs twenty-six offices outside the United States,foreign trade unions increasingly enlist the help of U.S. organized labor,and U.S. labor has a loud voice in America’s international trade policy,from NAFTA to the WTO to China relations. Meanwhile, with the riseof expatriate assignments and immigration, lawyers who represent in-dividual employees and executives increasingly run into problems thatspan borders.

Outshining both the globalization of multinational employers andunion/employee matters is the meteoric rise of international labor lawin public consciousness. Before December 1999, international labor lawwas an obscure topic that interested almost nobody outside Geneva,Switzerland—the seat of the International Labour Organization (ILO).In December 1999, international labor law rights (along with interna-tional environmental concerns) ignited riots at the now-infamous SeattleWTO meeting. Seattle police declared a week-long state of martial


The Practice of International Labor & Employment Law 3

law; the rioters’ destruction cost $3 million and spooked the WTO intoscheduling its next meeting (November 2001) in remote and authoritar-ian Qatar. The Seattle riots were no one-time fluke; they were the dawnof an era. International-labor-law issues touched off looting just a monthafter Seattle’s riots at a World Economic Forum (WEF) meeting in Davos,Switzerland (January 2000). These issues ignited mass demonstrationsat a World Bank/IMF meeting in Washington, DC (April 2000); they ledto Molotov-cocktail-throwing at the subsequent World Bank/IMF meet-ing in Prague (September 2000), and they caused mass demonstrationsat the subsequent Swiss WEF conference (January 2001).

So coming out of nowhere, international labor law has grabbed theattention of globalizing multinationals, the international labor move-ment, activists, newspapers, governments, and non-governmental dip-lomatic organizations (NGOs) the world over. In the process, interna-tional employment law morphed from an arcane backwater into atinderbox that (quite literally) ignites violence in the world’s streets.Today, it is little wonder that the outlook is indeed rosy for internationalemployment-law practitioners.

II. What International Labor and Employment Law PracticeIs NotAppreciating that international labor and employment law prac-

tice is at last coming into its own means nothing until one understandswhat international labor and employment practice actually is. Becauseinternational issues have not traditionally been on labor and employ-ment lawyers’ radar screens, many labor/employment specialists do notunderstand the international field, and they make wrong assumptionsabout what it must be.

Indeed, plenty of labor/employment practitioners out there still in-sist that international labor and employment practice does not evenexist. These practitioners point out that every country has its own dis-crete employment law system and that any lawyer who advises on for-eign labor/employment law is merely practicing overseas law withouta license. Alas, while this analysis perhaps used to make sense, in thenew global millennium it is no longer quite so simple.

This article demonstrates why international labor and employ-ment law practice is an increasingly viable—indeed, vital—concentra-tion within labor and employment law practice. Because internationallabor/employment law practice is so poorly understood, I have to startby clearing up the misconceptions. I begin by discussing what the prac-tice of international labor and employment law is not.

A. Single Foreign-Country Employment-Law PracticeA scenario that happens all the time is as follows: A U.S.

labor/employment lawyer sitting in an office in Cleveland or Sacra-mento or wherever receives a call from a frantic client, a U.S.-based



multinational. Breathlessly the client announces, “We need to fire aguy in our Paris office immediately,” or “We’ve just announced we’reshutting down our Sao Paulo factory and we don’t know what we needto do,” or “Our Tokyo people just made a job offer to a sales managerwho is demanding a written employment contract,” or “Our plant man-ager in Sydney says we might be getting a union. What can we do?”These are all urgent and important questions, but none involves inter-national labor or employment law: Each involves merely a single coun-try’s foreign employment laws. When any one single country is the siteof employment, the residence of the employees in question, and theplace of controlling law, there is no cross-border or international is-sue—even if the employer’s parent company is a multinational basedelsewhere (for example, in the United States). Indeed, in these situa-tions the only international issue is that the U.S. lawyer being askedthe question is trained and licensed in the wrong country’s legal sys-tem. No lawyer in any one country will ever master (or be licensed topractice in) all the local domestic employment laws of every nation onthe planet. There is no such thing as a global practitioner of foreignemployment laws.

The quick way to tell whether a client’s question is merely one ofa single foreign country’s law is to determine whether a local employ-ment lawyer in the foreign country at issue would see the whole prob-lem as arising under local domestic law. If the answer is yes, then whatis needed is an employment lawyer in the right country. Single foreign-country employment law questions come up all the time in interna-tional employment practice, so international employment lawyers doindeed need to be able to help field them. Develop a network of overseasemployment lawyers, and to understand the issues, get access to up-to-date research materials on foreign employment laws (such as thoselisted in the bibliography for this article).

Note, though, that I am confining my discussion to single foreign-country issues, not multiple foreign-country problems. Internationalemployment-law practitioners have to be intimately familiar with thewildly different issues that arise under foreign (local) employment lawsbecause international employment practice constantly involves ques-tions of multiple countries’ foreign laws simultaneously. Multipleforeign-country-law problems are, by definition, cross-border and henceinternational. Cross-border projects that simultaneously raise issuesunder a cluster of foreign countries’ domestic employment laws requirethe oversight of a single international employment expert collectinganswers or opinions from local practitioners in each country involvedand molding them together into a global solution for the client. Ex-amples of these projects include the following: a multinational thatwants to roll out a stock-option plan to its employees in, say, sixteencountries; a multinational that demands an employment-law com-



pliance audit in, say, the five countries where it has factories; a com-pany doing due diligence for the acquisition of a multinational thatemploys talent in, say, three countries; and a U.S.-based multinationalthat needs to ensure its human resources information system orPeopleSoft program, e-HR system, and internal Web site all complywith foreign data protection laws everywhere it operates.

B. Public International (Diplomatic) Employment-Law PracticeBecause international employment-law practice does not involve

single-country foreign practice, many labor/employment lawyers as-sume it must involve public-international or diplomatic employmentlaw (such as treaty-drafting for the ILO, government dispute resolutionunder NAFTA’s North American Agreement on Labor Cooperation(NAALC), and international employment-standards projects for theUN and the WTO). Public international employment law is, of course,a cutting-edge topic that is constantly in the news, so perhaps it isunfortunate that public law issues rarely come up in the private prac-tice of international employment law. Yes, there are plenty of lawyerswho wrestle daily with public law employment issues, but these law-yers tend to hold policy positions with governments or NGOs and arenot practicing law in the usual sense of the term.

However, public international employment law kicks up plenty ofissues that land in private practitioners’ laps. A good example is thediplomatic focus on labor standards in international trade treaties,which leads to lots of international employment-law work, drafting mul-tinationals’ codes of conduct. Another example is the dispute-resolutionbody of the NAFTA labor side agreement, the NAALC. Although openonly to nations as parties, most NAALC disputes implicate individualcompanies’ employment practices (NAALC cases, though, are rare).

C. Inbound-Employer Law PracticeOften American employment lawyers who represent foreign-based

multinationals in matters involving U.S. operations think of thesematters as involving international employment law, but really theydo not. Local employment-law practice representing an overseas-based client is more likely to raise cross-cultural problems than cross-border legal ones. Think of a German auto maker opening a plant inthe Carolinas: Carolina employment lawyers would need to educateGerman expatriates on how things get done in stateside workplaces,but the laws that govern a German-owned Carolina factory’s relation-ships with its workers are local U.S. laws. The same is true for lawyerswho represent individual employees; even when clients are immi-grants, cases arising within the United States under U.S. employmentlaws (including nationality discrimination issues) are usually alwaysdomestic law matters.



There are some exceptions, but they are few (and frankly, literaturemakes too much of them). In the 1980s, for example, in U.S. courts,there was a discrete line of cases involving Japanese-based companiesthat were alleged to have discriminated against American-born man-agers in favor of Japanese expatriates. These cases implicated a so-called Friendship, Commerce, and Navigation Treaty, and to this ex-tent, they genuinely were international employment law matters. Butcases like these are rare and come up only randomly; no one bases alaw practice around them.

D. Immigration Law PracticeImmigration is relevant to international labor and employment

law practice chiefly to dismiss it: The practice of immigration law is adiscrete area unto itself. Immigration is not a branch of internationalemployment law. Why? First, immigration law is not strictly interna-tional law because it involves whether an alien is entitled to a visaunder local domestic laws of a host country: An immigrant may havecrossed borders, but the legal issues have not. (Indeed, many immigra-tion lawyers’ employer clients are not multinationals; they are domesticbusinesses without any international employment operations.) Second,immigration law is not really employment law because immigrationlaw looks to whether a government will award an alien permission toreside inside its borders. Yes, lots of visas are linked to employment,but many aliens, even aliens with good jobs in a host country, get visasunconnected to employment status.

Yet immigration laws—particularly foreign countries’ immigrationlaws—often play a role in international employment-law projects. Forexample, international employment lawyers have to keep aware of im-migration law issues as they design a multinational employer’s expa-triate policy and as they integrate human resources operations after aglobal merger or acquisition.

III. Practice for Multinational CompaniesHaving disposed of what international employment law practice is

not, now I can drill down to what the practice actually is. The best wayto understand international employment as a law-practice field is tolook at the contexts in which international employment lawyers actu-ally work. Labor and employment lawyers define their practice contextsaccording to who their clients are: employers, labor unions, or individualemployees. These three groupings define international employment-lawpractice. I begin with the biggest of these three practice contexts: prac-tice for multinational-company clients.

The recent rise of the importance of talent in business operationsand the fact that free trade and technology push multinationals to in-tegrate human resources operations across borders mean that, these



days, multinational clients ask all kinds of international employment-law questions. Indeed, it is impossible to spell out every type of inter-national employment-law problem that multinationals run into, but Ican summarize the main areas where these issues arise.

A. Global Legal-Compliance AuditsA multinational that globalizes its talent operations quickly real-

izes how little headquarters knows about the human resources policiesand practices the company offers around the world—and whether itsown overseas human resources programs comply with local laws. Somultinationals embarking on talent-globalization projects often startwith a worldwide employment-law compliance audit. International em-ployment law practitioners (in liaison with local employment experts,of course) are the ideal candidates to quarterback these projects.

B. Global Policies and HandbooksWhen multinationals think about globalizing human resources

procedures, the common knee-jerk reaction is to try to propagate a sin-gle set of employment policies, a single global handbook, or a singleform employment contract (countries from Mexico to Chile to China toall of the European Union (EU) require employers to give each em-ployee a written employment contract or statement). Unfortunately, theradically different employment laws of the world make these projects,in many respects, impossible. But it is possible—and desirable—for aglobalizing multinational to articulate overall employment philoso-phies and objectives and implement them locally. International em-ployment lawyers often help lead these projects, translating global tal-ent aspirations into collections of local employment policies that meshwith one another.

Some multinationals that think about globalizing work policies as-sume they need a global employee handbook or collection of HR policies.Many U.S.-based companies long for a single handbook they can applyaround the world. Global handbooks, though, are impossible to draftwith any specificity due to huge differences among local employmentlaws and customs. Regardless of the wording of a disclaimer, legal sys-tems outside the United States tend to enforce handbooks as contracts(something American companies fear). Global-handbook projects are,therefore, best directed to a global employment-law professional.

However, workplace policies on many specific topics—from em-ployee communications to workplace harassment to workplace diver-sity to performance management to employee recognition and motiva-tion—are increasingly susceptible to globalization, and multinationalsare increasingly issuing global (or globally coordinated) policies in theseand other areas. One specific employment policy that merits special at-tention—because it is inherently global by its nature—is a multina-tional’s expatriate policy. Expensive, old-fashioned, and U.S.-centered



expatriate policies built on the old model of overseas postings as hard-ship duty no longer make sense in this era of mobile, globally plugged-in talent. International employment lawyers play a key role in craftingaffordable expatriate policies that account for today’s global workforce.

C. Global Labor RelationsRelated to globalizing employment policies is the issue of global-

izing labor relations. Plenty of U.S.-based employers actually forgetabout unions, because only nine percent of the U.S. non-governmentworkforce is unionized. Abroad, though, unions are statistically farmore likely to represent a company’s workers.

Actual union representations and collective bargaining will al-ways be inherently local (except in Europe, where there is talk ofelevating labor relations to the European level). As free trade pushesmultinationals to restructure production and distribution globally,multinationals see that they now need to globalize collective bargain-ing strategies. On-the-ground labor negotiators in a company’s over-seas facilities need to get a heads-up as to what changes headquarterswill impose down the road, and they need to know what their counter-parts in other countries are telling their unions. Unions compare notesand forge formal alliances with other unions abroad. International laborlawyers are uniquely positioned to integrate multinationals’ labor-relations practices.

D. Human Rights, Civil Rights, and Codes of ConductThe highly charged politics after the 1999 WTO riots in Seattle

catapulted onto international employment-law agendas a range ofissues involving multinationals’ human rights, civil rights, codes of con-duct, and minimum employment guarantees around the world. Justask McDonald’s or Nike. The ethical investor movement fuels theflames; billions of dollars are now invested in funds that push compa-nies to do double bottom-line assessments, auditing not only a financialbottom line, but a social one as well. It is little wonder that the EthicsOfficer Association now reports that every single one of the Fortune500 boasts a code of conduct. Industry-wide and NGO-produced codesalso get pushed on multinationals.

Codes of conduct are corporate pledges of minimum employmentstandards ensured around the world—not only in a multinational’sown employment operations, but, often, even in suppliers’ workplaces.Consulting firms like PricewaterhouseCoopers and Deloitte & Toucheemploy hundreds of people who draft and monitor these codes; specialtyconsulting/monitoring firms like Verite dedicate themselves to the field.America’s code-of-conduct industry offers enormous opportunity to in-ternational employment law counselors because—believe it or not—the entire movement is built on the fallacy that America’s minimumlabor standards are superior to those in poor countries. The underlying



idea that U.S. companies should extend American-style employmentprotections to help third-world workers makes no sense at all becausepoor countries actually offer their workers better protections than theemployment-at-will, laissez-faire U.S. does. (For details on what thethird world’s tough employment laws say, see the summaries of foreignemployment laws in the bibliography and my article, The Multina-tional’s Manifesto on Sweatshops, Trade/Labor Linkage, and Codes ofConduct.)

Poor-countries’ employment protection laws not only require allthe basics (no child labor, a minimum wage, adherence to safety stan-dards, and the right to unionize), but—unbelievable as it is to Ameri-cans—they go a lot farther, well beyond the U.S. counterparts. Typicalexamples are as follows: Mexico requires mandatory annual profit shar-ing, mandatory year-end bonuses, and paid vacations—at premiumpay. Peru and Venezuela require employers to provide onsite childcare.Chile requires an hour a day paid leave for mothers to feed babies. Indiarequires six weeks’ paid leave when a woman has a miscarriage. Chinarequires employers to pay for worker housing. Nigeria’s worker com-pensation system compensates for non-job-related illnesses. Malawiallows a twenty-percent minority of a workforce to vote-in a union(overruling an eighty-percent majority). The Philippines requires anannual government safety inspection of every work site (even wherethere are no reported problems). South Africa mandates affirmativeaction even for private non-government-contractor employers, and SouthKorea statutorily mandates sexual harassment training. Almost everythird-world country imposes rest periods, absolute caps on hours worked,and severance pay for firings. Yet U.S. law does none of this. The ironyhere makes international employment lawyers critical players in draft-ing and enforcing codes of conduct: Only an international expert in com-parative employment laws can ground a code of conduct in compliancewith other country’s sophisticated and tough employee protections.

Going beyond codes of conduct, still other workplace civil-rightsissues arise in multinationals’ cross-border operations. America’sunique bundle of anti-discrimination laws has, of course, spawned de-tailed domestic employment policies that ban harassment and ensureworkplace diversity (and sometimes affirmative action). In sharp con-trast to a few decades ago, all American employers now claim to becommitted to eradicating workplace harassment and promoting work-place diversity. So sooner or later, it occurs to every globalizing Amer-ican company that, just maybe, a real commitment to fighting harass-ment and ensuring diversity cannot stop at the U.S. border. Abroad,most countries’ employment laws and cultures all but ignore these is-sues (although this is changing: South Africa recently mandated affir-mative action, South Korea recently mandated harassment training,and the EU recently passed broad anti-discrimination directives). The



upshot is that, for the most part, overseas workplaces are not yetready for America’s harassment and diversity polices—at least intheir current, American-style form. International employment law-yers are ideally situated to guide multinationals toward a workablemiddle ground.

Another human-rights-in-the-foreign-workplace issue affecting in-ternational employment-law practice is the new but huge trend amongforeign workers to bring bet-the-company employment class-action law-suits in U.S. courts. For example, Unocal Oil is defending itself againsta billion-dollar California class action over work conditions in Burma.The New York-based maker of Perry Ellis clothes paid $30 million tosettle a Texas lawsuit over an employee benefit it offers in Mexico. Chi-quita and Dole are being sued in Texas by thousands of sterile bananapickers from Africa, Asia, and Latin America. Decades after the fact,Ford and Bayer were sued in the U.S. for profiting from slave labor inGermany during World War II, and Mitsubishi was sued in Californiaover labor relations practices in World War II-era China. The Gap, J.C.Penney, and The Limited were sued in California for $1 billion by aclass of 50,000 workers from Asia. Nike and other apparel makers andretailers constantly fend off threatened U.S. class actions arising outof alleged overseas sweatshops.

Only an international employment lawyer should be entrustedwith the defense of these class actions because they raise tricky andspecialized issues ranging from sovereign immunity to internationaltreaties to the workers’-compensation-bar defense. Anyway, waiting fora class action to get filed takes too long: Multinationals need interna-tional employment lawyers on the front end, ensuring overseas em-ployment operations do not expose them to too much risk.

E. Global Employee Benefits, Compensation, and Stock OptionsIn 2000, Ford Motor Company took a simple but masterful step in

globalizing its workforce when it announced that every Ford employee,the world over, would get the use of a home computer and printer for$5 a month. From the point of view of employee benefits structure,Ford’s subsidized computer was a very rudimentary offering, but Ford’sgesture garnered glowing praise on the front page of The New YorkTimes. Ford’s simple benefit was lauded as a huge step toward global-izing its workforce.

The lesson is that globalizing benefits is a key piece to globalizinga company. Right now, most multinationals are taking huge steps to-ward globalizing compensation and benefits, starting by articulating aglobal rewards philosophy and implementing it through global rewardsprograms—although huge differences among the world’s health care,social security, and mandatory benefit-law systems make full unifor-mity impossible. (Indeed, it is still impossible to design a single pen-



sion plan just for Europe.) While complete global uniformity of bene-fits and compensation systems is still a far-off goal, plenty of workexists right now for international employee-benefits and compensa-tion practitioners.

One huge piece of international benefits and compensation isstock options (i.e., employee ownership). U.S. companies tend to em-brace the business justifications for giving their employees options, so(not surprisingly) American multinationals like to extend employeeoption/ownership programs abroad. After all, the same reasons foroffering options stateside apply to foreign employees—especially nowthat options are better understood and appreciated abroad. Globaloption/ownership plans mean a lot of work for lawyers. Securities andemployee benefits are regulated heavily everywhere; indeed, just own-ing stock can be illegal (in places like China and Russia), and evencountries like France and England offer a special tax-favored status forstock options that requires a lot of t-crossing and i-dotting.

F. Data Privacy and Global Human Resources Information SystemsAnother big problem is starting to send multinationals scrambling

to international employment law practitioners: data privacy. Multina-tionals employing people worldwide need to ensure foreign data privacylaws accommodate their global personnel information systems—sys-tems like human resources information systems (HRISs), global per-formance management, and global benefits/stock options.

Back in October 1998, the EU had implemented sweeping dataprotection laws, and these laws have since been cloned by governmentsaround the globe, from Eastern Europe to Canada to Asia to SouthAmerica’s southern cone. Data protection laws protect personal—in-cluding personnel—information (even basic stuff like addresses andphone numbers) as if it were private property that could not be usedwithout its owner’s permission. The philosophy underlying these datalaws is tough for Americans to grasp. The First Amendment affirma-tively grants the right to traffic information about others. Besides,Americans actually like the benefits that flow from readily availabledata about themselves. Yes, telemarketing and spam e-mails can beannoying, but Americans accept them because they love the trade-offthat ready access to personal data allows: fast and easy credit. (WhatAmerican is ready to give up the joy of buying a car, signing for a loan,and driving off the dealer’s lot the same day?)

A multinational’s overseas employees think very differently. Work-ers abroad can be surprisingly circumspect to HR data about them-selves that their employer—especially if it is a faceless Americangiant—inputs into its computers and transmits to God knows where.Data privacy laws are designed to quell concerns like these. The prob-



lem is that in globalizing a personnel system in this era of e-HR, HRISs,and PeopleSoft, the data laws’ effect can be downright Luddite-like.American multinationals aiming to globalize HRISs hit a wall whensome lawyer explains that they cannot use their own databases forotherwise legitimate business purposes.

Unfortunately, U.S.-based multinationals face even bigger data-privacy problems than their locally based competitors abroad becausedata-protection countries erect huge barriers to transmitting personaldata offshore. (The countries fear that scofflaws will send personal dataabout local citizens abroad to do what would be—in the data’s countryof origin—illegal.) These barriers frustrate U.S. multinationals when-ever headquarters decide to roll out global performance management,stock options, or HRISs. In 2000, the EU and the United States ham-mered out a safe harbor agreement setting out a complex system bywhich, in theory, compliant U.S. companies could repatriate data aboutEuropeans without fear of prosecution. One job of international em-ployment lawyers is to ensure that global HRISs and employment datasystems comply with this safe harbor’s principles or with foreign coun-tries’ domestic data-protection laws.

G. Global Mergers and AcquisitionsI constantly hear how global mergers and acquisitions (M&A) are

critical events in the life of any aggressive multinational (for example,apparel giant Warnaco Group, in a recent six-year period, made fourteenacquisitions and eight divestitures, many of them global in scope). In2000, according to a widely reported statistic, M&A worldwide totaled$3.48 trillion. It is rare to hear about the fact that most merger-and-acquisition deals fail. The occasional transaction actually ends up un-raveling; more frequently, a deal fails by draining profits from themerged company and inflicting a blow to the stock price. Research showsthat seventy-five percent of M&A never realize expected results; moretellingly, a full eighty-three percent of global deals (i.e., transactions be-tween multinationals or companies in different countries) fail to bringany benefit to shareholders. Why do so many global deals end up beinglosers? According to the research, a huge reason is people—employees.Look at the granddaddy of failed deals, the now-unraveled AT&T andNCR merger. The reasons AT&T’s marriage to NCR ended in divorceclustered around incompatible corporate cultures and other human re-sources problems. A more recent, if less extreme, example is the peopleproblem that is dogging DaimlerChrysler.

Any global merger-and-acquisition deal starts with due diligence.And in global due diligence, employment needs to play a starring role—even though in U.S. transactions, employment, at best, gets relegatedto the supporting cast. In domestic deals, particularly where no laborunion is involved, employment due diligence can afford to be light



because America’s employment-at-will rule empowers buyers—evenin stock-purchase transactions—to perform layoffs and change em-ployment terms after the closing. Abroad, things differ. Almost allworkers overseas enjoy vested rights in their jobs and terms of em-ployment. Even if a deal is structured as an asset-purchase, a buyerabroad steps into the seller’s shoes and acquires a duty to respect theseller’s seniority system, pay rates, benefits, employment policies, andother vested rights. (This is called the acquired rights, transfer-of-undertakings, or—in Australia—transmission rule.)

What this all means to international employment lawyers shouldbe obvious: U.S. companies are not accustomed to ceding employmentissues more than a sliver of their M&A radar screens, but neglectingto include an employment expert on a team doing a global deal invitesdisaster. Besides piloting global human-resources due diligence beforea closing, international employment practitioners need to guide theback end of any global deal in post-merger integration, ensuring thetransaction succeeds and brings the intended synergies.

A more mundane but equally important employment law aspect tointernational M&A (and to international business law practice gener-ally) is accounting for the employment ramifications of corporate form.Abroad, how a company is structured can determine many of its em-ployment obligations. In Europe, for example, certain labor law obli-gations (ranging from the duty to recognize local country and Europeanworks councils to the need to appoint labor representatives on a com-pany’s board) can turn on what corporate form a business chooses. InMexico and other Latin countries, computations under employee profit-sharing laws turn on whether a business employs its workers directlyor through a separately incorporated services company subsidiary.Lawyers who structure corporations abroad simply must account forlabor law in a merger-and-acquisition deal.

H. Global Layoffs and Plant Shutdowns (Collective Redundancies)Talking about the synergies in a global merger-and-acquisition

deal sounds good, but in real life, synergies often mean overlap; thus,synergies often lead to laying off unneeded workers whose jobs dupli-cate positions in the acquiring company. Even outside the M&A context,market pressures and global restructuring projects push multination-als to have global layoffs and shut down factories.

U.S. multinationals, unfortunately, tend to be bad at global lay-offs. American businesses are steeped in their unique and peculiaremployment-at-will doctrine, which even other Anglo-system countrieslike England, Canada, and Australia rejected years ago. U.S. employ-ment lawyers say that America’s employment at will has eroded away,but theirs is a historical, not an international, perspective. By compar-



ison to other countries, employment at will is alive and well in the U.S.and explains why America’s employers are the world’s most trigger-happy when it comes to layoffs, downsizing, and plant shutdowns. Asrecently as 1997, North Carolina’s Supreme Court noted that Americanemployment at will “remains an incentive to economic development,and any significant erosion of it could serve as a disincentive.” Notsurprisingly, American employers suffer from a bad reputation abroad:Announce to a foreign company’s workers that their boss is selling outto a U.S. multinational and watch them justifiably quake with fear.(Economists, by the way, have an interesting take on the dichotomyhere: Alan Greenspan sees America’s world-beating economic perfor-mance in the 1990s as a result of our business-friendly “freedom to hireand fire” trumping other countries’ “relatively inflexible, hence morecostly, labor markets.”)

The point for international employment lawyers is that when aU.S. multinational’s headquarters decides to shed workers overseas,sparks fly. Abroad, collective redundancies are so expensive and sociallyunacceptable that locally based employers shy away from them. Theduties that foreign laws impose on employers doing layoffs includemandatory severance-pay requirements, obligations to consult with(and sometimes get approval from) labor bureaucrats and worker rep-resentatives, and advance notification similar to—but a lot stricterthan—America’s anemic Worker Adjustment Retraining & Notification(WARN) Act. None of this factors in public relations: Layoffs and plantshutdowns abroad quickly become causes celebre, sometimes leadingto street protests that damage a corporate reputation for years. It istherefore little wonder that at least one big-name American multi-national has decreed it will never again lay off anyone in Europe (inEurope, downsizing is more expensive and troublesome than any-where). Simply put, anyone who neglects to calculate and minimizeinternational layoff costs ends up paying a lot more than anticipated.Cross-border downsizing and plant closings need close oversight frominternational experts.

This all addresses large-scale, cross-border reductions in force.Just as multinationals run into these international employment lawissues when they have simultaneous layoffs in a number of countries,multinationals also encounter significant international employmentlaw problems whenever they fire individual expatriate employees whoare posted overseas. These issues are discussed later.

IV. Practice for Labor UnionsHaving run through the areas that international employment prac-

titioners cover when they represent multinationals, I now turn to union-side international practice. The range of issues here is every bit as broad.



A. International Employment and Local Organizing/CollectiveBargainingA basic role for union-side international practitioners is supplying

international information for local organizing campaigns and collectivebargaining. Union-side practitioners who are familiar with foreign lawsand collective bargaining agreements feed union organizers data onoverseas work practices (especially data about a target multinational’ssuperior offerings abroad). For years, U.S. unions have exploited, asan organizing tool, the fact that foreign employers offer better workerprotections and broader benefits. Flyers that circulate in U.S. orga-nizing campaigns say things such as “Organize for lower hours—French unions won thirty-five hours per week!” or “Organize for morevacations—German unions won six weeks per year!”

These data can be even more useful in local collective bargainingwith a multinational employer. Knowing the specific terms and con-ditions that a multinational offers abroad sharpens a union’s localbargaining demands. (“What do you mean ‘company policy won’tpermit profit-sharing accounts and free lunches’? You share profitswith everybody in Guadalajara—and that plant has a free cafeteria!And why can’t you open an onsite day care center here, like the onein Caracas?”)

B. Cross-Border Union Initiatives against MultinationalEmployersUnion-side international lawyers do a lot more than summarize

foreign laws and collective agreements. They also structure initiativesamong the unions in different countries that represent a single multi-national’s workers. Cross-border union alliances compare notes in col-lective bargaining and apply cross-border pressure (such as throughglobal boycotts) to win concessions. In 1999, for example, the U.S. steel-workers union signed a formal alliance—drafted by international laborlawyers—with a Uruguayan labor organization, coordinating their ef-forts against multinational Titan International.

Indeed, cross-border union alliances have picked up a lot in recentyears. Not long ago stories were still being told about unions unable(or unwilling) to communicate with overseas counterparts because ofsimple language difficulties. At one union’s offices, for example, foreign-language faxes from overseas union brothers were routinely going un-read. Now the union world has gone global. As an example, when theWisconsin subsidiary of a Japan-based multinational fired a memberof the electrical workers union, the electrical workers phoned theirJapanese-union counterpart (the labor federation Zenroren), whichpressured the company’s Japanese headquarters and got the Wiscon-sinite reinstated.



C. International Politics and Public RelationsUnion-side international lawyers also play a key role in politics

and public relations. One piece of this is advising on international boy-cotts and initiatives regarding international work issues. For example,in 1998 union lawyers advised the AFL-CIO’s national labor committeein its international boycott against Wal-Mart, protesting Wal-Mart’scontracts with overseas suppliers that allegedly paid low wages andexploited child labor.

Union international lawyers also petition governments to enforcelabor treaties like NAFTA’s NAALC labor-side agreement. For exam-ple, in the late 1990s, U.S. union lawyers filed charges with NAFTA’sU.S. National Administrative Office (NAO), alleging unionization-lawviolations at the Mexican plant of Echlin, Inc. (a Connecticut-basedauto-parts maker) and at the Mexican plant of Han Young (a SouthKorea-based Hyundai supplier). Meanwhile, Mexican international la-bor lawyers brought charges before Mexico’s NAO, alleging U.S. laborlaw violations at a factory in California (Solec, Inc.) and within theWashington state apple industry.

A big piece of international union lawyers’ political and public re-lations work goes into lobbying to ratify ILO conventions and to injectlabor standards into international trade treaties. For example, in mid-2000, U.S. unions loudly opposed the U.S. African Growth and Oppor-tunity Act because it failed to include tough labor provisions. Simul-taneously, however, African labor leaders begged the U.S. Congress topass the law. New York Times commentator Thomas Friedman con-demned American unions’ “phony-baloney assertions” that they “justwant to improve worker rights around the world,” championing “moreworker standards” in poor countries but not supporting “more work.”

D. International Labor Practice in EuropeUnion-side international lawyers in the EU play a special role—

along with their management counterparts—in Europe-wide employ-ment practice because they actually get to help write employment lawsthat bind the fifteen EU countries. Under a law-making procedure thatis unique in the world, the EU requires that any proposed instrument(law) regulating social (employment) matters be vetted by the socialpartners (union and management representatives) over a nine-monthperiod—lawmakers in Brussels have an active duty to take social part-ners proposals into account.

Separately, the EU has a directive setting up a unique form ofinternational labor organization called the European Works Council(EWC), a worker-representative body consulting with management ontrans-European workplace problems. EWC keeps European interna-tional labor practitioners busy on both sides of the bargaining table.Indeed, in the EU there has even been a move underfoot to elevate



sector (industry-wide) collective bargaining up to the European level.If that ever happens, almost all labor relations in Europe could be in-herently cross-border.

V. Practice for Individual Employees and ExecutivesLaw practice representing individual employees—including exec-

utives—differs substantially from union-side practice, even thoughboth pit talent against employers. Most employment lawyers who rep-resent individuals have largely domestic practices and do not concen-trate internationally. But as more and more employees work as immi-grants and expatriates, cross-border employment issues increasinglypop up, such as when executives’ lawyers are asked to negotiate ex-patriate agreements and to resolve disputes after expatriate postingssour. The legal issues here, not for novices, include such arcana as in-ternational taxation; offshore pension accruals; cross-border social se-curity equalization; and friendship, commerce, and navigation treaties.

The threshold issue, often dispositive, in representing individualemployees internationally—be it contract drafting or dispute resolu-tion—is the question of whose law applies. Answering this question istough, so I need to drill down. Imagine, for example, a U.S. citizenworking for a U.S.-based multinational airline; he is stationed out ofMilan and says he was unfairly fired. Which employment laws andcourts—U.S. or Italian—have jurisdiction over a termination case in-volving a Yankee expatriate based in Italy? Does it make a differenceif the airline had the American to sign an expatriate agreement with achoice-of-law/choice-of-forum clause calling for U.S. law and U.S. courtsto control? Keep in mind that the United States is the only country onthe planet that presumes to extend abroad its anti-discrimination laws(Title VII, the Age Discrimination in Employment Act, and the Amer-icans with Disabilities Act). Also keep in mind that Italy—unlikeAmerica but like most every other country—has laws requiring sev-erance pay and wrongful termination damages for fired employees. For-eign employment laws, in rich and poor countries alike, offer plenty ofmoney that is unavailable in the employment-at-will United States.

The answer to this choice-of-law question is both. Both U.S. anti-discrimination laws and the employment protection laws of a host coun-try (here, Italy) simultaneously protect a U.S. citizen working abroadfor a U.S.-controlled employer. This answer does not turn on any choice-of-law clause in an expatriate’s agreement because—believe it or not—there is nothing anyone can write into an expatriate agreement tochange this!

To understand how two countries’ laws can apply simultaneously,regardless of what an expatriate contract says, one has to understandthat employment-protection laws apply by force of public policy: Onecannot opt out of or waive them. Frequently, American lawyers talk



about how foreign countries impose their employment laws by force ofpublic policy, but the truth is that all countries—including the UnitedStates—work this way.

To explain this, I must tweak the airline hypothetical. Now imag-ine that a Mexican airline assigns a Mexican citizen expatriate (with awork visa) to a reservation office in Houston. Imagine also that theairline has the Mexican sign an expatriate agreement calling for Mex-ican employment law to apply and for Mexican courts to adjudicate anyemployment dispute. Because both parties to the expatriate agreementare Mexican, under contract-law principles the Mexican law clause isreasonable. But what if, after working in Houston for a few weeks, theMexican expatriate learns that she is earning less than U.S. minimumwage, that she is being sexually harassed in violation of Title VII, andthat her work conditions violate OSHA regulations? The Mexican ex-patriate, of course, can pursue complaints with, respectively, the U.S.Department of Labor Wage/Hour Administrator, the EEOC, and theOSHA, and her cases can proceed to a lawsuit in a U.S. court underU.S. law. What happens when the Mexican airline asserts a defensethat the expatriate’s own agreement called for Mexican law and Mex-ican courts? The U.S. legal system will flatly reject it: U.S. public policyprohibits workers on American soil from waiving their rights underAmerican employment protection laws—even where the waiver takesthe form of a reasonable choice-of-law clause.

It works exactly the same way in reverse. An American workingoverseas—even one whose expatriate agreement contains a U.S.choice-of-law and-courts clause—enjoys the protection of local foreignemployment protection laws, such as mandatory caps on hours, man-datory paid vacation, mandatory profit-sharing, and severance or no-tice pay. How does this square with the fact that America extends itsanti-discrimination laws abroad? Simple: An expatriate who is anAmerican citizen (or dual citizen or, maybe, green-card-holding U.S.resident alien) working for a U.S.-controlled employer enjoys the pro-tection of both American anti-discrimination laws and the local coun-try’s employment protection laws—simultaneously. If there is a directconflict between the laws, America’s discrimination rules lose out, butthis almost never happens because although foreign countries oftentolerate discrimination, they almost never require it: Overseas, even inthe Arab world, statutes almost never force employers to discriminate.

This means that Americans (not locals) working overseas for U.S.-controlled multinationals (not foreign companies) enjoy protections oflocal laws and simultaneously have a U.S. law right to work overseasfree from harassment and discrimination because of gender, ethnicity,race, age, or disability. The corresponding legal doctrines also protectAmericans overseas: no “hostile environments,” no mandatory retire-ment, and a right to “reasonable accommodation.” The result, not sur-



prisingly, is that the extraterritorial reach of U.S. discrimination lawsis a hot potato in international human resources. Problems pop upwhen workplace cultures abroad conflict with Americans’ hypersensi-tive, politically correct workplace philosophies.

Because two sets of employment laws cover Americans workingabroad, when U.S. expatriates get fired, demoted, or harassed, theycan—and increasingly do—retain one lawyer abroad and one in theUnited States. They sue in both countries, seeking severance payabroad and discrimination damages stateside. (Damages awards mightbe offset, but the independent causes of action legitimately give rise toseparate lawsuits.) Lawyers representing executive expatriates need tobe ready to coordinate strategy with counsel overseas, ensuring clientstake advantage of all that two countries’ laws offer.

VI. ConclusionAs multinationals globalize their human resources operations in re-

sponse to free trade and technology, international employment-law prob-lems keep popping onto the radar screen. International employment-lawpractice is standing by, ready for take-off, but so far, at the start of thenew millennium, surprisingly few practitioners are focusing on inter-national employment law.

Indeed, there is a chicken-and-egg scenario here: So few interna-tional employment law specialists exist that lots of clients assume laborand employment lawyers are the wrong people to help resolve employ-ment law problems that cross borders. (Clients see employment lawyersas experienced only domestically; they also often see international law-yers as ignorant of human resources.) Many clients—particularly mul-tinationals—reflexively assume that no lawyer can possibly help withemployment matters that straddle different legal systems. So whenemployment law problems jump borders, clients often turn to non-lawyers, or—worse—they allow the problems to fester unresolved. Ofcourse, un-addressed legal problems grow, get a lot more expensive, andbecome crises.

The fact that few clients yet demand international employment lawpractitioners explains why, for example, so many multinationals doglobal M&A that end up failing because of unexpected foreign employ-ment liabilities and cross-border HR problems. This fact also explainswhy, for example, so many multinationals suffer turnover problemsrelated to the radically different employment terms they impose ontheir co-workers, based only on their home countries. This fact ex-plains why so many U.S. multinationals face bet-the-company class-action lawsuits in U.S. courts over foreign workplace problems—prob-lems that would have been averted had someone overseen aforeign-workplace legal-compliance check. Simultaneously, the lack ofinternational lawyers representing employees explains why many



expatriate executives fail to assert legal claims that they do not evenknow they have.

As soon as lawyers’ clients realize how many huge problems canbe solved—and how much money can be saved—by retaining an inter-national labor and employment lawyer, international labor and em-ployment law will thrive as a critical sub-concentration within laborand employment law practice.

VII. BibliographyA. Cross-Border Labor and Employment Law

• Canada—Mexico—United States: North American Agreementon Labor Cooperation, Pub. L. No. 103–182, 107 Stat. 2057,32 Int’l Legal Materials 1499, 1502 (1993) (labor-side agree-ment to NAFTA)

• ADVANCING THEORY IN LABOUR LAW AND INDUSTRIAL RELATIONS

IN A GLOBAL CONTEXT (T. Wilthagen ed., 1998)• INTERNATIONAL EMPLOYMENT LAW: THE MULTINATIONAL EM-

PLOYER & THE GLOBAL WORKFORCE (Christian T. Campbell &Donald C. Dowling Jr. eds., 1999) (Transnational Publishers)

• COMPARATIVE LABOR LAW JOURNAL (quarterly journal of theUniversity of Pennsylvania)

• COMPARATIVE LABOR LAW & POLICY JOURNAL (quarterly journalof the University of Illinois)

• INTERNATIONAL LABOUR REVIEW (bi-monthly journal of the In-ternational Labour Organization)

• Matthew Finkin, International Governance and Domestic Con-vergence in Labor Law, 76 IND. L.J. 143 (2001)

• Stephen A. Mazurak, Comparative Labor and Employment Lawand the American Labor Lawyer, 70 U. DET. MERCY L. REV. 531(1993)

• www.llrx.com (links to global research guides, primary sources,and official documents and reports)

• Institutional Assistance:➤ International Labour Organization Washington Branch Of-

fice, 1828 L St. N.W. suite 600, Washington DC 20036; tel.(202) 653–7652; fax (202) 653–7687; U.S. Web site, atwww.us.ilo.org; Geneva Web site, at www.ilo.org

➤ U.S. National Administrative Office for NAFTA/NAALC,Bureau of International Labor Affairs, U.S. Department ofLabor, 200 Constitution Ave. N.W. room C-4327, Washing-ton DC 20210; tel. (202) 501–6653; fax (202) 501–6615

B. Cross-Border Human Resources Administration• CAROLYN GOULD & BARBARA SCHMIDT-KEMP, INTERNATIONAL

HUMAN RESOURCES GUIDE (Warren, Gorham & Lamont/West



2000) (chapters on “Global Strategy,” “Expatriate Policies,” “Lo-cal National Workforce,” and similar topics)

• THE INTERNATIONAL HR MANAGER’S “DUE DILIGENCE” CHECK-LIST (Income Data Services 1997)

• INTERNATIONAL HR JOURNAL (quarterly journal of West Group)• INTERNATIONAL JOURNAL OF HR MANAGEMENT (bi-monthly jour-

nal of Routledge, U.K.)• Donald C. Dowling Jr., U.S.-Based Employers and Europe’s Data

Privacy Law, 2 J. Alternative Dispute Resolution in Employ-ment (CCH) 1, at 31 (2000)

• Donald C. Dowling Jr., Top Ten Tips for Tacking Talent Traumain Trans-Border Transactions (or, How to Ensure EmploymentProblems Don’t Torpedo Global Mergers and Acquisitions), 13DEPAUL BUS. L.J. 2 (2001)

C. Foreign Labor and Employment Laws (Outside the United States)• INTERNATIONAL EMPLOYMENT LAW (Dennis Campbell ed., Mat-

thew Bender, 1996 & supp.) (chapters summarizing national em-ployment laws)

• INTERNATIONAL HANDBOOK ON CONTRACTS OF EMPLOYMENT

(1988 & supp.) (two-volume summary of various countries’ em-ployment laws prepared by the International Bar Association)

• INTERNATIONAL LABOR & EMPLOYMENT LAWS (William Keller, etal., eds. 1997 & supps.) (ABA/BNA pub.; chapters summarizenational employment laws in major countries, and address cross-border topics like the ILO and union participation in interna-tional affairs)

• INTERNATIONAL ENCYCLOPAEDIA FOR LABOUR LAW AND INDUS-TRIAL RELATIONS (Roger Blanpain ed., Kluwer 1977 & supp.)(chapters summarize national employment laws of the world)

• CANADIAN EMPLOYMENT LAW FOR U.S. COMPANIES (monthly,Lee Smith Publishers, Nashville)

• EUROPEAN INDUSTRIAL RELATIONS REVIEW (monthly journal ofIRS/Reed Elsevier, U.K.)

• IDS EMPLOYMENT EUROPE (monthly journal of Incomes DataServices, U.K.)

• Donald C. Dowling Jr., European Union Employment LawComes Alive, 29 CORNELL INT’L L.J. 43 (1996)

• http://europa.eu.int (European Union portal; link to Eur-Lex, da-tabase of EU legal texts)

• www.incomesdata.co.uk (Incomes Data Service; research insti-tute with subscription databases and news on human resourcesand employment conditions in Europe)

• www.natlaw.com (employment and other laws in Latin America)



• www.privacyexchange.org (national laws relating to data pro-tection and privacy)

• www.eiro.eurofound.ie (European Industrial Relations Observa-tory)

• www.findlaw.com (finding international laws)• Institutional Assistance: Delegation of the European Commis-

sion in Washington, 2300 M St. N.W. suite 300, Washington, DC;tel. (202) 862–9500; fax: (202) 429–1766; at www.eurorg.com.

D. International Labor Standards, Free Trade, and CorporateCodes of Conduct• JAROL B. MANHEIM, CORPORATE CONDUCT UNBECOMING: CODES

OF CONDUCT AND ANTI-CORPORATE STRATEGY (Tred Avon Press2000)

• JAROL B. MANHEIM, THE DEATH OF A THOUSAND CUTS: CORPO-RATE CAMPAIGNS AND THE ATTACK ON THE CORPORATION (Law-rence Erlbaum Assoc., Inc. 2001)

• TRADE & LABOR STANDARDS: A REVIEW OF THE ISSUES (OECD1995) (summarizes role of labor issues in free trade agreements)

• BY THE SWEAT AND TOIL OF CHILDREN (5 vols. 1994–1998); THE

APPAREL INDUSTRY AND CODES OF CONDUCT: A SOLUTION TO THE

INTERNATIONAL CHILD LABOR PROBLEM? (1996) (publications ofthe U.S. Department of Labor, Bureau of International Affairs,at www.dol.gov/dol/ilab/public/programs/iclp/)

• Donald C. Dowling Jr., The Multinational’s Manifesto on Sweat-shops, Trade/Labor Linkage, and Codes of Conduct, 8 TULSA J.COMP. & INT’L J. 1 (2001)

• Jay Mazur, Labor’s New Internationalism, FOREIGN AFFAIRS, at79 (Jan./Feb. 2000)

• www.CodesofConduct.org (sample codes of conduct)• www.iso.ch (International Organization for Standardization; in-

ternational standards on country codes)• www.gilc.org (Global Internet Liberty Campaign; privacy, hu-

man rights agreements)• Institutional Assistance: Bureau of International Labor Affairs,

U.S. Department of Labor, 200 Constitution Ave. N.W. rm.S-5006, Washington DC 20210; tel. (202) 219–7616; fax (202)219–5613

E. International Benefits and Compensation• GUIDE TO GLOBAL COMPENSATION AND BENEFITS (Calvin Rey-

nolds ed., Harcourt Professional Publishing 2000)• BENEFITS & COMPENSATION INTERNATIONAL (Pension Publica-

tions Ltd., U.K. 1999) (monthly journal)• www.ibfd.nl (International Bureau of Fiscal Documentation;

subscription service on tax law worldwide)



• www.issa.int (International Social Security Association; data-base of social security law)

• www.ssa.gov (text of U.S. social security totalization agreementsand summaries of social security programs around the world;includes links to ministries and departments of social security)

• www.ibisnews.org (International Benefit Information Service;subscription news service on worldwide benefits, pensions, em-ployment terms)

F. Extraterritorial Reach of U.S. Employment Laws and U.S.Court Lawsuits Involving the Overseas Workplace

• 29 U.S.C. §§ 623(h), 630(f) (ADEA abroad); 42 U.S.C. §§ 2000e-1(a),(c), 2000e-5(f)(3) (Title VII abroad); 42 U.S.C. §§ 12111(4),12112(c) (ADA abroad).

• EEOC Policy N-915.002, “Enforcement Guidance on Applicationof Title VII and the ADA to American Firms Overseas and toForeign Employers Discriminating in the U.S.” (20 Oct. 1993,reprinted in EEOC Compliance Manual (CCH) ¶ 2169); EEOCPolicy N-915.039, “Application of ADEA and the Equal Pay Actto American Firms Overseas and Foreign Firms” (3 Mar. 1989,reprinted in EEOC Compliance Manual (CCH) ¶ 2165)

• JAMES M. ZIMMERMAN, EXTRATERRITORIAL EMPLOYMENT STAN-DARDS OF THE U.S. (1992)

• Donald C. Dowling Jr., Mutiny for a Bounty: Overseas Workers’U.S.-Court Class Actions Against U.S. Multinationals, 29 INT’LL. NEWS 4 at 1 (2000) (newsletter of ABA Section of Interna-tional Law & Practice)

• Jordan W. Cowman & Kimberly Rich, Are Your [Employment]Operations Abroad Exposing You to Multimillion Dollar Liabil-ity under U.S. Law? A Texas Court Recently Answered “Yes”(2001) (19-page, 58-footnote unpublished article by lawyers atBaker & McKenzie’s Dallas office)

• Institutional Assistance: U.S. Equal Employment OpportunityCommission New York District Office, 7 World Trade Center,18th fl., New York, NY 10048–0948, tel. (212)748–8500; fax(212)748–8464 (New York office has initial jurisdiction foroverseas-based claims)


25

Jumping Ship: Legal IssuesRelating to Employee Mobility inHigh Technology Industries

William Lynch Schaller*

I. IntroductionBy world standards, employee mobility has always been extraor-

dinarily high in the United States,1 and nowhere is it higher than inhigh tech industries in places like Silicon Valley and Seattle. Even withthe recent dot-com downturn, industry estimates suggest an approxi-mate shortfall of 425,000 skilled information technology workers.2 In-deed, with the implosion of high tech stocks in recent months, leavingemployee stock options under water, high tech employee job hoppinghas actually accelerated in some sectors.3 By definition, corporate

* Mr. Schaller is a partner in the Compensation and Employment Law PracticeGroup of Baker & McKenzie in Chicago, Illinois. He is chairman of the Trade SecretInevitable Disclosure Sub-Committee of the American Bar Association’s IntellectualProperty Law Section. The author thanks Baker & McKenzie associate Jack Simms,University of Notre Dame law student and former Baker & McKenzie summer associateRyan Constantini, and Lake Forest College student Natacha von Will for their researchassistance on parts of this paper. This article is dedicated to John Iacono, who had thecourage to jump ship.

1. See Avinash Persaud, The Knowledge Gap, 80 FOREIGN AFFAIRS 107, 109(March/April 2001) (noting that Silicon Valley has benefited significantly by a “braindrain” from the developing world to the developed world, as United States laws encourageimmigration of highly skilled workers from developing countries); G. Pascal Zachary,People Who Need People: With Skilled Workers in High Demand, Employers are HuntingThem Down—No Matter Where They Live, WALL ST. J., Sept. 25, 2000, at R8 (noting that“talented people are jumping countries at a record rate,” as illustrated by the fact that“roughly a third of Silicon Valley’s engineers are foreign-born”).

2. See T. Shawn Taylor, Work Buzz: Down but Not Out, CHI. TRIB., April 11, 2001,Sec. 6, at 1 (citing recent report by the Information Technology Association of Americastating that demand for Internet technology workers has declined 44% from a year ago,but noting the 425,000 worker shortfall and stressing that demand has actually increasedin the areas of enterprise systems by 62% and network design/administration by 13%).

3. See Scott Thurm, No-Exit Strategies: Their Outlook Bright, Fiber-Optics FirmsPut Job-Hoppers on Notice, WALL ST. J., Feb. 6, 2001, at A1 (describing litigation byCiena Corp. against former employees to keep them from joining competitors); JaysonBlair, West’s Investors Cool to Silicon Alley, N.Y. TIMES, Mar. 16, 2001, at A17 (describingdifficulties New York Silicon Alley firms now face in raising venture capital investments);Susan Pulliam & Scott Thurm, What Goes Up: For Some Executives, the Internet DreamHas a Deep Downside; An Unhappy Upper Echelon of Ex-Centimillionaires Sees StakesPlunge 90%, WALL ST. J., Oct. 20, 2000, at A1 (noting stock value declines of 90% andmore for leading Internet firms such as InterWorld, eToys, Webvan, Internet CapitalGroup, Ask Jeeves, Priceline.com, ICG Communications, Razorfish, iVillage, and Intra-ware); Kevin McCoy, Tech Workers Seek Jobs, Network at Pink Slip Parties, CHI. SUN-TIMES, Nov. 7, 2000, at 44 (discussing downsizing by many dot-com firms); Pui-Wing Tam



downsizing will force many employees to change jobs whether theywant to or not, perhaps in a minor replay of the early 1990s.4

Needless to say, given the amount of time and money employersinvest in recruiting and training their employees, watching them de-part to competitors is an unhappy experience. Appointing chief talentofficers, awarding notification bonuses to employees who disclose joboffers, docking managers’ pay for excessive employee turnover, grant-ing stock options, searching at home and abroad for talent, and otherbusiness solutions may not be enough to stem the tide of employeedefections.5 As a result, legal avenues frequently must be examined,and many firms and employees are surprised to learn that courts canand will check employee mobility in the right circumstances, even inemployee-friendly California.6

This article begins with a brief history of U.S. employee mobilitylaws to show their odd origin in restrictive English rules. Although it

& Mylene Mangalindan, Pet.com’s Demise: Too Much Litter, Too Few Funds, WALL ST. J.,Nov. 8, 2000, at B1 (reporting closing of Pet.com and layoff of 255 out of 320 employees);Julia Angwin & Karen Lundegaard, Priceline Auto-Services Executive Quits, WALL ST.J., Nov. 8, 2000, at B6 (reporting resignations of top Priceline executives Maryann Kellerand Heidi Miller along with layoffs of other employees); Shawn Young, Lucent LaunchesSeries of Measures to Cut Work Force, WALL ST. J., Nov. 8, 2000, at B6 (reporting pendingreduction of 10,000 jobs at Lucent).

4. See Adams v. Ameritech Servs., 231 F.3d 414 (7th Cir. 2000) (noting that cor-porate downsizing was a popular strategy in the 1990s); Alvin & Heidi Toffler, New Econ-omy? You Ain’t Seen Nothin’ Yet, WALL ST. J., March 29, 2001, at A22 (arguing that theentire digital revolution is only the first phase of an even larger, longer process remakingeconomies, where mind-work will be at a premium); Jon Swartz, Net Companies’ LossesAre E-recruiters’ Gain, CHI. SUN-TIMES, Feb. 20, 2001, at 54 (noting frenzied market forjob switches being handled by Monster.com, CareerBuilder, HotJobs.com, Headhun-ter.net and ELance electronic recruiting firms); Kathy Chen, Weak Economy Puts theBrakes On Job-Hopping, WALL ST. J., March 27, 2001, at B1 (noting that uncertain eco-nomic outlook has put a damper on many employees’ desire to change jobs); TRUMAN F.BEWLEY, WHY WAGES DON’T FALL DURING A RECESSION 303 (1999) (noting that voluntaryturnover normally decreases during recessions, in part because of fewer jobs and in partbecause newly hired employees are often laid off first).

5. See Joann S. Lublin, In Hot Demand, Retention Czars Face Tough Job, WALLST. J., Sept. 12, 2000, at B1 (describing internal turmoil at Agilent Technologies in SanJose, California, when the company’s chief talent officer tried to revolutionize employeeretention practices); Rachel Emma Silverman, Raiding Talent Via the Web: PersonalPages, Firms’ Sites Are Troves of Information for Shrewd Headhunters, WALL ST. J., Oct.3, 2000, at B1 (relating Internet search techniques used to locate and steal talent basedupon companies’ own Websites); Employee Retention: A Costly Revolving Door, CFO MAG-AZINE, at 28 (Oct. 2000) (reporting new study claiming earnings and stock prices weredepressed an average 38% as a result of employee turnover costs in industries such asspecialty retail, call-center services and high tech).

6. Cross-border employee mobility claims are beyond the scope of this paper, butthey certainly exist. See Todd Harrold & Michael Michalyshyn, Confidential Informationand Technical “Know How”: What Leaves with Your Employees?, 13 INTELL. PROP. J. 1(1998) (summarizing Canadian employee non-compete and trade secret policies); Ga-briella Stern & Brandon Mitchener, VW Agrees to Give GM $100 Million to Settle LopezTrade-Secret Lawsuit—U.S. Automaker Will Get $1 Billion in Parts Sales; Pact Less ThanSought, WALL ST. J., Jan 10, 1997, at A3 (reporting settlement of cross-border litigationbetween General Motors and Volkswagen over Jose Lopez’ defection and alleged tradesecret misappropriation).


Employee Mobility in High Technology Industries 27

may seem hard to believe, for centuries English law not only sanctionedcompulsory labor, but even made it a crime for an employee to quit orfor one employer to hire away another’s workers. These rules fadedduring the 1800s in the United States due in part to the rise of the freelabor movement and the resulting abolition of slavery and involuntaryservitude. They were eventually replaced by the termination at-willrule, which brought employee mobility full circle by relieving at-willemployees of even civil liability for quitting without cause. Yet, non-competes survived this transformation and remain an important partof modern U.S. employee mobility laws.

Following the historical background, this article turns to liabilitytheories, remedies, and defenses relating to jumping-ship claims in-volving high tech employees, including common law actions arising outof term agreements, non-compete theories, trade secret litigation, em-ployee intellectual property ownership disputes, and suits against thirdparties for inducing employee job-switching. As demonstrated later,two general legal observations can be made: (1) there is nothing specialabout high tech employees that exempts them from ordinary employeemobility restrictions—if anything, they sometimes are subject togreater restraints in the form of intellectual property assignment agree-ments, especially those with holdover or trailer clauses; and (2) thereis nothing special about high tech employee mobility cases—like allother employee mobility cases, they almost always present fact-intensequestions that do not lend themselves to simple answers. What doesset high tech employee cases apart are, instead, two common factualpatterns: (1) rapid technological obsolescence sometimes causes courtsto limit relief against high tech employees to short periods or to denyit outright, and (2) many high tech employees live or work in California,bringing into play California’s general prohibition against employeenon-competes.

This article ends with some practical tips for former employers,new employers, and employees caught between them, in an effort toshow some counter-intuitive aspects of commonly used tactics such asnotice letters and indemnity agreements. Common sense does not nec-essarily track common law; thus, caution is important in investigatingand litigating these complex, high-speed cases. Complexity and speedpresent an explosive mix, making it imperative that inside and outsidecounsel map their strategy as thoroughly and as soon as possible. Thisis easier said than done when one considers the intense pressure de-parting employees and management on both sides of these disputesplace upon a favorable outcome to their respective positions, often inthe glare of intense publicity.

II. Employee Mobility: A Brief Legal HistoryLaws governing employee mobility have a long and interesting his-

tory in the United States, but only a short discussion is relevant here.



State law, rather than federal law, usually supplies the rule of decision,and virtually all state laws relating to employee mobility descendedfrom English law. Although now long-forgotten, English law from 1349to 1875 made it a crime for many employees to quit before the end oftheir term,7 and many were convicted—according to Professor Morriss,more than 100,000 between 1860 and 1875 alone.8 Certain classes ofemployees could also be compelled to work under English law.9 Indeed,they were not even called employees back then; lawyers generally re-ferred to them as servants, with reciprocal rights and duties imposed onthe master and the servant through a melange of legal concepts thateventually took the predominate form of contractual rules by the 1800s.10

The United States generally adopted English law by custom andthrough reception statutes, but restraints on employee mobility beganto fade after the American Revolution because such restrictions in-creasingly came to be viewed as inconsistent with the free status ofAmericans.11 The free-labor movement eventually took hold in variousforms and rose to the level of a dominant political theme by the CivilWar,12 as partly captured in an Abraham Lincoln aphorism: “The manwho labored for another last year, this year labors for himself and nextyear . . . will hire others to labor for him.”13 Of course, the Civil Warresulted in the abolition of slavery and involuntary servitude, through

7. See CHARLES G. BAKALY JR. & JOEL M. GROSSMAN, THE MODERN LAW OF EM-PLOYMENT RELATIONSHIPS § 1.1 (PRENTICE HALL LAW & BUSINESS 1991) (noting that theearliest Statute of Laborers, enacted in 1349, sought to restrict labor mobility in responseto the Black Plague, which created a shortage of workers and hence increased demandfor them), citing 2 W.S. HOLDSWORTH, A HISTORY OF ENGLISH LAW, 460–61 (3d ed. 1927);ROBERT J. STEINFELD, THE INVENTION OF FREE LABOR: THE EMPLOYMENT RELATION INENGLISH AND AMERICAN LAW AND CULTURE, 1350–1870, at 169 (1991) (noting Englishemployers attempted to limit labor mobility in light of increased demand for labor follow-ing the Black Death).

8. See Andrew P. Morriss, Exploding Myths: An Empirical and Economic Reas-sessment of the Rise of Employment-At-Will, 59 MO. L. REV. 679, 761 (1994) (supplyingfigures); STEINFELD, supra note 7, at 204 n.39 (noting it was not until 1875 that the finalsections of laws criminalizing employee departures were removed from English statutebooks); Jay M. Feinman, The Development of the Employment At Will Rule, 20 AM. J.LEGAL HIST. 118, 120 n.8 (1976) (noting repeal of criminal sanctions under English lawin 1875).

9. STEINFELD, supra note 7, at 22–24.10. See id.11. See In re Clark, 1 Blackf. 122 (Ind. 1821) (holding that indentured servitude

contract was unenforceable); Phoebe v. Jay, 1 Ill. 268 (1828) (voiding indentured servitudecontract where the master used “a little force and beating” to compel the servant to attendto and perform her duties). These cases are discussed and compared by Professor Stein-feld, supra note 7, at 142–46.

12. See generally ERIC FONER, FREE SOIL, FREE LABOR, FREE MEN: THE IDEOLOGYOF THE REPUBLICAN PARTY BEFORE THE CIVIL WAR (1995); William E. Forbath, The Am-biguities of Free Labor: Labor and the Law in the Gilded Age, 1985 WIS. L. REV. 767(1985); Daniel R. Ernst, Free Labor, the Consumer Interest, and the Law of IndustrialDisputes, 1885–1900, 36 AM. J. LEGAL HIST. 19 (1992).

13. GUNTHER PECK, REINVENTING FREE LABOR: PADRONES AND IMMIGRANT WORK-ERS IN THE NORTH AMERICAN WEST, 1880 – 1930, at 9 (2000).



the Thirteenth Amendment, as well as the abolition of related legalinstitutions like peonage through the Anti-Peonage Act of 1867.14 AsProfessor Steinfeld notes, the Anti-Peonage Act “marked the triumphin law of free labor ideas, denying to states the authority to enact leg-islation that might criminally punish breaches of labor contracts orspecifically compel their performance.”15 Still, the last vestiges of theselaws did not disappear until the Supreme Court’s 1944 decision in Pol-lock v. Williams,16 which struck down labor contract statutes that crim-inalized employee fraud in failing to start work or in quitting before anagreed term’s end. This history is occasionally alluded to in cases re-fusing injunctive relief for employee non-competes, often accompaniedby free labor rhetoric.17

In addition to abandoning over time criminal liability for workersdeparting early, American courts promoted employee mobility by grad-ually adopting the termination at-will rule, which freed most employeesfrom civil liability for quitting without cause or notice. The origin andhistory of the employee mobility rule have been explored in detail, andthe reasons for its emergence have been intensely debated for overthirty years, starting with Professor Blades’s 1967 article.18 ProfessorMorriss, however, appears to be the only scholar who has bothered tocarefully map the course of such cases, and his 1994 article shows thatthey followed a relatively random path and offered differing ration-ales—if they gave any rationale at all. It is hard to say whether courtsthat adopted the at-will rule were really trying to help employees, werereally trying to protect emerging industrial capitalism in the UnitedStates, or were simply clinging to a fading classical economic view;19

14. See Slaughter-House Cases, 83 U.S. 36, 72 (1872) (noting Thirteenth Amend-ment was intended to abolish all forms of slavery, including Mexican peonage and Chi-nese coolie labor).

15. STEINFELD, supra note 7, at 184. See also RESTATEMENT OF CONTRACTS § 379(1932) (personal service contracts cannot be the subject of specific performance orders).

16. 322 U.S. 4 (1944).17. See Heartland Sec. Corp. v. Gerstenblatt, Nos. 99 CIV. 3694, 3858, 2000 WL

303274, at *7 (S.D.N.Y. March 22, 2000) (day trader’s training repayment/non-compete,requiring him to repay up to $200,000, “approache[d] indentured servitude”); North Am.Paper Co. v. Unterberger, 526 N.E.2d 621, 625 (Ill. App. Ct. 1988) (non-compete was“redolent of the historical past when involuntary servitude was an accepted practice”);Oak Cliff Ice Delivery Co. v. Peterson, 300 S.W. 107, 111 (Tex. Civ. App. 1927) (employeerestrictive covenants must be carefully scrutinized to avoid “industrial servitude”); Kau-magraph Co. v. Stampagraph Co., 138 N.E. 485, 487 (N.Y. 1923) (employee non-competes“savored of servitude”).

18. See Lawrence E. Blades, Employment at Will vs. Individual Freedom: On Lim-iting the Abusive Exercise of Employer Power, 67 COLUM. L. REV. 1404 (1967).

19. See Feinman, supra note 8 (tracing the historical evolution of the at-will ruleand tying its relation to the development of advanced capitalism, from an admittedlyMarxist perspective); Charles W. McCurdy, The Roots of Liberty of Contract Reconsidered:Major Premises in the Law of Employment, 1984 S. CT. HIST. SOC. YRBK. 20 (1984) (de-scribing “free labor” ideology’s role in the rise of constitutional decisions that blockedemployment law reforms under the “liberty of contract” theory); HERBERT HOVENKAMP,ENTERPRISE AND AMERICAN LAW, 1836–1937, at 177 (1991) (observing that during the



perhaps these courts were just trying to maintain their institutionalintegrity by avoiding a flood of cases through a rule easy to understandand apply, as Professor Morriss suggests.20 Alternatively, perhaps allof these and other influences were at work because free labor meantdifferent things to different people, particularly in the aftermath of theCivil War.21 Whatever the reason or reasons, at-will employment be-came so embedded that it remains the general rule in the United Stateseven to this day.22 While significant modern limitations have emergedon employer termination power in cases involving discrimination, civilservice, whistle-blowing, handbooks, and collective bargaining agree-ments, virtually no restrictions have arisen with respect to at-will em-ployee termination power—a questionable asymmetry in some sectors,most notably in high tech, where employee mobility and concomitantemployee bargaining power could hardly be greater.23

By contrast, despite (or perhaps because of) free-labor sentiments,state and federal courts in the United States have been fairly willingto restrict employee mobility pursuant to non-compete agreements. Onthis issue, courts in the United States have generally followed the his-torical English perspective, which is that non-compete agreementsshould be enforceable so long as they are designed to protect legitimateproprietary interests through reasonable time, geographic, and subjectmatter restrictions.24 In a bizarre historical twist, however, California,

heyday of substantive due process, from 1885 to 1937, “the Supreme Court continued torely on classical economic theories developed in the late eighteenth and early nineteenthcenturies”); Adair v. United States, 208 U.S. 161 (1908) (elevating at-will employment toconstitutional stature under the “liberty of contract” doctrine in vogue until 1937).

20. See Morriss, supra note 8, at 679 (attacking Jay Feinman’s theory, referencedin supra note 8, and dispelling many other myths and misstatements about the at-willrule’s origin and development).

21. See Forbath, supra note 12, at 782–94 (arguing abolitionist free labor branchevolved into anti-majoritarian liberalism reflected in “liberty of contract” philosophy,while traditional entrepreneurism/artisan/farmer free labor branch evolved into radicalNorthern labor movement opposed to “wage slavery”); LEE J. ALSTON & JOSEPH P. FERRIE,SOUTHERN PATERNALISM AND THE AMERICAN WELFARE STATE: ECONOMICS, POLITICS,AND INSTITUTIONS IN THE SOUTH, 1865–1965 at 27 (1999) (describing how Southern pa-ternalism discouraged job mobility of tenant laborers by raising the cost of leaving aspecific patron-client relationship).

22. See Guz v. Bechtel Nat’l, Inc., 8 P.3d 1089 (Cal. 2000) (twenty-two years ofemployment did not give rise to implied good faith termination rights under Californialaw in light of explicit at-will employment provision); Hartlein v. Ill. Power Co., 601N.E.2d 720 (Ill. 1992) (employment at-will remains the rule in Illinois, and exceptionsshould remain narrow); Barr v. Kelso-Burnett Co., 478 N.E.2d 1354 (Ill. 1985) (Illinoiscommon law does not favor expansion of exceptions to at-will employment).

23. See Richard A. Epstein, In Defense of the Contract at Will, 51 U. CHI. L. REV.947, 947–49 (1984) (arguing commentators are wrong in their broad assertion that at-will employment is an archaic relic that should be jettisoned along with other vestigesof nineteenth-century laissez-faire economics).

24. See generally Harlan M. Blake, Employee Agreements Not to Compete, 73 HARV.L. REV. 625, 626 (1960) (noting that employee non-compete disputes of one form or an-other have been litigated for over 500 years, starting with the English decision in Dyer’sin 1414); Maureen B. Callahan, Comment, Post-Employment Restraint Agreements: A



in an 1872 effort to end confusion flowing from Spanish, Mexican, andAmerican law influences over California law, 25 passed the so-calledField Code.26 The Field Code included what is now known as section16600 of the California Business and Professions Code, barring non-compete agreements by employees, with limited exceptions for businesssales. This dramatic departure from traditional English non-competelaw apparently went unnoticed at the time. Professor Gilson believesthis bit of serendipity, resulting in section 16600, has played a key rolein the rapid and continuing rise of Silicon Valley. In his view, the ab-sence of employee non-compete restrictions in California enables em-ployees to move more freely from firm to firm and thus enhances thelikelihood of “spill over” knowledge being transmitted from firm to firm,with an overall net benefit to high tech industries in the region.27

Other basic limitations on employee mobility also claim lengthylineage. The duty of loyalty, which includes an obligation not to competeduring the term of employment, has been a fixture of U.S. law almostfrom the country’s beginning. It derives from the basic duty of faithfulservice found in English master and servant law.28 Sections 387 and393 of the RESTATEMENT (SECOND) OF AGENCY capture this concept,

Reassessment, 52 U. CHI. L. REV. 703, 707–12 (1985) (reviewing early English non-compete cases); Herbert Morris, Ltd. v. Saxelby, 1 A.C. 688 (1916) (protection of tradesecrets and customer relations justifies employee non-competes; a desire to avoid com-petition by ex-employees does not); Mitchel v. Reynolds, 1 P. Wms. 181, 24 ENG. REP. 347(Q.B. 1711) (seminal English case establishing common law reasonableness test for non-compete agreements); RESTATEMENT (SECOND) OF CONTRACTS § 188 (1979) (restraint isreasonable only if it is (1) no greater than is required to protect employer’s legitimateinterests; (2) does not impose undue hardship on employee; and (3) is not injurious to thepublic); STEINFELD, supra note 7, at 73–74 (noting that the term “covenant” in mid-fourteenth century England meant an agreement to do something in the future).

25. See Ronald J. Gilson, The Legal Infrastructure of High Technology IndustrialDistricts: Silicon Valley, Route 128, and Covenants Not to Compete, 74 N.Y.U. L. REV.575, 579, 614–18 (1999); Morriss, supra note 8, at 708 n.81.

26. The Field Code is named after David Dudley Field, a New York lawyer and lawreformer who sought to simplify American common law by organizing legal rules intostraightforward codes. See PAUL KENS, JUSTICE STEPHEN FIELD: SHAPING LIBERTY FROMTHE GOLD RUSH TO THE GILDED AGE 172 (1997).

27. See Gilson, supra note 25, at 585–86. Of course, culture plays an importantrole as well. See Clayton Christensen, Thomas Craig & Stuart Hart, The Great Dis-ruption, 80 FOREIGN AFFAIRS 80, 88 (March/April 2001) (comparing lack of venturecapital and employee mobility in Japan with Silicon Valley’s fluid labor and capitalmarkets); G. Pascal Zachary, Location, Location: A Leading Urbanist Argues That WhenIt Comes to Innovation, Place Really Does Matter, WALL ST. J., Sept. 25, 2000, at R11(reporting University College London Professor Peter Hall’s observation that SiliconValley’s wide-spread education and artisan craft-type tradition helped spur its growthin the 1970s, 1980s and 1990s); Hanna Bui-Eve, Note, To Hire or Not to Hire: WhatSilicon Valley Companies Should Know about Hiring Competitors’ Employees, 48 HAST.L. J. 981, 982 (1997) (noting Silicon Valley’s regional network-based industrial systempromotes collective learning and flexible adjustment among specialized producers ofrelated technology).

28. See STEINFELD, supra note 7, at 16 (quoting English law treatise in the 1700sthat referred to a servant’s duty of “allegiance”).



which is the universal rule throughout the United States.29 Patent andcopyright protection emerged by statute in England in 1623 and 1709,respectively, and were included in the original U.S. Constitution.30

Trade secret law is somewhat newer, having appeared in various formsin English and American judicial opinions in the early to mid-1800s.31

Today, all states extend protection to trade secrets, and forty-three ju-risdictions have adopted some version of the Uniform Trade Secrets Act(UTSA).32

Although a twentieth century development, modern tortious inter-ference claims for poaching employees can be traced back at least 500years, when it was a crime under English law to hire away another’semployee. 33 While no longer a crime, employee raiding can give rise totortious interference with contract charges when an employee is undera term contract or subject to a non-compete agreement.34 At-will em-

29. See Mullaney, Wells & Co. v. Savage, 402 N.E.2d 574 (Ill. 1980) (citing sections387 and 393 in connection with a fiduciary duty of loyalty claim against an employee).Section 387 provides, “Unless otherwise agreed an agent is subject to a duty to his prin-cipal to act solely for the benefit of the principal in all matters connected with his agency.”Section 393 provides, in relevant part, “Unless otherwise agreed, an agent is subject toa duty not to compete with the principal concerning the subject matter of his agency.”

30. See Lasercomb Am., Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990) (reviewinghistory of patent and copyright laws in England and the United States).

31. See Newbery v. James, 2 Mer. 446, 35 ENG. REP. 1011 (Eng. Ch. 1817) (firstEnglish trade secret case, concerning contract-based trade secret injunction claim overpatent medicine formula); Vickey v. Welch, 36 Mass. 523 (1837) (first United States tradesecret case, concerning chocolate making arising out of mill sale); Peabody v. Norfolk, 98Mass. 452 (1868) (famous early case, concerning contract-based trade secret injunctionclaim over gunny cloth manufacturing process); McGowin v. Remington, 12 Pa. 56 (1849)(first Pennsylvania trade secret case, though the term was not used, concerning sur-veyor’s plans and maps); JOHN J. FIALKA, WAR BY OTHER MEANS: ECONOMIC ESPIONAGEIN AMERICA 3–17 (1997) (describing Francis Cabot Lowell’s theft from England in theearly 1800s of mechanized loom that started the American Industrial Revolution); RICH-ARD A. LUECKE, SCUTTLE YOUR SHIPS BEFORE ADVANCING AND OTHER LESSONS FROMHISTORY ON LEADERSHIP AND CHANGE FOR TODAY’S MANAGERS 158 (1994) (noting thatthanks to Francis Cabot Lowell’s theft, by the 1860s New England textiles had displacedBritish manufactures in the American market); PAUL JOHNSON, A HISTORY OF THE AMER-ICAN PEOPLE 364 (1999) (describing Francis Cabot Lowell’s exploits); DAVA SOBEL, LON-GITUDE: THE TRUE STORY OF A LONE GENIUS WHO SOLVED THE GREATEST SCIENTIFICPROBLEM OF HIS TIME (1995) (describing John Harrison’s decades-long struggle withBritish authorities in the 1700s over secrets behind his navigational sea clocks).

32. See JAY DRATLER JR., 1 INTELLECTUAL PROPERTY LAW: COMMERCIAL,CREATIVE,AND INDUSTRIAL PROPERTY § .01[3] n.72 (2000) (collecting state statutes following theUTSA); Uniform Trade Secrets Act, 14 UNIF. L. ANN. 433 (1995) (same).

33. See Lumley v. Gye, 2 El. & Bl. 216, 118 ENG. REP. 749 (1853) (leading moderncase defining tortious interference in case concerning opera singer’s services); STEINFELD,supra note 7, at 33 (noting that enticing away another’s servant was punishable evenbefore the Statute of Artificers was enacted in 1562); W. PAGE KEETON, PROSSER ANDKEETON ON THE LAW OF TORTS, Ch. 25, § 129 (West Publishing, 5th ed. 1984) (recountinghistory of tortious interference claims starting with early Roman law).

34. See RESTATEMENT (SECOND) OF AGENCY § 393, cmt. e (an employee is liable if,before or after leaving the employment, he causes fellow employees to break their con-tracts with his employer).



ployees also can be wrongfully wooed if improper means are used, suchas defamation or use of an insider to lead a raid.35

In short, everything new is old and sometimes very old. Americanlaws have addressed employee mobility for centuries, and no high techexception has ever been recognized. The issue is instead how to applythese well established laws to the sometimes unique circumstances ofhigh tech employees.

III. Liability Theories, Remedies, and DefensesA. Wrongful Termination Claims against Employees

1. General PrinciplesMany discussions of employee mobility skip the most basic source

of potential liability for departing employees: wrongful termination bythe employee before the end of an agreed term of employment. If theemployment relationship is other than terminable at will, damages andinjunctive relief may be available against the departing employee incertain limited circumstances involving employment for a specific term.Even if the agreement is terminable at will, fraud or other circumstancemay give rise to liability.

2. CasesA. SMITH, WATERS, KUEHN, BURNETT & HUGHES, LTD. V. BURNETT

One such circumstance is the presence of unique services as aground to enjoin an employee from competing during the balance of theemployee’s agreed term, as shown by Smith, Waters, Kuehn, Burnett &Hughes, Ltd. v. Burnett.36 In this case, a lawyer quit in breach of hisemployment agreement. Because he had left without good cause, hisformer firm sued to enjoin him from competing during the remainderof his contractual term, but the court refused injunctive relief. Thecourt in Burnett recognized that unique services justified injunctiverelief for the balance of a contractual term but found that the lawyer’sservices were not sufficiently unique to justify such relief because hisposition was not comparable to athletes and entertainers, whose ser-vices were universally deemed unique.37

35. See Preferred Meal Sys., Inc. v. Guse, 557 N.E.2d 506 (Ill. App. Ct. 1990) (officerencouraged fellow employees to resign with him to compete); Diodes, Inc. v. Franzen, 67Cal. Rptr. 19 (Cal. Dist. Ct. App. 1968) (if defecting employee uses unfair or deceptivemeans to solicit fellow employees, the former employer has a cause of action); RESTATE-MENT (SECOND) OF TORTS § 768 (competitor’s privilege to interfere with at-will contractsis lost if wrongful means are employed).

36. 548 N.E.2d 1331 (Ill. App. Ct. 1989).37. See MCA Records, Inc. v. Newton-John, 153 Cal. Rptr. 153 (Cal. Dist. Ct. App.

1979) (singer Olivia Newton-John); Lemat Corp. v. Barry, 80 Cal. Rptr. 240 (Cal. Dist.Ct. App. 1969) (basketball star Rick Barry); Torrence v. Hewitt Assoc., 493 N.E.2d 74 (Ill.App. Ct. 1986) (in-house counsel had “unique skill” in designing flexible compensation



B. TICOR TITLE INSURANCE CO. V. COHEN

Although unique services are generally thought to be limited toathletes and entertainers, this is not necessarily true. For example, inTicor Title Insurance Co. v. Cohen, 38 a key title insurance sales em-ployee left one firm to join a competitor. The employee was given exclu-sive control over key clients, was assigned a large staff to service thoseclients, and was given a huge entertainment expense account to main-tain his customer contacts at those clients. The court in Cohen heldthat unique services were not limited to athletes and entertainers; theoperative New York test was instead whether the employee’s serviceswere of unique importance to the employer in question. Mass depar-tures of customers following employee defections in the title industrydemonstrated they were in Cohen. Cohen turned on a non-compete, butits unique services discussion could have been used to expand the tra-ditional meaning of the unique services concept in other contexts wherean employee performs critical functions.

C. VENDO CO. V. STONER

Even when unique services are not present, employment for a spe-cific term may warrant injunctive relief for the term’s balance if an in-term restrictive covenant is involved, as in Vendo Co. v. Stoner.39 Stonersold his business to Vendo and signed an employment contract as partof the deal. The employment agreement barred Stoner from competingduring the five-year term of the contract and for an additional five yearsthereafter. Stoner began competing before the initial five-year employ-ment term expired and later challenged the in-term restriction asoverly broad because it covered the entire state of Illinois. The Illinoisappellate court rejected Stoner’s contention, holding that in-term cov-enants, unlike post-term covenants, did not need to be reasonable atleast when the employee quit. The employee in this situation had notbeen deprived of the means to support himself except through his ownchoice. The court noted numerous decisions in Illinois and elsewheresupporting this in-term/post-term distinction.40 This often overlookedissue is crucial to note because many term employment agreementsexplicitly impose in-term covenants in boilerplate language.

D. MEDPLUS NECK AND BACK PAIN CENTER, S.C. V. NOFFSINGER

Another important implication of an employee’s term agreement isthat the employee needs cause to quit. For instance, in MedPlus Neck

for firm clients); American Broad. Co. v. Wolf, 420 N.E.2d 363 (N.Y. 1981) (sports an-nouncer Warner Wolf); Lumley v. Wagner, 1 De G. M. & G. 604, 42 ENG. REP. 687 (1852)(establishing unique services doctrine in English law in case involving singer).

38. 173 F.3d 63 (2d Cir. 1999).39. 245 N.E.2d 268 (Ill. App. Ct. 1969).40. 245 N.E.2d at 273–76 (citing Saul v. Thalis, 156 F. Supp. 408 (D.D.C. 1957) and

Good v. Modern Globe, Inc., 78 N.W.2d 199 (Mich. 1956)).



and Back Pain Center, S.C. v. Noffsinger,41 the court noted that con-sequential damages were available against an employee for wrongfultermination when the parties contemplated such relief.42 The courtheld, however, that absent evidence of an intention to pay consequen-tial damages, monetary relief for an employee’s wrongful terminationwas limited to the employee’s wages and the cost of finding and traininga replacement. No such intent had been shown; thus, only limited dam-ages were allowed. Nevertheless, the rule in Noffsinger is quite impor-tant: Even when consequential damages are not contemplated, a high-level executive or key employee who quits without cause before the endof the contract term may have to pay the former employer the differencebetween the employee’s old and new compensation for the balance ofthe contract period43—no small matter when the case involves hugecompensation increases in the form of signing bonuses, salary boosts,and stock options.

E. P.A. BERGNER & CO. V. MARTINEZ

The same concepts can appear under other guises if the right cir-cumstances are present, as in P.A. Bergner & Co. v. Martinez.44 In thatcase, three corporations—P.A. Bergner & Co., Sears, Roebuck & Co.,and Saks Fifth Avenue—found themselves vying for the affections ofexecutive Arthur Martinez, though only Bergner and Sears (and Mar-tinez) were parties to the lawsuit. Bergner had slipped into bankruptcyand sought Martinez’s services as CEO to help resuscitate its fortunes.Martinez was interested but did not wish to lose over $1,000,000 inSaks compensation if bankruptcy court and creditor approval would notbe secured for his proposed employment contract as Bergner’s newCEO. Bergner’s representatives and Martinez therefore executed anindemnity agreement providing that Bergner would protect Martinezfrom these losses, and the parties were then to finalize the details of aproposed twenty-four page employment agreement they had beenworking on. Reflecting the competitive importance of this situation, thedraft employment agreement was labeled “privileged and confidential”and was to be submitted to the bankruptcy court in camera or underseal. As soon as the ink was dry on the indemnity agreement, Martineztold Bergner that he had informed Saks that he was terminating hisSaks employment agreement, which apparently did not restrict Mar-

41. 726 N.E.2d 687 (Ill. App. Ct. 2000).42. See Roth v. Speck, 126 A.2d 153 (D.C. 1956) (recognizing consequentialdamages

rule for employee’s breach of contract, but finding the rule inapplicable on the facts).43. See DAN B. DOBBS, HANDBOOK ON THE LAW OF REMEDIES § 12.26 (1973) (ex-

plaining that employee wage damages in this context means the difference between for-mer wages and new wage during the notice/breach period).

44. 823 F. Supp. 151 (S.D.N.Y. 1993).



tinez from seeking competitive positions (other than through loss of hisSaks compensation, which Bergner had agreed to indemnify against).45

Martinez hedged his bets, however, as he secretly began negoti-ating to become Sears’s CEO. Martinez gave Bergner assurances of hiscontinued commitment to Bergner when Bergner learned of Sears’s un-solicited overtures, and Bergner thereafter moved the bankruptcy courtto approve Martinez’s appointment as Bergner’s CEO. Only then didMartinez announce he had accepted and signed an employment agree-ment with Sears. The district court rejected Martinez’s motion to dis-miss, ruling that Bergner had stated claims against Martinez forbreach of the indemnity agreement, promissory estoppel, and fraud.46

The district court also rejected Sears’s motion to dismiss, ruling thatBergner had stated claims for tortious interference with contract andtortious interference with prospective economic advantage.47 Thus,Martinez readily demonstrates that key employees and new employerscan be saddled with liability in unusual ways on the right facts.

3. SummaryUnique services, consequential damages, and fraud-related rules

present subtle exposures; wage-differential damage claims and in-termcovenants are subtler still. As common law doctrines, they can be in-voked in almost any jurisdiction. In addition, they present fact-dependent inquiries, making them difficult to rule out absent clear con-tractual language. Many employees move closer to the unique servicescategory as their skills become firm-specific and they rise through theranks, and one needs only passing familiarity with contract litigationto appreciate the complexity of determining contracting parties’ inten-tions when their contracts are ambiguous—as widespread employeehandbook and haphazard letter agreement cases amply attest.48 Em-ployees who are truly key to an organization, as high tech employeesoften are, and employees who operate under informal contractual ar-rangements, as high tech employees often do, could thus be trapped bythese rules.

B. Non-Compete Agreement Claims against Employees1. General PrinciplesEmployee restrictive covenants come in various forms, from agree-

ments prohibiting employees from joining competitors to agreementsprohibiting employees from soliciting customers to agreements prohib-iting employees from soliciting fellow employees; even oral non-

45. Id. at 154.46. Id. at 158–62.47. Id. at 162–63.48. See Duldulao v. St. Mary of Nazareth Hosp. Ctr., 505 N.E.2d 314 (Ill. 1987)

(promises of employment security in company handbooks can create enforceable contractrights).



compete claims are occasionally asserted.49 As noted, most states followthe common law rule of reasonableness, pursuant to which courts willenforce non-compete agreements if a legitimate proprietary interestneeds protection and the contract is reasonably limited in terms of geo-graphic scope, time, and subject matter.50 Most states consider tradesecrets, confidential information, customer contacts, and good will tobe legitimate proprietary interests.51 New York, as Cohen reflects, addsunique services to this proprietary interest list,52 as do Maryland andUtah,53 and Georgia includes employee training.54

In general, assuming a proprietary interest can be shown, suchagreements are likely to be enforced if narrowly drawn, especially ifthe relevant jurisdiction follows some form of the blue-pencil rule thatallows courts to modify overly broad covenants in order to enforce

49. See Kodeky Elec., Inc. v. Mechanex Corp., 486 F.2d 449, 450–53 (10th Cir. 1973)(affirming preliminary injunction and damage award under Colorado law based on oralnon-compete between businesses); Fireworks Spectacular v. Premier Pyrotechnics, Inc.,86 F. Supp. 2d 1102 (D. Kan. 2000) (granting preliminary injunction under Kansas lawto enforce oral non-compete based upon promissory estoppel because employee agreed tosign and continued work for plaintiff); AM Cosmetics, Inc. v. Solomon, 67 F. Supp. 2d 312(S.D.N.Y. 1999) (enforcing oral non-compete during term of employment under New Yorklaw); Metcalfe Invs., Inc. v. Garrison, 919 P.2d 1356 (Alaska 1996) (enforcing employee’soral non-compete of unlimited duration); Barnett v. Jabusch, 607 So.2d 1007 (La. Ct. App.1993) (enforcing oral non-compete relating to business sale); Hubbard v. Logsdon, 372N.E.2d 101 (Ill. App. Ct. 1978) (oral non-compete claim against business seller not barredby Statute of Frauds); but see Maintenance Supply Co. v. Raymond, No. Civ. A. 95–3714,1996 WL 635996, at *1 (E.D. La. Nov. 1, 1996) (oral non-compete claim against employeerejected for lack of geographic limitations complying with Louisiana non-compete stat-ute); Frantz v. Parke, 729 P.2d 1068 (Idaho Ct. App. 1986) (oral non-compete claim againstemployee barred by Statute of Frauds); Collection & Investigation Bureau of Maryland,Inc. v. Linsley, 375 A.2d 47 (Md. Ct. Spec. App. 1977) (oral non-compete claim againstemployee barred by Statute of Frauds); Professional Investigations and ConsultingAgency v. Kingsland, 591 N.E.2d 1265 (Ohio Ct. App. 1990) (oral non-compete claimagainst employee barred by Statute of Frauds).

50. See Hapney v. Central Garage, Inc., 579 So.2d 127 (Fla. Dist. Ct. App. 1991)(collecting employee non-compete cases discussing proprietary interests in thirty-five ju-risdictions); Phillip J. Closius & Henry M. Schaffer, Involuntary Nonservitude: The Cur-rent Judicial Enforcement of Employee Covenants Not to Compete—A Proposal For Re-form, 57 S. CAL. L. REV. 531 (1984) (extensive discussion of employer proprietaryinterests and their relationship to employee non-competes).

51. See IKON Office Solutions, Inc. v. Belanger, 59 F. Supp. 2d 125 (D. Mass. 1999)(customer goodwill is a protectible interest warranting enforcement of employee restric-tive covenant); BDO Seidman v. Hirshberg, 712 N.E.2d 1220 (N.Y. 1999) (partially en-forcing employee restrictive covenant to protect employer’s goodwill for those customerswith whom accounting firm employee developed customer contacts at employer’s ex-pense).

52. See Cohen, 173 F.3d 63 (invoking unique services principle in enforcing “star”employee’s restrictive covenant to protect employer’s goodwill with customers).

53. See Becker v. Bailey, 299 A.2d 835 (Md. 1973) (automobile tag and title courierwas an unskilled worker whose services were not unique); System Concepts, Inc. v. Dixon,669 P.2d 421 (Utah 1983) (national sales manager’s responsibilities were special andunique in comparison to the other employees with sales-related positions).

54. See Wesley-Jessen, Inc. v. Armento, 519 F. Supp. 1352 (N.D. Ga. 1981) (timenecessary to train a replacement may be considered in evaluating an employee restrictivecovenant).



them.55 Enforcement is almost always by means of injunctive relief,given the preventive purpose of non-competes, but damages and otherrelief are available. The principal defenses, of course, are that no pro-prietary interest exists or that the covenant is overly broad, meaningits restrictions are not narrowly tailored to protect the employer’s le-gitimate interests. Other defenses are also available, such as lack ofconsideration, fraud, duress, waiver, estoppel, wrongful termination,and antitrust violations.56

Some states have abrogated or modified the common law rule ofreasonableness by statute, notably Florida and California.57 Floridamakes employee non-compete agreements entered into after July 1,

55. Compare House of Vision, Inc. v. Hiyane, 225 N.E.2d 21 (Ill. 1967) (Illinoiscourts have discretion to modify restrictive covenants to make them enforceable, butoverbreadth of original contractual restraint is an equitable factor to be considered) andBDO Seidman v. Hirshberg, 712 N.E.2d 1220 (N.Y. 1999) (same holding), with KogerProperties, Inc. v. Adams-Cates Co., 274 S.E.2d 329 (Ga. 1981) (Georgia has rejected theblue pencil rule) and CAE Vanguard v. Newman, 518 N.W.2d 652 (Neb. 1994) (Nebraskacourts cannot reform covenants not to compete).

56. See Rao v. Rao, 718 F.2d 219 (7th Cir. 1983) (wrongful termination of employeereleased restrictive covenant); In re UFG Int’l, Inc., 225 B.R. 51 (S.D.N.Y. 1998) (termi-nation without cause released employee from restrictive covenant); Applied Micro, Inc.v. SJI Fulfillment, 941 F. Supp. 750 (N.D. Ill. 1996) (noting divided Illinois authorities asto whether continuing employment constitutes sufficient consideration to support after-thought non-compete); Surgidev Corp. v. Eye Tech. Inc., 648 F. Supp. 661 (D. Minn. 1986),aff’d, 828 F.2d 452 (8th Cir. 1987) (employer’s past failure to enforce employee non-competes estopped employer from enforcing another employee’s non-compete); Pochopienv. Marshall, O’Toole, Gerstein, Murray & Borun, 733 N.E.2d 401 (Ill. App. Ct. 2000) (non-enforcement of repayment provision as to previous employees in different situations wasinsufficient to constitute waiver as to subsequent employee); Midwest Television, Inc. v.Oloffson, 699 N.E.2d 230 (Ill. App. Ct. 1998) (question of fact existed as to whether em-ployer waived non-compete rights by virtue of past releases for other employees); Agri-merica, Inc. v. Mathes, 557 N.E.2d 357 (Ill. App. Ct. 1990) (rejecting duress and no con-sideration defenses to employee restrictive covenant); Williams & Montgomery, Ltd. v.Stellato, 552 N.E.2d 1100 (Ill. App. Ct. 1990) (finding no waiver or estoppel becauseemployee failed to show other employees had violated non-competes to trigger compa-rable enforcement actions); Jefco Labs v. Carroo, 483 N.E.2d 999 (Ill. App. Ct. 1985)(duress established where new employee was required to sign restrictive covenant or facelosing employer’s litigation payments relating to pending suit); Marshall v. Miles Labs,Inc., 647 F. Supp. 1326 (N.D. Ind. 1986) (rejecting federal antitrust claim employeebrought to defeat his non-compete); Charles A. Sullivan, Revisiting the “Neglected Step-child”: Antitrust Treatment of Postemployment Restraints of Trade, 1977 U. ILL. L. FORUM621 (1977) (discussing relationship between antitrust rule of reason and common lawemployee non-compete rule of reason).

57. Other state statutes regulating employee restrictive covenants include: ALA.CODE § 8–1-1 (1993); COLO. REV. STAT. ANN. §§ 8–2-113(2) and (3) (West 1994); GA. CODEANN. § 13–8-2.1 (Harrison 1998); HAW. REV. STAT. ANN. § 480–4(c)(4) (Harrison 1998);LA. REV. STAT. ANN. § 23:921 (West 1993); MICH. COMP. LAWS ANN. § 445.774(a) (West1993); MONT. CODE ANN. § 28–2-703 (1998 & Supp. 2001); NEV. REV. STAT. ANN. §613.200 (Michie 2000); N.C. GEN. STAT. § 75–4 (1999); N.D. CENT. CODE § 9–08–06(1987); OKLA. STAT. ANN. tit. 15, § 217 (West 1993); OR. REV. STAT. § 653.295 (1989 &Supp. 1998); S.D. CODIFIED LAWS § 53–9-11 (Michie 1990); TENN. CODE ANN. § 47–25–101 (1995); TEX. BUS. & COM. CODE §§ 15.50–15.52 (Vernon Supp. 2001); W. VA. CODEANN. § 47–18–3(a) (Michie 1999); and WIS. STATS. ANN. § 103.465 (West 1997 & Supp.2000).



1996, relatively easy to enforce, as the statute deems a restriction ofsix months or less presumptively reasonable.58 California, by contrast,completely prohibits post-employment non-competes.59 Moreover, Cali-fornia courts void California employee non-competes under Californialaw even when some other state law is designated in the contract.60

One of the few California cases to depart from this choice-of-law ap-proach was the Ninth Circuit’s recent decision in International Busi-ness Machines Corp. v. Bajorek,61 in which the court honored a NewYork law designation by upholding the $900,000 stock option forfeitureof a technical employee who jumped ship to a competitor.

Illinois law falls between these extremes. Illinois follows the com-mon law reasonableness test but with a decided twist: Non-competeagreements can only be used to protect near-permanent customer re-lations, as opposed to ordinary customer relations.62 In the alternative,non-compete agreements in Illinois can only be enforced to protect con-fidential information or trade secrets when an employer demonstratesthat an employee not only has access to such information, but has alsoattempted to use it.63 These rather restrictive standards make it diffi-cult to enforce non-compete agreements in Illinois despite the fact thatIllinois purports to follow the common law rule of reasonableness.64 Notsurprisingly, the Illinois Supreme Court has never explicitly endorsedthis questionable approach.65

As noted, employee restrictive covenants are not limited to non-competition agreements; other post-termination restraints include cus-tomer non-solicitation provisions, employee anti-raiding provisions,and golden handcuffs, which call for forfeiture of post-employment com-pensation. In general, courts favor customer non-solicitation clausesover broad non-compete clauses for the simple reason that customernon-solicitation clauses allow an employee to remain in the industry.To prevail on a non-solicitation claim, an employer must show that the

58. FLA. STAT. ANN. § 542.335 (West 1997).59. CAL. BUS. & PROF. CODE § 16600 (West 1997).60. See Application Group, Inc. v. Hunter Group, Inc., 72 Cal. Rptr. 2d 73 (Cal. Ct.

App. 1998) (rejecting contractual choice of law and instead applying California law toCalifornia employees).

61. 191 F.3d 1033 (9th Cir. 1999).62. See Outsource Int’l, Inc. v. Barton, 192 F.3d 662 (7th Cir. 1999) (enforcing tem-

porary staffing agency employee’s non-compete agreement based upon “near-permanentrelationship” test).

63. See Nationwide Adver. Serv., Inc. v. Kolar, 302 N.E.2d 734 (Ill. App. Ct. 1973)(denying enforcement of employee restrictive covenant in the first Illinois decision toexplicitly adopt “near-permanent customer relationship” test and the alternative “tradesecret access/subsequent use” test).

64. See Curtis 1000 v. Seuss, 24 F.3d 941 (7th Cir. 1994) (comparing traditionalDelaware standard with restrictive Illinois standard in employee non-compete case).

65. See Shapiro v. Regent Printing Co., 549 N.E.2d 793 (Ill. App. Ct. 1989) (Jiganti,J., dissenting) (arguing that Illinois Appellate Court should follow traditional “customercontact” test rather than narrow near-permanent customer relationship test).



employee had sufficient access to customers to earn their trust andconfidence, thereby enabling the employee to erode the employer’s goodwill through post-employment competition. Most courts enforce cus-tomer non-solicitation clauses, though employees can successfully de-fend against such covenants when their customer contact was mar-ginal.66 Sometimes customer non-solicitation restrictions contain ageographic limitation, as is usually the case when route men are in-volved. Customer non-solicitation clauses can be enforced when no geo-graphic limitation is supplied, however, on the theory that a geographiclimitation makes no sense where customers are widely disbursed.67

Even California law may permit enforcement of very narrow customernon-solicitation clauses.68 On the other hand, no-acceptance clauses,which prohibit former employees from accepting customer businessthat they did not solicit, may be void in some jurisdictions.69

Contractual provisions restricting employee raiding are enforcedby many courts, including California, if only solicitation is prohibited.70

The rationale is not always stated, but it appears that workforce sta-

66. See Easy Returns Midwest v. Schultz, 964 S.W.2d 450 (Mo. Ct. App. 1998) (toshow a protectible interest in customer contacts under Missouri law, employer must dem-onstrate sales employee had “special influence” over customers; employer failed to provequality, frequency, or duration of employee’s customer contacts).

67. See ATLA Analytics, Inc. v. Muuss, 75 F. Supp. 2d 773 (S.D. Ohio 1999) (en-forcing employee non-compete that did not include geographic limitation, in light of in-dustry—insurance and financial fraud detection software—and presence of trade secretsin the form of current design, future design, and marketing features of employer’s soft-ware); American Software USA, Inc. v. Moore, 448 S.E.2d 206 (Ga. 1994) (non-competecan dispense with geographic limitations if restricted to customers actually served byemployee; non-compete barring software maintenance and support employee from ser-vicing any clients in the United States was overly broad and unenforceable); DonaldMcElroy, Inc. v. Delaney, 389 N.E.2d 1300 (Ill. App. Ct. 1979) (customer non-solicitationclause requires no geographic limitation); Wolf & Co. v. Waldron, 366 N.E.2d 603 (Ill.App. Ct. 1977) (same holding).

68. See General Commercial Packaging, Inc. v. TPS Package Eng’g, Inc., 126 F.3d1131 (9th Cir. 1997) (packing firm was entitled to enforce narrow non-solicitation clauseprohibiting subcontractor from stealing Walt Disney as a client; barring one from pur-suing only a small part of business, trade, or profession does not violate § 16600); Hol-lingsworth, Solderless, Termino Co. v. Turley, 622 F.2d 1324 (9th Cir. 1980) (remandingfor determination as to whether employee’s customer non-solicitation agreement couldbe enforced under California law to prevent disclosure of employer’s trade secrets); Camp-bell v. Bd. of Trs., 817 F.2d 499 (9th Cir. 1987) (Stanford University employee’s promisenot to “injure the sale” of a career counseling test was not void under § 16600); Boughtonv. Socony Mobil Oil Co., 41 Cal. Rptr. 714 (Cal. Dist. Ct. App. 1964) (contract prohibitinggas station operation on particular real estate parcel did not violate § 16600).

69. See AmeriGas Propane, L.P. v. T-Bo Propane, Inc., 972 F. Supp. 685 (S.D. Ga.1997) (“no acceptance” provisions are void under Georgia law as they overprotect an ex-employer’s interests and unreasonably impact on former employees and the public’s abil-ity to choose the services it prefers).

70. See Loral Corp. v. Moyes, 219 Cal. Rptr. 836 (Cal. Ct. App. 1985) (covenantwhich only barred solicitation, as opposed to hiring, did not violate § 16600); but seeSchmersahl, Treloar & Co. v. McHugh, 28 S.W.2d 345 (Mo. Ct. App. 2000) (holding em-ployee anti-recruitment clause violated Missouri law barring competitive restrictions).



bility and specialized training justify such covenants;71 confidential em-ployee compensation information might also do so.72 The precise word-ing of anti-recruitment clauses is important, as a clause forbiddingsolicitation is not the same as a clause prohibiting hiring.73 Enforce-ment of anti-raiding restrictions can be especially difficult where thelimitation is entered into between business entities rather than be-tween an employer and an employee.74

Golden-handcuff arrangements are sometimes utilized to deteremployee competition, and they are typically measured by the samestandards as employee non-compete agreements.75 Although monthlypayment and stock award forfeitures are common in golden handcuffarrangements,76 stock option forfeitures or repayments are used aswell,77 as in Bajorek, and so are cost-of-training repayments.78 Even

71. See Freund v. E.D.& F. Man Int’l, Inc., 199 F.3d 382 (7th Cir. 1999) (notingtraining as a potential rationale for anti-recruitment clauses); Arpac v. Murray, 589N.E.2d 640 (Ill. App. Ct. 1992) (noting workforce stability and training as rationalesfor anti-recruitment clauses); Loral Corp., 219 Cal. Rptr. 836 (noting workplace stabil-ity and employer’s continued viability as justifications for employee non-interferenceagreements).

72. Cf. Riggs Inv. Corp. v. Columbia Partners, L.L.C., 966 F. Supp. 1250 (D.D.C.1997) (executive’s use of subordinates’ confidential salary information constituted breachof fiduciary duty); Bancroft-Whitney Co. v. Glen, 411 P.2d 921 (Cal. 1966) (similar fidu-ciary duty holding concerning salary information).

73. See Lane Co. v. Taylor, 330 S.E.2d 112 (Ga. Ct. App. 1985) (approving anti-raiding covenant prohibiting both solicitation and hiring of employees); Loral Corp., 219Cal. Rptr. 836 (non-solicitation of employees is permitted under § 16600; hiring prohi-bition would be void).

74. See Emergency Med. Care, Inc. v. Marion Mem’l Hosp., 94 F.3d 1059 (7th Cir.1996) (narrow restriction in no switch agreement between hospital and medical firm didnot prevent hospital from hiring physicians once they joined a new firm); Frank B. Hall& Co. v. Alexander & Alexander, Inc. 974 F.2d 1020 (8th Cir. 1992) (anti-recruitmentagreement between insurance firms did not prevent insurance firm from suing its ownemployees to enforce their restrictive covenants); Szabo Food Serv. v. Cook County, 513N.E.2d 875 (Ill. App. Ct. 1987) (employer’s anti-recruitment agreement with governmentagency did prevent employees from joining new contractor that won same governmentagency’s bid and then assigned the same employees to the same jobs they previouslyheld).

75. See Torrence v. Hewitt Assoc., 493 N.E.2d 74 (Ill. App. Ct. 1986) (measuringpartner forfeiture-for-competition clause under non-compete standards); but see Lucentev. Int’l Bus. Mach., 75 F. Supp. 2d 169 (S.D.N.Y. 1999) (forfeiture-for-competition clauseis enforced without regard to its reasonableness, under New York “employee choice doc-trine,” if employer remains willing to keep employee).

76. See Sarnoff v. Am. Home Prods., 798 F.2d 1075 (7th Cir. 1986) (stock award ininstallments over ten years forfeited for competition under New York law).

77. See Maxxim Med., Inc. v. Michelson, 51 F. Supp. 2d 773 (S.D. Tex. 1999) (findingstock option forfeiture/non-compete void under California law), rev’d on other grounds,182 F.3d 915 (5th Cir. 1999); Cohen v. Lord, Day & Lord, 550 N.E.2d 410 (N.Y. 1989)(forfeiture for competition clause treated as non-compete and deemed void as applied tolawyer).

78. See Heartland Secs. Corp. v. Gerstenblatt, Nos. 99 CIV. 3694, 3858, 2000 WL303274, at *7 (S.D.N.Y. March 22, 2000) (day trader’s training repayment/non-compete,requiring him to pay up to $200,000, was void); Brunner v. Hand Indus., Inc., 603 N.E.2d157 (Ind. Ct. App. 1992) (voiding sliding scale clause requiring training cost repaymentranging from $2,200 to $20,000); Patrick McGeehan, Attempt to Dun a Former Broker



retirement benefits can be subject to non-competition forfeiture agree-ments.79 The problem with golden handcuffs, standing alone of course,is that the new employer may simply compensate the employee for theforfeited sums80 or the employee may simply walk away from them asthe cost of a better opportunity. The safest approach is to include bothnon-compete and post-employment payment/forfeiture provisions inthe same agreement.81

Whatever their form, non-compete agreements have three basicbenefits. First, they allow a former employer to go immediately to courtupon learning that an ex-employee has formed or joined a competitor,as such conduct by itself triggers the agreement;82 the ex-employer doesnot have to wait for more specific evidence of competitive wrongdoing,as in many trade secret and business tort cases.83 Second, courts arefar more willing to grant injunctive relief when they face agreed-uponrestrictions. This is especially true with respect to the length of therestriction; courts can fashion cooling-off or head-start injunction pe-riods on their own, even without a contract,84 but they are reluctant to

Costs Dean Witter $1.8 Million, WALL. ST. J., Oct. 23, 1997, at B4 (reporting adversearbitration award arising out of employer’s attempt to require repayment of trainingexpenses pursuant to non-compete).

79. See Clark v. Lauren Young Tire Center Profit Sharing Trust, 816 F.2d 480 (9thCir. 1987) (non-compete forfeiture clause is valid under ERISA so long as the plan pro-vides that benefits accrued after ten years of service cannot be forfeited); Noell v. Am.Design, Inc., 764 F.2d 827 (11th Cir. 1985) (same holding); Lojek v. Thomas, 716 F.2d 675(9th Cir. 1983) (same holding); Hepple v. Roberts & Dybdahl, Inc., 622 F.2d 962 (8th Cir.1980) (same holding); Capsonic Group v. Plas-Met Corp., 361 N.E.2d 41 (Ill. App. Ct.1977) (profit sharing agreement, which required repayment in the event of competitionwithin three years, was not a non-compete agreement); Van Pelt v. Berefco, Inc., 208N.E.2d 858 (Ill. App. Ct. 1965) (pre-ERISA decision enforcing retirement benefitsforfeiture-for-competition clause under Massachusetts law).

80. See Cohen, 173 F.3d 63 (new employer gave employee guaranteed base salaryof $750,000 and signing bonus of $2 million to cover employee’s loss of income in the eventsix-month restrictive covenant was enforced by former employer); P.A. Bergner & Co. v.Martinez, 823 F. Supp. 151 (S.D.N.Y. 1993) (discussing proposed agreement to indemnifyexecutive against $1,000,000 compensation loss if he joined competitor).

81. See Gateway 2000, Inc. v. Livak 19 F. Supp. 2d 748 (E.D. Mich. 1998) (computerassembly firm granted preliminary injunction enforcing six-month employeeseparation/non-compete agreement paying salary and benefits for the six-month period).

82. See Torrence, 493 N.E.2d 74 (mere employment by competitor, without more,triggered non-compete forfeiture/liquidated damages clause).

83. But see Shapiro v. Regent Printing Co., 549 N.E.2d 793 (Ill. App. Ct. 1989)(noting trial court issued 60-day injunction to remedy employee’s breach of fiduciaryduty); Cross Wood Prods., Inc. v. Suter, 422 N.E.2d 953 (Ill. App. Ct. 1981) (recognizingtrial court’s authority to issue injunctive relief to remedy employee’s breach of fiduciary);Shorr Paper Prods., Inc. v. Frary, 392 N.E.2d 1148 (Ill. App. Ct. 1979) (a court need notwait until an injury occurs before granting injunctive relief in an employee restrictivecovenant case); Armour & Co. v. United Am. Food Processors, Inc., 345 N.E.2d 795 (Ill.App. Ct. 1976) (a court need not wait until an injury occurs before granting injunctiverelief in an employee trade secret misappropriation case).

84. See Brunswick Corp. v. Outboard Marine Corp., 404 N.E.2d 205 (Ill. 1980) (ap-proving head start trade injunction concept); Schulenburg v. Signatrol, Inc., 212 N.E.2d865 (Ill. 1965) (same).



do so.85 By contrast, when a contract is present, courts at times willextend the restriction beyond the contractual period, depending uponthe equities.86 Third, non-compete agreements are a direct and simpledeterrent everyone in business understands and fears. Many employerssimply take a pass when they learn an attractive employment candi-date is subject to a non-compete agreement.87

2. Cases

A. BUSINESS INTELLIGENCE SERVICES V. HUDSON

Any number of cases reflects how courts apply these familiar non-compete principles in high tech settings, but a few will suffice. In Busi-ness Intelligence Services, Inc. v. Hudson,88 a British citizen, Hudson,joined Business Intelligence Services (BIS) and progressed from soft-ware programmer to senior programmer and then to consultant. Hud-son’s duties included developing and installing software products andproviding consulting services to financial institution customers usingBIS’s software for international multi-currency transactions. Hudsonhad been given a non-compete at the outset of her employment withBIS, but she apparently had never signed it. BIS later provided herwith another non-compete, which Hudson did sign, even though shewas contemplating a move to a rival firm, MTI, which was run by aformer BIS employee. Hudson subsequently announced her intentionto join MTI but agreed to a four-week notice period.

85. See EarthWeb, Inc. v. Schlack, 71 F. Supp. 2d 299 (S.D.N.Y. 1999) (refusinginevitable disclosure trade secret injunction on the ground the former employer shouldhave negotiated an enforceable non-compete), rev’d on other grounds, 205 F.3d 1322 (2dCir. 2000).

86. See JAK Prod., Inc. v. Wiza, 986 F.2d 1080 (7th Cir. 1993) (non-compete periodcan be extended by injunction beyond contract’s stated term where employee violatescontract); Overholt Crop. Ins. Serv. Co. v. Travis, 941 F.2d 1361 (8th Cir. 1991) (approvingdistrict court’s extension of restrictive covenant period by injunction); Thermatool Corp.v. Borzym, 575 N.W.2d 334 (Mich. Ct. App. 1998) (non-compete can be extended beyondits stated expiration date to avoid injustice); Preferred Meal Sys., Inc., 557 N.E.2d 506(remanding case to trial court to consider whether equities required extension of em-ployee restrictive covenant); Agrimerica, Inc. v. Mathes, 557 N.E.2d 357 (Ill. App. Ct.1990) (remanding case to trial court to determine whether the equities required extend-ing the ex-employee’s two-year, non-solicitation covenant, in view of ex-employee’s on-going breach of contract, to allow ex-employer to “win back” former customers); Elec.Support Sys., Inc. v. Schattke, 388 N.E.2d 787 (Ill. App. Ct. 1979) (in certain circum-stances injunctive relief may be appropriate even after the expiration of the contractualnon-compete period); but see Wesley-Jessen, Inc. v. Armento, 519 F. Supp. 1352 (N.D. Ga.1981) (under Georgia law, the pendency of litigation does not toll running of non-competeperiod called for in employment contract).

87. See Mark D. Risk, When the Tango Takes Three: Restrictive Covenants Recon-sidered, EMPLOYMENT RIGHTS AND RESPONSIBILITIES COMMITTEE NEWSLETTER, AMERI-CAN BAR ASSOCIATION SECTION OF LABOR AND EMPLOYMENT LAW, Vol. 5, No. 2, at 10(Fall 2000) (noting that even overbroad, unenforceable restrictive covenants discourageemployee mobility, as new employers are often unwilling to risk litigation).

88. 580 F. Supp. 1068 (S.D.N.Y. 1984).



The district court enforced Hudson’s one-year restrictive covenant.The court emphasized that BIS and MTI were head-to-head competi-tors; indeed, the top employee at MTI had designed BIS’s internationalcurrency program while employed with BIS and had since designed acompeting product for MTI. The court found that BIS’s source code con-stituted a trade secret and noted that BIS had developed confidentialinformation about its customers and potential customers—all infor-mation to which Hudson had had access while with BIS. The court alsonoted that BIS had initiated litigation for trade secret misappropriationagainst another ex-employee who had joined MTI. Under these circum-stances, the court concluded BIS would suffer irreparable harm if Hud-son were to disclose BIS’s information to MTI, a scenario the courtviewed as “likely, if not inevitable and inadvertent.”89 The one-yearrestriction struck the court as reasonable in light of the time and effortit had taken BIS to develop its software and customer relations, andthe worldwide prohibition was deemed reasonable since BIS did busi-ness worldwide. The district court subsequently rejected Hudson’sfraud defense and made the injunction permanent, even though theeffect of its final order would preclude Hudson from securing employ-ment in the United States due to her visa status.90

B. KRAMER V. ROBEC, INC.A similar analysis was used in Kramer v. Robec, Inc.91 In this case,

an employee signed a three-year agreement not to compete with Robec’sbusiness anywhere in the United States. The employee, Kramer, man-aged a project to develop a commercially viable computer network sys-tem but had no sales, marketing, or customer responsibilities. Kramersubsequently sought employment with Artisoft to oversee the plans anddevelopment of a competitive product. The court rejected Kramer’s ar-gument that Robec had no legally protective interest simply becausethe technology at issue was owned by Emex, a limited partnership thatlicensed the technology to Robec and was sixty-five-percent owned byRobec; the court deemed Robec’s business interest in Emex a sufficientprotective interest in and of itself. The court also rejected Kramer’sgeographic restriction challenge, noting that Robec did business nation-wide. The court modified the covenant from three years to two, however,in view of the “quick pace of obsolescence and technological innovation”in the computer industry—“often 12 to 18 months.”92 Kramer’s twentyyears of experience in the inter-computer communications field also in-fluenced the court’s decision to reduce the restriction.

89. Id. at 1072 (emphasis added).90. See Business Intelligence Servs., Inc. v. Hudson, No. 84 Civ. 0164, 1984 WL

555, at *1 (S.D.N.Y. June 21, 1984).91. 824 F. Supp. 508 (E.D. Pa. 1992).92. 824 F. Supp. at 512–13.



C. NATIONAL BUSINESS SERVICES, INC. V. WRIGHT

Kramer was subsequently followed partially in another high techcase, National Business Services, Inc. v. Wright.93 Wright entered into anon-compete agreement as an employee of National Business, which soldinformation products and services to the advertising specialty and pro-motional products industry. National Business had hired Wright tolaunch a new Internet product. Wright was in charge of sales to thirty-eight of National Business’s largest customers, which were locatedthroughout the United States. By virtue of her key sales position, Wrighthad access to confidential information about these customers and exten-sive and intimate contact with these and other customers. Wright roseto prominence in the industry, and her former employer, Impact, soughtto hire her away from National Business at a substantial salary increase.Impact also promised to indemnify and defend Wright in the event Na-tional Business sought to enforce her restrictive covenant.

National Business subsequently sued Wright, and the district courtgranted a permanent injunction based upon her non-compete. The courtfound the one-year contractual restriction reasonable, though it acknowl-edged that one year was a long time in the relatively fast-paced Internetadvertising industry. The court also found the nationwide limitation rea-sonable, relying on Kramer, because National Business and Impact com-peted nationwide. The court emphasized, “Transactions involving theInternet, unlike traditional ‘sales territory’ cases, are not limited by stateboundaries.”94 The court concluded that National Business’s customergoodwill and confidential information were legitimate proprietary inter-ests warranting protection. The court also concluded that Wright wouldsuffer little harm under its permanent injunction, as Impact had prom-ised to indemnify her and she was prominent in the industry.

D. SPRINT CORP. V. DEANGELO

While rapidly evolving technology failed as a defense in Kramerand Wright, it prevailed in Sprint Corp. v. DeAngelo.95 Sprint sold tele-communication services, including Internet access and support sys-tems. DeAngelo signed a non-compete with Sprint and served as assis-tant vice president for Internet services, a position in which hesupervised the development and marketing of Sprint’s Internet tele-communications services in the United States. DeAngelo developedstrategic, marketing, personnel, pricing, and customer information inthis capacity. He subsequently signed to join IXC, which competed withSprint in the long distance telephone business and was developing anInternet business.

93. 2 F. Supp. 2d 701 (E.D. Pa. 1998).94. Id. at 708.95. 12 F. Supp. 2d 1188 (D. Kan. 1998).



Sprint sought to enforce DeAngelo’s non-compete but ran into aproblem: The agreement only prohibited DeAngelo from engaging “inthe long distance business or performing functions relating to long dis-tance services.”96 DeAngelo argued, and the district court agreed, thatthe value-added Internet services business was not long distance busi-ness or even related to long distance services because of differences intheir purposes, regulations, pricing structures, and customer segments.Invoking the traditional rule that non-competes should be strictly con-strued, the court concluded that the agreement was ambiguous becausethe Internet landscape had rapidly evolved in the three years since theparties had executed the non-compete. The court, therefore, deniedSprint’s preliminary injunction request.

E. EARTHWEB, INC. V. SCHLACK

The Internet’s fast-paced evolution also played a key defense rolein EarthWeb, Inc. v. Schlack.97 The defendant, Schlack, before joiningEarthWeb, had worked in the publishing industry for sixteen years,including stints as senior editor and/or editor-in-chief of several printmagazines, such as Byte and Webb Builder. Schlack worked forEarthWeb for eleven months and had overall editorial responsibilitiesfor the content on EarthWeb’s Web sites. Schlack left EarthWeb to joinIDG, the world’s leading provider of IT print-based information becausehe was offered a significant increase in compensation. EarthWeb re-sponded by suing to enforce Schlack’s non-compete agreement.

In rejecting the non-compete claim, the district court relied heavilyon the unreasonableness of a one-year restriction in the rapidly chang-ing Internet field.98 Schlack’s position with EarthWeb, the court noted,had been dependent on his keeping abreast of daily changes in contenton the Internet. The court’s view was buttressed by the narrow scopeof Schlack’s non-compete, which only prohibited him from joining a firmwhose “primary business” was to provide information technology pro-fessionals with an online reference library or a directory of third partytechnology, software, or developer resources. Apart from the fact thatSchlack’s new firm had only a de minimus presence in these areas, thecourt stressed that EarthWeb was simply speculating that Schlack’snew employer might enter these areas in the next few months—a longtime indeed in the Internet world. Finally, the court rejectedEarthWeb’s unique services argument under Ticor Title Insurance Co.v. Cohen,99 ruling that high value to the ex-employer is not enough.

96. Id. at 1190.97. 71 F. Supp. 2d 299 (S.D. N.Y. 1999), remanded, 205 F.2d 1322 (2d Cir. 2000).98. Id. at 302–03.99. 173 F.3d 63 (2d Cir. 1999).



The court ruled that EarthWeb also had to show Schlack’s replacementwas impossible or that his departure would cause irreparable harm.

F. CAP GEMINI AMERICA, INC. V. JUDD

Another representative restrictive covenant case is Cap GeminiAmerica, Inc. v. Judd.100 The employer, Cap Gemini, provided computersoftware programming and analytical services for clients. Judd wasCap Gemini’s Los Angeles branch manager. Judd and Cap Gemini be-came dissatisfied with one another over Judd’s responsibilities andother matters. Fearful Judd would become a competitor, Cap Geminigave Judd a new position and had Judd sign an agreement in an at-tempt to resolve their disputes. The agreement, which stated that Cali-fornia law governed, included an employee non-solicitation clause, buta non-compete provision was deleted. Judd later formed a competingfirm and then resigned from Cap Gemini shortly thereafter. The partiesagreed to a release and payment of a $23,000 bonus to Judd, but CapGemini subsequently refused to pay the bonus when Judd solicitedCap Gemini employees in violation of his anti-recruitment agreement.Cap Gemini sued to enforce the covenant and for other relief, and Juddcounter-claimed, asserting breach of contract, fraud, and other theo-ries. The trial court found that Cap Gemini had never intended to giveJudd a new position and therefore voided both the employment agree-ment and the release on fraud grounds. The trial court then awardedJudd $3,000,000 in compensatory damages and $1,000,000 in punitivedamages, plus Judd’s $23,000 bonus.

The Indiana Court of Appeals, applying California law, affirmedthe trial court’s finding that Cap Gemini had been guilty of fraud inprocuring Judd’s employment agreement and release but reversed thecompensatory damages awards as speculative. In view of the lack ofcompensatory damages, the court also reversed the punitive damagesaward, although the court approved the $23,000 bonus judgment. De-spite having determined that the employment agreement containingthe non-interference clause had been fraudulently obtained, the courtaddressed Judd’s argument that the employee anti-recruitment clausewas void under section 16600 of the California Business and Profes-sions Code. The court in Judd distinguished Loral Corp. v. Moyes,101

emphasizing that the clause in Loral was designed to maintain a stableworkforce in a small way with no significant impact on trade or busi-ness because it prohibited the defendant employee from soliciting em-ployees but allowed him to receive and consider applications. By con-trast, the clause in Judd prohibited the defendant from soliciting orinducing fellow employees from leaving their employment. The court

100. 597 N.E.2d 1272 (Ind. Ct. App. 1992).101. 219 Cal. Rptr. 836 (Cal. Ct. App. 1985).



in Judd took offense at the notion that the non-interference clause pre-cluded Judd from merely accepting applications from Cap Gemini em-ployees who responded to Judd’s blind newspaper ads in Indianapolis.It therefore concluded the restriction was unenforceable under Califor-nia law. Finally, the court rejected Cap Gemini’s claim that Judd hadtortiously interfered with non-compete agreements signed by seven In-diana employees whom he had recruited through his ads, holding thenon-competes were overly broad and thus void.

G. APPLICATION GROUP, INC. V. HUNTER GROUP, INC.California law was also at issue in the potentially far-reaching case

of Application Group, Inc. v. Hunter Group, Inc.102 Application Group,Inc. (AGI), and Hunter were frequent combatants in employee raidingskirmishes over high tech computer consultants. When Hunter sued anex-employee and AGI in Maryland state court, AGI retaliated with aCalifornia state court declaratory judgment action. Hunter lost theMaryland case, but AGI pressed on with its California case, seeking tobar Hunter once and for all from restricting AGI in recruiting and hir-ing employees in California. In view of the continuing battle betweenHunter and AGI, as well as past notice letters from Hunter to AGI, theCalifornia Court of Appeal held that a justifiable controversy existedon the important question of mobile computer consultants who workfor virtual employers in California. The court concluded that section16600 represented a fundamental California public policy that trumpedMaryland choice of law designations in Hunter’s employment con-tracts—even for non-California residents so long as they worked inCalifornia, regardless of their “precise degree of involvement in Cali-fornia projects.”103 To hold otherwise, the court stressed, “would havebeen to allow an out-of-state employer/competitor to limit employmentand business opportunities in California.”104

H. INTERNATIONAL BUSINESS MACHINES CORP. V. BAJOREK

More recently, in International Business Machines Corp. v. Bajo-rek,105 the Ninth Circuit seemed to reach the opposite result in enforc-ing a choice-of-law clause designating another state’s law in a Califor-nia employee case. Bajorek had worked for International BusinessMachines (IBM) for twenty-five years, mostly in California but also fora few years in Minnesota and New York. Bajorek’s stock option agree-ment with IBM contained a cancellation clause stating he would repayhis gains if he worked for a competitor within six months after exercis-ing his options. Bajorek quit and joined a competitor, and IBM thereforedemanded repayment of over $900,000 in option gains that Bajorek had

102. 72 Cal. Rptr. 2d 73 (Cal. Ct. App. 1998).103. Id. at 85.104. Id. at 86.105. 191 F.3d 1033.



received. New York-based IBM sued for breach of contract and fraud inNew York, and Bajorek sued for declaratory relief in California. TheNew York action was transferred to California; the California federaldistrict court dismissed the New York case and granted Bajorek’s re-quest for a declaratory judgment voiding the cancellation clause undersection 16600.

The Ninth Circuit reversed. The court of appeals found the stockoption agreement had a sufficient connection to New York to warrantenforcement of the New York choice-of-law provision in the agreement,noting that IBM was headquartered there and had a legitimate interestin consistent interpretations of its stock option plan under New Yorklaw.106 The court also held that section 16600 did not apply on the nar-row facts presented because Bajorek was free to work in his professionand in the same industry and to keep the money so long as he simplydid not work for a competitor within the six-month period. Indeed, thecourt pointed out that “Bajorek could have kept the money and gone towork for a competitor immediately upon quitting, had he elected toexercise his stock options six months before he quit.”107 The court there-fore avoided the choice-of-law controversy in holding that Bajorek hadto repay the money. Interestingly, despite an exhaustive review of Cali-fornia conflicts of law principles, the Ninth Circuit did not discuss oreven cite Hunter, which had been decided only nineteen months earlier.

I. NET2PHONE V. SINCLAIR

The same California exception recently surfaced again in anotherhigh tech case, Net2Phone v. Sinclair.108 New Jersey-based Net2Phonesued California-based Dialpad in New Jersey federal court for luringaway employees Sinclair and Doyle. Both employees had signed one-year non-compete agreements designating New Jersey law as govern-ing, even though they worked for Net2Phone in California. Sinclairbecame Dialpad’s business development director, and Doyle becameDialpad’s executive vice president. Net2Phone argued that Sinclair andDoyle had had access to confidential information in the form of businessstrategies and were violating their agreements by virtue of their newemployment with Dialpad. Dialpad responded with a California actionof its own, seeking declaratory relief, as did Sinclair and Doyle in sepa-rate California declaratory judgment actions. The New Jersey federalcourt issued a preliminary injunction against Sinclair and Doyle before

106. In fact, IBM had made a similar stock forfeiture claim under New York lawagainst another employee in Int’l Bus. Mach. Corp. v. Martson, 37 F. Supp. 2d 613(S.D.N.Y. 1999) (stock options are not “wages” and may be forfeited under New York“employee choice doctrine”), a case decided seven months before Bajorek that the NinthCircuit did not note.

107. 191 F.3d at 1041.108. See Wylie Wong, Tech Worker Case Highlights Tight Job Market, at http://

news.cnet.com/news (visited Nov. 4, 2000) (describing Net2Phone litigation).



the California courts made any substantive rulings. The defendantsappealed to the Third Circuit, but the case ended with a confidentialsettlement shortly thereafter.

J. ADVANCED BIONICS CORP. V. MEDTRONIC, INC.Yet another variation on the California exception recently arose in

Advanced Bionics Corp. v. Medtronic, Inc.109 Here, a Minnesota em-ployee, Stultz, was hired by Medtronic to work in its marketing de-partment. Stultz signed a two-year non-compete agreement that calledfor the contract to be governed by the law of the state in which Stultzworked: Minnesota. On June 7, 2000, Stultz quit Medtronic and wentto work on the same day for Advanced Bionics in California. More im-portantly, on the same day, Stultz filed a declaratory relief action inCalifornia state court, seeking to invalidate his non-compete agreementpursuant to section 16600. On June 8, Stultz moved for a temporaryrestraining order to prevent Medtronic from taking any action, otherthan in the California case, to enforce Stultz’s non-compete agreement.In response, on June 8, 2000, Medtronic removed the California statecourt action to federal court, and on June 9, 2000, Medtronic broughtits own injunctive relief action against Stultz in Minnesota state court.

These initial tactical maneuvers were just the beginning, however.The California federal district court remanded Stultz’s case back to theCalifornia state court, and the California state court then issued anorder barring Medtronic from proceeding with its Minnesota state courtaction. After a long and complicated parallel litigation battle, the Cali-fornia state court restraining order was appealed to the CaliforniaCourt of Appeal. The court of appeal affirmed the restraining orderbecause the California state court action was the first-filed case. Thecourt also found that the case was controlled by Application Group, Inc.v. Hunter Group, Inc.110 on the question of section 16600’s applicationto a California employee who had signed a non-compete agreement des-ignating foreign law. The court in Medtronic therefore remanded thematter for further proceedings on the merits. Accordingly, Stultz wasable to control the forum and the choice of law by his filing strategy,and the ultimate outcome of his non-compete dispute on remand seemsfairly plain under section 16600.

3. SummaryIn summary, high tech employees are subject to the same post-

employment contract constraints as other employees. Courts are opento reducing or even eliminating limitations where information or cus-tomer contacts have quickly diminishing value, as in Kramer andEarthWeb, but this is true in all cases when such facts are present, not

109. 105 Cal. Rptr. 2d 265 (Cal. Ct. App. March 22, 2001).110. 72 Cal. Rptr. 2d 73 (Cal. Ct. App. 1998).



just in high tech employee disputes. In addition, as EarthWeb andDeAngelo underscore, rapidly evolving technology can create ambigui-ties in narrow non-compete agreements that were drafted years beforedisputes arise. When California law applies, section 16600 can voidcertain covenants for high tech employees, as is the case for all Cali-fornia employees (as Hunter shows). The only significant questionseems to be how courts should apply choice-of-law provisions callingfor non-California law to govern California employees, as in Hunter,Bajorek, Net2Phone, and Medtronic.111 This issue will remain contro-versial until the California Supreme Court expresses its view.112

C. Trade Secret Claims against Employees1. General PrinciplesAs noted, trade secret claims are recognized in all jurisdictions in

the United States. Most jurisdictions, and especially those followingthe UTSA, have embraced a very broad definition of trade secrets, en-compassing both technical and non-technical information. In general,to qualify for trade secret status, information must be generally un-known in the industry, must give the employer an economic advantageby virtue of its secrecy, and must be subject to reasonable secrecy ef-forts.113 A wide range of remedies are available for actual or threatenedtrade secret misappropriation, including damages, reasonable royal-ties, and injunctive relief.114

111. See Baxter Int’l, Inc. v. Morris, 976 F.2d 1189 (8th Cir. 1992) (disapprovingdistrict court’s ruling voiding employee’s non-compete under § 16600; employee no longerworked in California and district court therefore should have honored contractual choiceof law clause designating Illinois law as governing); SG Cowen Sec. Corp. v. Messih, No.00CIV.3228, 2000 WL 633434, at 1 (S.D.N.Y. May 17, 2000) (denying injunctive reliefpending arbitration, in part on the ground that § 16600 likely applied to California-basedhigh tech investment banker, despite New York law designation clause in the underlyingemployment agreement); Maxxim Med., Inc. v. Michelson, 51 F. Supp. 2d 773 (S.D. Tex.1999) (stock option forfeiture/non-compete was void under § 16600), rev’d on othergrounds, 182 F.3d 915 (5th Cir. 1999).

112. See Nedlloyd Lines B.V. v. Superior Court, 834 P.2d 1148 (Cal. 1992) (adopting§ 187 of the RESTATEMENT (SECOND) CONFLICT OF LAWS in a case not involving § 16600).

113. See Serv. Ctrs. of Chicago, Inc. v. Minogue, 535 N.E.2d 1132 (Ill. App. Ct. 1989)(noting this definition under the Illinois version of the Uniform Trade Secrets Act).

114. See Cacique, Inc. v. Robert Reiser & Co., 169 F.3d 619 (9th Cir. 1999) (holdingthat reasonable royalty is available under the California version of the UTSA only whenactual damages and unjust enrichment are unprovable); Caliper Technologies Awarded$52.6 Million in Suit Against Aclara, WALL ST. J., Oct. 31, 2000, at B6 (reporting tradesecret misappropriation jury verdict in computer chip case based upon intellectual prop-erty lawyer’s simultaneous representation of rivals that allegedly resulted in one firm’strade secrets being used to secure a patent for the other); ConAgra Foods, Inc.: Appealof $20 Million Award Vowed in Trade-Secrets Suit, WALL. ST. J., Oct. 19, 2000, at B20(noting Arkansas state court jury verdict of $20 million against ConAgra for stealing feedformula and recruiting employees from Tyson Foods); Charles McCoy, Avant! Corp. IsHit with Judgment of $31.4 Million, WALL ST. J., Nov. 17, 1997, at B11 (reporting $31million trade secret misappropriation verdict and noting related felony indictmentagainst Avant! Corp. for industrial espionage).



The most difficult problem in many trade secret cases is distin-guishing between an employee’s general skill and knowledge, whichthe employee has the right to use after leaving, from particularizedemployer knowledge, which warrants trade secret protection. This is-sue lies at the heart of trade secret inevitable disclosure claims. Ininevitable disclosure cases, the former employer alleges, in essence,that the employee knows too much and therefore cannot effectively per-form in a new, competitive position without at least inadvertently draw-ing upon prior, proprietary knowledge of the ex-employer.115 Inevitabledisclosure claims have become widely accepted throughout the UnitedStates, especially since the Seventh Circuit’s 1995 decision in PepsiCo,Inc. v. Redmond.116 The doctrine is much older than the PepsiCo deci-sion,117 however, and it has been employed in a variety of circumstancesthat typically involve engineers or other technical employees.118

California, the most populous state and the home of Silicon Valley,is presently a battleground over the inevitable disclosure doctrine.Many assume the doctrine will not take root in California, given section16600’s strong prohibition of non-compete restrictions. While someCalifornia federal courts have rejected the doctrine,119 other Californiafederal courts have accepted it120 or at least not questioned it.121 Addingto the confusion, the California Court of Appeal embraced the doctrinein Electro Optical Industries, Inc. v. White,122 only to have the Califor-

115. See Strata Mktg., Inc. v. Murphy, 740 N.E.2d 1166 (Ill. App. Ct. 2000) (inevitabledisclosure trade secret claim was properly alleged based upon assertion that ex-employeecould not perform new job without disclosing former employer’s secrets).

116. 54 F.3d 1262 (7th Cir. 1995) (affirming six-month injunction, completely bar-ring marketing executive from working for a competitor, based on inevitable disclosuretheory).

117. See B.F. Goodrich Co. v. Wohlgemuth, 192 N.E.2d 99 (Ohio Ct. App. 1963) (rec-ognizing early form of inevitable disclosure claim); E.I. duPont de Nemours & Co. v.American Potash & Chem. Corp., 200 A.2d 428 (Del. Ch. 1964) (mentioning inevitabledisclosure in following Wohlgemuth).

118. See Union Carbide Corp. v. UGI Corp., 731 F.2d 1186 (5th Cir. 1984) (vice pres-ident and general manager/gas products); FMC Corp. v. Varco Int’l, Inc., 677 F.2d 500(5th Cir. 1982) (engineering manager); Hyman Cos., Inc. v. Brozost, 119 F. Supp. 2d 499(E.D. Pa. 2000) (general counsel); Emery Indus, Inc.. v. Cottier, 202 U.S.P.Q. (BNA) 829(S.D. Ohio 1978) (chemical engineer); Air Prods. and Chems., Inc. v. Johnson, 442 A.2d1114 (1982) (petroleum engineer).

119. See Danjaq LLC v. Sony Corp., 50 U.S.P.Q.2d (BNA) 1638 (C.D. Cal. 1999) (stat-ing without analysis that inevitable disclosure is not the law in California or the NinthCircuit); Bayer Corp. v. Roche Molecular Sys., Inc., 72 F. Supp. 2d 1111 (N.D. Cal. 1999)(finding inevitable disclosure doctrine runs afoul of California public policy reflected in §16600).

120. See Excel Dowel & Wood Prods., Inc. v. Kavanaugh, No. SA CV 00–577 DOC(C.D. Cal. June 26, 2000) (granting trade secret preliminary injunction to prevent inev-itable disclosure of identities of former employer’s overseas suppliers).

121. See Computer Sciences Corp. v. Computer Assoc. Int’l, Inc., Nos. CV 98–1374-WMB SHX, CV 98–1440-WMB SHX, 1999 WL 675446, at *1 (C.D. Cal. Aug. 12, 1999)(finding inevitable disclosure doctrine irrelevant on money damages summary judgmentmotion).

122. 90 Cal. Rptr. 2d 680 (Cal. Ct. App. 1999).



nia Supreme Court de-publish the Electro Optical decision, thereby rob-bing it of precedential value. Nevertheless, California is a UTSA state,and there is no reason why this commonsense doctrine should not befollowed. On the other hand, given the strong public policy in favor ofemployee mobility in California and given the extraordinary success ofSilicon Valley, the inevitable disclosure doctrine will probably be ap-plied with caution by California courts, as shown by the recent Cali-fornia state trial court preliminary injunction ruling in Intel Corp. v.Broadcom Corp.,123 which is discussed later. This is particularly likelywhere the trade secret in question has a limited useful life, as is oftenthe case in high tech industries.124

The main defenses of special relevance in high tech fields are gen-eral skill and knowledge and reverse engineering. General skill andknowledge, as noted, are often difficult to distinguish from particu-larized, proprietary information that can be protected under trade se-cret law. Nevertheless, as a rule of thumb, the longer an employee hasbeen in a particular industry, the more likely the court will give se-rious thought to the notion that the value of the employee’s generalskill and knowledge outweighs the claimed trade secret. Reverse en-gineering is, in a sense, a related concept in that it suggests that aperson reasonably skilled in the industry could develop a competingproduct simply by examining or disassembling it. These are, of course,highly fact-sensitive inquiries.

2. CasesA. DOUBLECLICK, INC. V. HENDERSON

In high tech circles, two inevitable disclosure cases have attracteda fair amount of attention: DoubleClick, Inc. v. Henderson125 andEarthWeb v. Schlack.126 DoubleClick involved two employees who con-spired to leave DoubleClick, an Internet advertising firm. The courtfound that the employees had had access to significant confidential in-formation in the form of revenue projections, future project plans, pric-ing and product strategies, and databases containing client informationthat had been collected by DoubleClick. The court further found thatthe employees had not only begun competing before quitting, but hadalso misappropriated at least some of this information before departing.Against this backdrop, it was only a small step for the court to concludethat these employees would inevitably disclose or use this and otherinformation to which they had accessed while DoubleClick employees.

123. No. CV 788301 (Super. Ct. Santa Clara County, Cal. May 25, 2000).124. See Bridgestone/Firestone, Inc. v. Lockhart, 5 F. Supp. 2d 667 (S.D. Ind. 1998)

(general familiarity with past employer’s financial data had limited and diminishing po-tential value as compared to a knowledgeable outsider’s estimates, and thus inevitabledisclosure injunction was not warranted).

125. No. 116914/97, 1997 WL 731413, at *1 (N.Y. Sup. Ct. 1997).126. 71 F. Supp. 2d 299 (S.D. N.Y. 1999).



The DoubleClick court’s main difficulty was fashioning appropriateinjunctive relief. Because the defendants had previously worked forcompanies, placing advertisements in other media, the court was notwilling to completely prevent them from working in the advertisingindustry, particularly since some companies engaged in Internet ad-vertising as only a marginal part of their businesses. The court alsorecognized that in the rapidly evolving Internet advertising industry,secret information would likely have quickly diminishing value. Thecourt therefore limited the preliminary injunction to six months.

B. EARTHWEB V. SCHLACK

In EarthWeb, discussed earlier, the employer not only sued Schlackon non-compete grounds, it also argued in the alternative that Schlackwould inevitably disclose trade secrets in the form of information re-lating to strategic content planning, licensing agreements and acqui-sitions, advertising, and technical knowledge. The court appreciatedthe inevitable disclosure doctrine’s relevance where the new employercompeted directly with the ex-employer and the transient employeepossessed highly confidential or technical knowledge concerning manu-facturing processes, marketing strategies, and the like. The court alsorecognized that PepsiCo and several New York decisions,127 includingDoubleClick, had acknowledged this doctrine. Nonetheless, the courtcharacterized DoubleClick as representing “a high water mark for theinevitable disclosure doctrine in New York,”128 emphasizing thatDoubleClick rested heavily on evidence of the defendants’ overt theft oftrade secrets and breaches of fiduciary duty. The EarthWeb court thencautioned that an expansive view of the inevitable disclosure doctrineran counter to New York’s strong policy against non-compete agree-ments and could have had a chilling effect on employees changing jobs.The court found that EarthWeb had failed to demonstrate an imminentand inevitable risk of trade secret disclosure warranting injunctive reliefpartly because EarthWeb’s Web sites themselves revealed EarthWeb’sstrategies and partly because Schlack did not have access to some of theasserted trade secrets. Nevertheless, a careful reading of EarthWebreadily reveals that the court did not hold that inevitable disclosure

127. See Int’l. Paper Co. v. Suwyn, 966 F. Supp. 246 (S.D.N.Y. 1997) (rejecting inevi-table disclosure theory on the facts presented; wood and building products are “compara-tively low-technology industries” and executive merely had general managerial expertise);Lumex, Inc. v. Highsmith, 919 F. Supp. 624 (E.D.N.Y. 1996) (applying inevitable disclosurerule in health fitness industry because there was a “high risk” of disclosure in that “copycat”/“cloning” industry); Bus. Intelligence Serv., Inc. v. Hudson, 580 F. Supp. 1068 (S.D.N.Y.1984) (computer software programmer’s non-compete agreement enforced; trade secret dis-closure was likely, “if not inevitable and inadvertent,” given competition between old andnew employers); Eastman Kodak Co. v. Powers Film Prods., 179 N.Y.S. 326 (N.Y. App. Div.1919) (enforcing non-compete covenant where departing employee possessed informationabout Kodak secret film manufacturing processes and formulae that he would have inevi-tably used in performing his new job duties for competitor).

128. 71 F. Supp. 2d at 310.



was never available as a theory; the court simply said that the doctrinecalled for careful and narrow application.

C. PSC, INC. V. REISS

EarthWeb was followed recently by another high tech inevitabledisclosure case, PSC, Inc. v. Reiss.129 PSC and Optimal Robotics werepartners in developing and manufacturing Optimal U-Scan, an auto-mated self-checkout system for use in grocery stores and other retailestablishments. Optimal Robotics developed the software and designedthe configuration of the partnership’s scanning unit, and PSC manu-factured and assembled the component parts. PSC’s key salesman,Reiss, had sold Optimal U-Scan units for the partnership for severalyears. The PSC/Optimal Robotics partnership collapsed when theycould not agree on renewal terms, and Reiss later jumped ship to Op-timal Robotics. PSC sought a preliminary injunction on inevitable dis-closure grounds since Reiss had signed no restrictive covenant.

The district court relied heavily on EarthWeb in rejecting PSC’sinevitable disclosure claim. The court ruled that Reiss’s minimal accessto and input in the preparation of PSC’s proposed rival scanning unitdid not justify injunctive relief. The court stressed that Reiss was nota scientist, an engineer, or a computer specialist. What little he didhave to offer from a technical standpoint appeared, to the court, to benothing more than general knowledge in the industry. Reiss’s minimalknowledge also struck the court as having little value to Optimal Ro-botics, which was the leader in its industry and which already hadhundreds of units in place in the market. As far as the court was con-cerned, Reiss was simply going “to continue doing what he ha[d] beendoing for years—sell[ing] the Optimal U-Scan equipment.”130 The courtconcluded by observing that since PSC intended to launch its new prod-uct within a few months, “all of [PSC’s] supposed confidential matterswill be on display for all to see,”131 an apparent reference to the fastevolution of the market at issue there.

D. WAL-MART V. AMAZON.COM

Inevitable disclosure is an especially important theory in team-raiding situations. En masse departures present a heightened threatof disclosure: the more employees involved, the more likely someonewill engage in questionable conduct in departing and the more likely acourt will find an unfair competitive advantage is being sought throughcollective memory.132 One recent high tech example of team raiding is

129. 111 F. Supp. 2d 252 (W.D.N.Y. 2000).130. Id. at 259.131. Id.132. See Advanced Power Sys., Inc. v. Hi-Tech Sys., Inc., 801 F. Supp. 1450 (E.D. Pa.

1992) (taking of computer program plus recruiting of seven employees from competitorgave rise to trade secret misappropriation inference).



Wal-Mart v. Amazon.com.133 Wal-Mart alleged that Amazon.com hadpoached fifteen information systems employees who were familiar withWal-Mart’s data warehousing, merchandise systems, and buyer-decision supportive software trade secrets. Wal-Mart stressed the ob-vious: Why would a high tech center firm like Seattle-based Ama-zon.com come all the way to Arkansas to find its target (a pointedquestion other courts have also raised on similar facts)?134 No judicialdecision resulted from the case because the parties settled. Accordingto one press account, the settlement required Amazon.com to reassignone former Wal-Mart employee, to limit the job responsibilities of otherformer Wal-Mart employees, and to require former Wal-Mart employ-ees to return Wal-Mart’s property. The settlement also was said to barAmazon.com from recruiting additional Wal-Mart employees for oneyear unless they first approached Amazon.com.135

E. INTEL CORP. V. BROADCOM CORP.Another recent case, Intel Corp. v. Broadcom Corp.,136 also shows

the risk of luring away multiple high tech employees from a compet-itor. Intel alleged that Broadcom had raided four Intel engineeringemployees, thereby posing a threat of inevitable disclosure of Intel’sethernet computer network secrets. The California state trial courtsided with Intel, at least in part, after a preliminary injunction hear-ing on the evidence. The trial court’s injunction ruling was not offi-cially reported,137 but the court’s May 25, 2000, order indicated thatJudge Martin required Broadcom to (1) implement an adequate train-ing/educational program concerning trade secret law and the relatedobligations of Broadcom’s employees and executives, and (2) establishappropriate mechanisms to monitor Broadcom’s compliance in these

133. See David Smith, Wal-Mart Weighs Threat by Amazon.com, ARK. BUS., Nov. 9,1998, at 1 (describing Wal-Mart/Amazon.com lawsuit shortly after it was filed); MikeLynn, Is “Team Raiding” Misappropriation? Wal-Mart Claims Amazon.com Obtained ItsTrade Secrets By Hiring Skilled Retail Employees, NAT’L L. J., Feb. 8, 1999, at C10 (com-menting on Wal-Mart/Amazon.com action).

134. See Anaconda Co. v. Metric Tool & Die Co., 485 F. Supp. 410 (E.D. Pa. 1980)(Pennsylvania tool and die employer targeted employees from Illinois town where com-petitor was located); American Potash, 200 A.2d 428 (California firm advertised for em-ployees exclusively in Delaware city where competitor was located).

135. See Emily Nelson & George Anders, Wal-Mart, Amazon.com Settle Fight OverRecruitment and Trade Secrets, WALL ST. J., April 6, 1999, at A2 (reporting settlementof Wal-Mart/Amazon.com litigation).

136. No. CV 788301 (Super. Ct. Santa Clara County, Cal. 2000).137. See Sukhjt Purewal, Judge Rules, THE RECORDER, May 26, 2000, at 1 (reporting

defeat of Intel’s inevitable disclosure trade secret injunction request seeking to bar threeformer Intel engineers from joining rival Broadcom); Broadcom Restricted from Obtain-ing Proprietary Injunction from Intel Workers, 1 EMPL. L. WEEK (BNA) 11 (June 30, 2000)(reporting trial judge’s order requiring Broadcom to establish procedures, including apossible special master, to prevent trade secret disclosure by three ex-Intel employees,and barring Broadcom from hiring a fourth ex-Intel employee).



areas, including possible audits, ongoing discovery, a special master,138

and verified statements of compliance by Broadcom’s top management.Judge Martin also prohibited Broadcom from employing one engineer,Gunther, in any capacity pending trial; the court drew an inference oftrade secret misappropriation arising from Broadcom’s retention of cer-tain notes relating to its interview of Gunther. For the same reason,the court enjoined Broadcom from using or disclosing any Intel tradesecrets disclosed by Gunther and required Broadcom to return theoriginal and all copies of any writings relating to interactions with Gun-ther. The trial court, however, allowed Broadcom to retain the otherthree ex-employees of Intel, finding them trustworthy with the fore-going safeguards in place.139

Cases like Wal-Mart and Broadcom are becoming almost common-place in the high tech sector. McKesson recently brought a similar ac-tion in a Massachusetts federal court against W3Health Corporationover the loss of twelve employees.140 A comparable claim concerningthe departure of eighteen employees was also recently filed in Califor-nia state court by PeopleSoft against Evolve Software.141 A recent newsarticle suggests this problem may be brewing in Seattle as well, whereMicrosoft has apparently lost many teams of employees to start ups.142

Clearly, inevitable disclosure is alive and well in high tech fields, de-spite the frequent assertion that high tech is somehow different fromother industries.

F. PROCTER & GAMBLE V. STONEHAM

Inevitable disclosure allegations can also buttress non-competeclaims, as common sense suggests. A district court in New York usedinevitable disclosure language (though it cited no cases) in enforcingthe one-year non-compete agreement in Business Intelligence Services,Inc. v. Hudson,143 as noted earlier. More recently, the Ohio Court ofAppeals invoked the inevitable disclosure doctrine in enforcing a three-

138. See American Can Co. v. Mansukhani, 742 F.2d 314 (7th Cir. 1984) (approvingappointment of special master as a possible option for trade secret monitoring); PickerInt’l Corp. v. Imaging Equip. Servs., Inc., 931 F. Supp. 18 (D. Mass. 1995) (appointingformer FBI agent to monitor new employee in order to prevent trade secret violations).

139. Order at p. 5–6 (on file with author).140. See McKesson Sues Rival, NAT’L L. J., Sept. 25, 2000, at B2 (reporting that in

a recently filed federal court action, McKesson HBOC, Inc. recently accused rival W3HealthCorp. of stealing trade secrets, by recruiting twelve former McKesson employees to designand develop a software management system based on a McKesson prototype).

141. See John Roemer, Trade Secret Law Limits Internet Job Hopping, THE INDUS-TRY STANDARD, March 21, 2000, at C1 (reporting PeopleSoft’s inevitable disclosure tradesecret action against Evolve Software for raiding 18 employees); Kelly Zito, Evolve ClaimsIntimidation By PeopleSoft, SAN FRANCISCO CHRONICLE, March 21, 2000, at 1 (reportingsame lawsuit by PeopleSoft against Evolve Software).

142. See Rebecca Buckman, Tech Defectors From Microsoft Resettle Together, WALLST. J., Oct. 16, 2000, at B1 (describing Microsoft’s desire, thus far, to work with its formeremployees, even when they depart in teams).

143. 580 F. Supp. 1068.



year non-compete in Procter & Gamble Co. v. Stoneham.144 Stoneham,a senior level manager for Procter & Gamble, had signed a non-competeagreement when he became eligible for stock options. He subsequentlyjoined a competitor, Alberto Culver, as president of Alberto Culver In-ternational. Procter & Gamble sued Stoneham in Ohio and Alberto Cul-ver in Illinois, and Stoneham sued Procter & Gamble in Germany.145

The Ohio Court of Appeals reversed the trial court’s denial of injunctiverelief, holding that Stoneham had had significant access to Procter &Gamble competitive information that would give Alberto Culver an un-fair advantage. The court stressed that under Ohio law, an actualthreat of harm existed when an employee possessed knowledge of anemployer’s trade secrets and began working in a position that causedhim to compete directly with the former employer or the product linethe employee had formerly supported. Although it thought Ohio courtshad not previously referred to this evidentiary proposition as inevitableuse or inevitable disclosure, the court in Stoneham viewed the conceptsas the same as Ohio’s traditional actual threat standard. In fact, atleast two Ohio decisions had previously embraced the inevitable dis-closure concept.146

G. VERMONT MICROSYSTEMS, INC. V. AUTODESK

Inevitable disclosure may seem like the only game in town, buttraditional misappropriation cases are plentiful in high tech situations.To name just one, consider Vermont Microsystems, Inc. v. Autodesk,Inc.147 Vermont Microsystems, Inc. (VMI) developed a display listdriver, called AutoMate, that produced faster graphics speed forcomputer-aided design software used by engineers and architects torender computer drawings. VMI also developed a triangle-shading al-gorithm for coloring three-dimensional objects displayed on computerscreens. Berkes, a VMI employee and gifted programmer, was the prin-cipal architect of AutoMate, and he authored or at least had access toVMI’s triangle shading algorithm source code.

When Berkes announced his intention to leave VMI to join Auto-desk, VMI sensed trouble and gave Berkes two separate exit interviewsto remind him of his confidentiality obligations with respect to VMI’strade secrets. VMI also sent warning letters to Autodesk. Despite thesesecrecy preservation measures, Autodesk did little other than to con-duct a superficial and inadequate investigation; worse still, the inves-tigation suggested that Berkes had misappropriated VMI’s display list

144. No. C-990859, 2000 WL 1455278, at *1 (Ohio Ct. App. Sept. 29, 2000).145. See Procter & Gamble Co. v. Alberto-Culver Co., No. 99 C 1158, 1999 WL

319224, at *1 (N.D. Ill. April 28, 1999) (reviewing history of multiple proceedings amongthe parties).

146. See Emery Indus. Inc. v. Cottier, 202 U.S.P.Q. (BNA) 829 (S.D. Ohio 1978); B.F.Goodrich Co. v. Wohlgemuth, 192 N.E.2d 99 (Ohio Ct. App. 1963).

147. 88 F.3d 142 (2d Cir. 1996), appeal after remand, 138 F.3d 449 (2d Cir. 1998).



driver source code. Despite the obvious risks, Autodesk quickly cameout with a competing display list drive product, which Berkes had cre-ated—the product was an immediate success in the market. The over-lapping origins of the VMI and Autodesk products were both obviousand undeniable: Berkes had retained the source code for VMI’sAutoMate. To add insult to injury, Autodesk published VMI’s triangle-shading algorithm source code in materials detailing technical specifi-cations for Autodesk’s rival triangle-shading product.

Long litigation predictably ensued, including two visits to the Sec-ond Circuit. On the first appeal, the court of appeals affirmed the lowercourt’s trade secret misappropriation findings but vacated its $25 mil-lion reasonable royalty award. The Second Circuit criticized the lowercourt’s royalty methodology, which rested entirely on an opening set-tlement offer VMI had made.148 On remand, the lower court initiallyawarded approximately $7.7 million as a reasonable royalty but thenincreased it to about $14 million based on VMI’s argument thatAutodesk needed to be punished and deterred. On the second appeal,the Second Circuit affirmed the $7.7 million royalty award but vacatedthe additional amounts. The Second Circuit concluded that the lowercourt had improperly allowed a double recovery in increasing the judg-ment to $14 million and had erroneously ignored its own finding thatAutodesk had not acted willfully and maliciously for punitive damagespurposes.149

As Autodesk graphically displays (pun intended), trade secretclaims present a serious and ever-present risk when high tech employ-ees are pirated. Whatever could go wrong did go wrong there, as oftenhappens when companies turn a blind eye to danger signals. Indeed,the only surprising aspect of Autodesk was the defendants’ escape frompunitive damages and attorney fees under the California version of theUTSA applicable there. Some courts would not be so forgiving whenfaced with a new employer’s conscious decision to ignore notice lettersand its own internal investigation revealing red flags.150

H. ISC-BUNKER RAMO CORP. V. ALTECH

Another traditional trade secret case that involves elements ofmany of the cases described earlier is ISC-Bunker Ramo Corp. v. Altech,

148. 88 F.3d at 146, 151–52.149. 138 F.3d at 452–53.150. See e.g., Micro Data Base Sys., Inc. v. Dharma Sys., Inc., 148 F.3d 649 (7th Cir.

1998) (holding that some form of aggravated conduct is necessary to trigger a willfulnessfinding under UTSA); Mangren Research and Dev. Corp. v. Nat’l Chem. Co., 87 F.3d 937(7th Cir. 1996) (affirming punitive damages and attorney’s fees awards under UTSA, andholding that “willful and malicious” for these purposes simply means a conscious disre-gard for the trade secret owner’s rights); Miles Inc. v. Cookson Am., Inc., No. Civ. A.12,310, 1994 WL 676761, at *1 (Del. Ch. Nov. 15, 1994) (awarding plaintiff’s fees underDelaware version of UTSA for willful and malicious misappropriation where defendantsused plaintiff’s trade secrets despite notice letters).



Inc.151 ISC, a Washington state-based firm, designed, sold, and servicedcomputer systems for financial institutions. Its workforce grew fromseventy to over one thousand, all of whom signed nondisclosure agree-ments. Trade secrets in the form of software code, service manuals, andtechnical bulletins were distributed to employees on a need-to-knowbasis and were appropriately marked confidential and proprietary.Similar secrecy measures were employed on the infrequent occasionswhen ISC’s customers needed access to proprietary information. Altech,a firm that serviced ISC computer systems, sought to expand its busi-ness in Chicago in the most expedient fashion possible: It hired twenty-two ex-ISC employees, all of whom had been specially trained by ISC.Altech also copied ISC’s service manuals and software, which it claimedto have obtained through purchases of used ISC equipment, eventhough Altech admitted such equipment was extraordinarily hard tocome by. In light of this evidence, the district court had little difficultyin preliminarily enjoining Altech from infringing ISC’s copyrights, mis-appropriating ISC’s trade secrets, and interfering with ISC’s employeenondisclosure agreements. ISC’s widespread distribution of its secretswas not fatal, thanks to its reasonable and comprehensive secrecymeasures.

3. SummaryIn summary, trade secret rules apply with full force to high tech

employees. They may be valuable employees, but like all other employ-ees, they owe the same continuing duty not to use or disclose their prioremployers’ secrets, as cases like Autodesk, Hudson, Stoneham, and Al-tech show. Even when actual misappropriation or overt threats are ab-sent, inevitable disclosure can be asserted, particularly in mass raidsituations, as in Wal-Mart and Broadcom. Courts have wide discretionto prevent disclosure through injunctive relief and other measures, asthe trial court’s order in Broadcom demonstrates. Substantial mone-tary awards can be rendered if actual misappropriation is shown, asAutodesk reflects.

D. Breach of Fiduciary Duty Claims against Employees1. General PrinciplesAn agent’s duty of loyalty includes an obligation not to compete

during the term of the agency. This means an employee may not solicitcustomers or fellow employees before departure or otherwise interferewith the employer’s operations through sabotage or espionage.152 Of-

151. 765 F. Supp. 1310 (N.D. Ill. 1990).152. See DeLeonardis v. Credit Agricole Indosuez, No. 00 CIV. 0138, 2000 WL

1718543, at *1 (S.D.N.Y. Nov. 15, 2000) (subordinate employee’s attendance at meeting,where immediate supervisor offered to move the group to a rival, was subject to termi-nation for cause); conflicts of interest are also prohibited by the duty of loyalty, but theydo not always involve competitive activity. See Glenn R. Simpson & Scott Thurm, Web of



ficers and managers are routinely held to this standard;153 in fact, somecases hold that such high level employees owe an affirmative duty toprotect their employer, thereby placing them at special risk when theylead subordinates out the door to compete.154 Lower level employees,as agents, should be held to this standard as well, and they usuallyare,155 though some courts purport to find the duty of loyalty more lim-ited or even non-existent when it comes to mere employees.156 Corpo-rate opportunity claims are an important component of the duty of loy-alty and are often asserted against departing employees.157 In addition,

Interests: At Cisco, Executives Accumulate Stakes in Clients, Suppliers, WALL ST. J., Oct.3, 2000, at A1 (describing controversy at Cisco over executives investing in or acceptingstock options from customers, suppliers, and partners).

153. See GAB Bus. Servs., Inc. v. Lindsey & Newsom Claim Servs., Inc., 99 Cal.Rptr.2d 665 (Cal. Ct. App. 2000) (holding that corporate officers are fiduciaries as a matterof law in a case involving mass exodus of seventeen employees to competitor); A. GilchristSparks, III & Lawrence A. Hamermesh, Common Law Duties of Non-Director CorporateOfficers, 48 BUS. LAWYER 215 (1992) (suggesting the proper fiduciary test is whether theofficer has discretionary management power).

154. See Veco Corp. v. Babcock, 611 N.E.2d 1054 (Ill. App. Ct. 1993) (corporate offi-cers owe a higher duty of disclosure than ordinary employees); Preferred Meal Sys., Inc.,557 N.E.2d 506 (corporate officers’ failure to inform their employer that other employeeswere forming a rival company constituted breach of fiduciary duty); Unichem Corp. v.Gurtler, 498 N.E.2d 724 (Ill. App. Ct. 1986) (same); Maritime Fish Prods., Inc. v. World-Wide Fish Prods., Inc., 474 N.Y.S.2d 281 (N.Y. App. Div. 1984) (employee has an affir-mative duty to act at all times in employer’s best interests); Quality Systems v. Warman,132 F. Supp. 2d 349 (D. Md. 2001) .

155. See United States v. Hernandez, 231 F.3d 1087 (7th Cir. 2000) (staff accountanthad sufficient access to items of value to trigger “position of trust” enhanced sentenceunder federal criminal sentencing guidelines); Fryetech, Inc. v. Harris, 46 F. Supp. 2d1144 (D. Kan. 1999) (fiduciary obligations apply to “mere employees,” not just those withmanagerial authority); Mullaney, Wells & Co. v. Savage, 402 N.E.2d 574 (Ill. 1980) (em-ployees, as agents, owe a fiduciary duty of loyalty); E. J. McKernan Co. v. Gregory, 623N.E.2d 981 (Ill. App. Ct. 1993) (employees, like officers and directors, owe a fiduciaryduty of loyalty); Maritime Fish Products, Inc., 474 N.Y.S.2d 281 (fiduciary obligationsapply to all employees, not just officers and directors).

156. See Pony Computer, Inc. v. Equus Computer Sys. of Missouri, Inc., 162 F.3d 991(8th Cir. 1998) (low level clerical employee owed no fiduciary duty); Condon Auto Sales& Serv., Inc. v. Crick, 604 N.W.2d 587 (Iowa 1999) (collecting and contrasting conflictingcases on lower level employee fiduciary duties); Radiac Abrasives, Inc. v. Diamond Tech.,Inc., 532 N.E.2d 428 (Ill. App. Ct. 1988) (mere employees owed no duty of loyalty).

157. See Regal-Beloit Corp. v. Drecoll, 955 F. Supp. 849 (N.D. Ill. 1996) (six-monthpreliminary injunction barring former executives from completing the purchase of a $10million business on the ground that such purchase was a usurped corporate opportunitybelonging to their former employer); LCOR Inc. v. Murray, No. 97 C 1302, 1997 WL136278, at *1 (N.D. Ill. 1997) (following Regal-Beloit in granting preliminary injunctiverelief to block employee corporate opportunity usurpation); MQS Inspection, Inc. v. Bie-lecki, 963 F. Supp. 771 (E.D. Wis. 1995) (granting summary judgment in employee cor-porate opportunity usurpation case); Kenneth B. Davis, Jr., Corporate Opportunity andComparative Advantage, 84 IOWA L. REV. 211 (1999) (suggesting reconsideration of stan-dard corporate opportunity principles to take into account the relative abilities of em-ployer and employee to develop and utilize the opportunity and the cost of contractingbetween them); Eric Talley, Turning Servile Opportunities to Gold: A Strategic Analysisof the Corporate Opportunities Doctrine, 108 YALE L.J. 277 (1998) (arguing that an op-timal corporate opportunity doctrine should turn on the extent to which corporate fidu-ciaries possess private, unverifiable knowledge about the relevant characteristics of new



disloyal conduct begun before but completed after quitting remains ac-tionable.158 Injunctive relief and damages, including punitive damages,are available in duty-of-loyalty cases. Indeed, because public policy sostrongly disfavors employee disloyalty, some courts hold, as a matter oflaw, that an employee forfeits all compensation during the period ofdisloyalty, even if the employer suffered no loss and even if the em-ployee arguably performed some valuable service during the ques-tioned period.159 COBRA benefits can also be lost for disloyalty.160

To be sure, in the universe of claims against departing employees,faithless conduct before departure is the most serious charge. Whilecourts tend to give ex-employees the benefit of the doubt in other wrong-ful competition cases, as often captured in the presumption favoringemployee mobility in non-compete and trade secret disputes, the op-posite presumption is obtained in employee disloyalty cases, withcourts frequently placing the burden of proof on the employee once anapparent breach of loyalty has been demonstrated.161 Thus, defensessuch as employer acquiescence or waiver seldom succeed in disloyaltycases except on clear and convincing proof.162

projects); Victory Brudney & Robert Charles Clark, A New Look At Corporate Opportu-nities, 94 HARV. L. REV. 998 (1981) (arguing that different rules should govern corporateopportunity claims involving closely held corporations and publicly held corporations).

158. See T.A. Pelsue Co. v. Grand Enters., Inc., 782 F. Supp. 1486 (D. Colo. 1991)(resignation does not automatically free an employee from fiduciary obligations); ComedyCottage, Inc. v. Berk, 495 N.E.2d 1006 (Ill. App. Ct. 1986) (same holding).

159. Compare Vendo Co. v. Stoner, 321 N.E.2d 1 (Ill. 1974) (holding that compen-sation must be forfeited during the period of disloyalty, as a matter of public policy, re-gardless of any injury to the employer); Zakibe v. Ahrens & McCarron, Inc., 28 S.W.2d373 (Mo. App. Ct. 2000) (former president forfeited all compensation, even if he did notprofit from his conflict of interest in secretly investing in competing venture) with In reTri-Star Techs. Co., 257 B.R. 629 (D. Mass. 2001) (under Massachusetts law, an em-ployee’s breach of fiduciary duty gives rise to forfeiture of only that portion of compen-sation which exceeds the worth of the employee’s services); Hartford Elevator, Inc. v.Lauer, 289 N.W.2d 280 (Wis. 1980) (rejecting rigid rule that forfeiture is automaticallyrequired for disloyalty, and instead adopting balancing test).

160. See Mlsna v. Unitel Communications, Inc., 41 F.3d 1124 (7th Cir. 1994) (disloy-alty, if proven, constitutes “gross misconduct” warranting forfeiture of COBRA benefits),appeal after remand, 91 F.3d 876 (7th Cir. 1996).

161. See Regal-Beloit Corp. v. Drecoll, 955 F. Supp. 849 (N.D. Ill. 1996) (initial bur-den of proving corporate opportunity’s existence rests upon the former employer; oncethis has been shown, burden of proof shifts to ex-employees to demonstrate they did notbreach their duty of loyalty).

162. See Dolezal v. Plastic and Reconstructive Surgery, S.C., 640 N.E.2d 1359 (Ill.App. Ct. 1994) (physician who moonlighted violated his fiduciary duties, but his employerwas aware of such conduct and therefore was barred from making a claim); Tarin v.Pellonari, 625 N.E.2d 739 (Ill. App. Ct. 1993) (breach of fiduciary/diversion of businessclaim defeated by laches, due to 15 month delay); Rybak v. Provenzale, 537 N.E.2d 1321(Ill. App. Ct. 1989) (employee’s “moonlighting” activities were “open and obvious,” in partbecause she recorded all such payments on ledger cards at the front desk of her employer’soffice).



Apart from full disclosure and ratification, the principal defensein disloyalty cases focuses upon the preparing-to-compete doctrine,163

although there is limited authority for the proposition that preparingto compete is itself a breach of fiduciary duty.164 Most states tolerate asurprising level of suspicious conduct under the preparation rubric, in-cluding purchasing equipment, obtaining leases and loans, and evenoutfitting or purchasing a rival concern before leaving. Solicitation ofcustomers and fellow employees before departure is prohibited, butwhat constitutes improper solicitation is often difficult to discern. Theclandestine nature of preparatory activities compounds the problem,leading to egregious situations in which employees orchestrate masswalkouts or engage in extortionate attempts to take over their em-ployer’s business.165

2. CasesA. CHEMFAB CORP. V. INTEGRATED LINE TECHNOLOGIES INC.Several cases demonstrate employee loyalty principles in action in

high tech settings. In Chemfab Corp. v. Integrated Line TechnologiesInc., 166 Chemfab took an assignment of claims that Loctite had againstthree former Loctite managerial employees: DeLaney, Petrosino, andGee. Loctite manufactured and distributed septa, which were smalllaminated disks of Teflon and silicone used as cap liners in the phar-maceutical trade. DeLaney and Petrosino lost their jobs as part of areduction in force on June 4, 1993, and they subsequently formed their

163. See William Lynch Schaller, Disloyalty and Distrust: The Eroding FiduciaryDuties of Illinois Employees, 3 DEPAUL BUS. L.J. 1 (1991) (exhaustive examination ofpreparing to compete under Illinois law, arguing it constitutes poor policy); Scott W. Field-ing, Note, Free Competition Or Corporate Theft?: The Need for Courts to Consider theEmployment Relationship in Preliminary Steps Disputes, 52 VAND. L. REV. 201 (1999)(arguing that a relaxed duty of loyalty should be required of an at-will employee withrespect to pre-departure preparation, but contending that stricter loyalty requirementsshould be demanded of fixed-term employees with respect to pre-departure preparation).

164. See Aero Drapery of Kentucky, Inc. v. Engdahl, 507 S.W.2d 166 (Ky. 1974) (cor-porate officers and directors must terminate their positions of trust before preparing tocompete); Standard Brands, Inc. v. U.S. Partition & Packaging Corp., 199 F. Supp. 161(D.C. Wis. 1961) (protection of employer requires employee to fully disclose employee’spreparation to compete); Sequoia Vacuum Sys. v. Stransky, 40 Cal. Rptr. 203 (Cal. Ct.App. 1964) (same holding); Daniel Orifice Fitting Co. v. Whalen, 18 Cal. Rptr. 659 (Cal.Ct. App. 1962), superceded by rule as stated in Cooper v. Westbrook Torey Hills, LP, 97Cal. Rptr. 2d 742 (Cal. Ct. App. 2000) (same holding); but see Bancroft-Whitney Co. v.Glen, 411 P.2d 921 (Cal. 1966) (officers are required to disclose preparatory activities onlywhen nondisclosure would be harmful to employer; mere act of disclosure, however, can-not immunize office from liability where officer’s conduct in other respects amounts tobreach of duty).

165. See Vigoro Indus., Inc. v. Crisp, 82 F.3d 785 (8th Cir. 1996) (mass walkout);Bancroft-Whitney Co. v. Glen, 411 P.2d 921 (Cal. 1966) (mass walkout and extortionatedemand); ABC Transp., Inc. v. Aeronautics Forwarders, Inc., 379 N.E.2d 1228 (Ill. App.Ct. 1978) (mass walkout), on later appeal, 413 N.E.2d 1299 (Ill. App. Ct. 1980); DuaneJones Co. v. Burke, 117 N.E.2d 237 (N.Y. 1954) (extortionate demand); Feddeman & Co.v. Langan Assoc., 530 S.E.2d 668 (Va. 2000) (mass walkout and extortionate demand).

166. 693 N.Y.S.2d 752 (N.Y. 1999).



own septa manufacturing firm, Integrated Liner Technologies (ILT), onJuly 22, 1993. Later, in October, they leased manufacturing facilities,and in November they began selling septa to a German firm, La-Pha-Pack, which had been a significant customer of Loctite during 1992 and1993. Loctite quickly learned of La-Pha-Pack’s switched allegiance,based on a tip, and began investigating possible misuse of confidenti-ality information by DeLaney and Petrosino. In March, Loctite discov-ered on Gee’s computer a letter written by Gee to La-Pha-Pack’s pres-ident, which had solicited a business partnership between ILT andLa-Pha-Pack and had requested financial assistance for ILT. Gee wasstill a Loctite employee at the time of this discovery. Loctite fired Geeshortly after learning about the letter. One month after his termina-tion, Gee became a one-third owner of ILT.

The New York Appellate Division agreed with the defendants thatno confidential information had been misused by the defendants, andan independent expert’s inspection of ILT’s operations confirmed this.The court also agreed that the identity of La-Pha-Pack did not consti-tute a trade secret or confidential information since La-Pha-Pack waswell known through trade shows and industry conferences. Neverthe-less, the court found sufficient evidence to warrant a trial for breach offiduciary duty. Gee’s use of Loctite’s computers suggested he had beenusing Loctite’s time and resources to further ILT’s competitive inter-ests—conduct inconsistent with an employee’s duty of loyalty underNew York law.167

B. CBS CORP. V. DUMSDAY

Six months later, the New York Appellate Division reached a simi-lar decision on analogous facts in CBS Corp. v. Dumsday.168 Con Edisoninvited CBS to bid on a proposal to perform design and licensing workfor a Con Edison nuclear power plant. CBS and Con Edison then en-tered into a no-switch agreement barring Con Edison for one year fromemploying or otherwise engaging CBS personnel who performed ser-vices under the anticipated design/licensing agreement, and CBS thenassigned a key employee, Dumsday, to head the project. Dumsdaydrafted CBS’s confidential bid proposal, and two other CBS employees,Proviano and Van Buren, created the commercial strategy and cost/price work-up for the proposal. The proposal was labeled proprietaryand submitted to Con Edison in October 1997 after certain revisionshad been made at Con Edison’s request. CBS was led to believe that itwas the only qualified bidder and that it would be awarded the ConEdison contract once a price was agreed upon.

167. Accord Preferred Meal Sys., 557 N.E.2d 506 (employee’s use of company com-puters to prepare competitive business plan constituted breach of fiduciary duty).

168. 702 N.Y.S.2d 248 (N.Y. App. Div. 2000).



Dumsday, Proviano, and Van Buren, however, had a plan of theirown. Van Buren resigned December 1 and Proviano resigned December31. Shortly before Proviano’s resignation, Van Buren and Proviano in-corporated a rival firm, Preferred Licensing Services, Inc. In January,Con Edison suddenly advised CBS that Con Edison would be doing theproject on its own, and shortly thereafter, Dumsday resigned from CBS.Just three days after these suspicious events, Dumsday began workingon the Con Edison project as an employee of Preferred Licensing Ser-vices, Inc., as did Van Buren and Proviano—all providing the sameservices CBS had sought to provide. Amazingly enough, the trial courtdismissed CBS’s claims.

The New York Appellate Division reversed. The court had no dif-ficulty inferring that Dumsday, Proviano, and Van Buren had usedCBS’s confidential information to win the Con Edison job “in light ofthe rapid-fire resignations.”169 The court properly concluded that dis-covery was necessary to unravel the suspicious circumstances underwhich Con Edison had replaced CBS with a start-up operation. Notsurprisingly, the court ruled that CBS had stated a cause of action forbreach of fiduciary duty based upon CBS’s allegation that the defen-dants had used CBS’s confidential information to plan and form a com-peting company while they had been CBS employees. The court alsosustained tortious interference with contractual and prospective eco-nomic relations as well as common-law unfair-competition claims forgood measure.

C. ICOM SYSTEMS, INC. V. DAVIES

Fiduciary duty outcomes always turn on the facts and circum-stances as well as nuances of local law, as shown by Icom Systems, Inc.v. Davies.170 In that high tech case, Dillingham, McGraw, and Daviesformed Icom Systems in 1989 to exploit the Telephone Interactive GolfReservation Exchange (TIGRE), an interactive computer system formanaging and scheduling golf course tee times. The system was laterexpanded to include tennis facility reservation times. Dillingham hadauthored and assigned to Icom Systems the software for the originaland updated versions of TIGRE. Even though Davies was Icom Sys-tems’ day-to-day manager, in 1991 he formed Interactive Promotions,Inc., to provide interactive point-of-purchase display software (calledthe Garden Professor) to a lawn care company, Green Light. Daviesused Icom Systems’ computers and telephones to correspond withGreen Light. Davies, however, hired an independent contractor to writethe Garden Professor point-of-purchase display software. Davies thenresigned from Icom Systems, and Dillingham resigned two weeks later.McGraw, as the sole remaining shareholder of Icom Systems, brought

169. 702 N.Y.S.2d at 250.170. 990 S.W.2d 408 (Tex. App. 1999).



an action for breach of fiduciary duty against Davies for usurping theGarden Professor point-of-purchase display software and Green Lightbusiness opportunities.

The Texas Court of Appeals rejected McGraw’s fiduciary dutyclaim. The court began by stating that Texas followed the “line of busi-ness” test in assessing corporate opportunity charges, a narrower stan-dard than the full disclosure rule used in some jurisdictions.171 Underthe line-of-business approach, the court noted, a claim arose when acorporation had a legitimate interest or expectancy in, and the financialresources to take advantage of, a particular business opportunity. Thisreduced to an inquiry of whether the corporation had the knowledge,experience, and ability to pursue the opportunity and whether the op-portunity was logically and naturally adaptable to the corporation’scurrent or anticipated business. A fiduciary’s full disclosure was also arelevant, but not necessarily controlling, factor. The trial court foundafter a trial on the merits that Davies had disclosed his activities inorganizing Interactive Promotions and developing the Garden Profes-sor program. The trial court also found that the TIGRE and GardenProfessor programs were dissimilar products that did not compete inthe same market. In view of these findings and the fact that Davieshad been completely supporting Icom by paying all its expenses untilhis resignation, the Texas Court of Appeals upheld the trial court’s ver-dict in favor of Davies on the ground that the line-of-business standardhad not been met.

D. PONY COMPUTER, INC. V. EQUUS COMPUTER SYSTEMS

Another high tech fiduciary duty case favoring employees is PonyComputer, Inc. v. Equus Computer Systems.172 Zhou was a data entryclerk and Jones was a shipping employee for Pony Computer. Both hadhad access to Pony Computer’s confidential computer data, but neitherwas shown to have improperly used or disclosed such information. Onthe other hand, Zhou had used her Pony Computer work telephonenumber to recruit employees for a competitor, and she also had onceused Pony Computer’s fax machine for this purpose. The Eighth Circuitrejected all claims against the defendants, holding that Zhou andJones, as low-level, non-managerial employees, had not held confiden-tial positions or had otherwise owed a fiduciary duty to disclose theirpreparatory activities before quitting.

E. UNITED STATES V. MARTIN

Although it is common to think of employee fiduciary misconductas solely a civil matter, United States v. Martin173 teaches a very dif-

171. Cf. Regal-Beloit Corp., 955 F. Supp. 849 (comparing broad Illinois full disclosureand narrow Wisconsin line of business corporate opportunity tests).

172. 162 F.3d 991 (8th Cir. 1998).173. 228 F.3d 1 (1st Cir. 2000).



ferent lesson. Martin was the first case to review a conviction followinga trial under the Economic Espionage Act, but it also addressed a fidu-ciary duty charge. A grand jury indicted Camp and Martin on “ten countsof wire fraud, two counts of mail fraud, one count of conspiracy to stealtrade secrets, one count of conspiracy to transport stolen goods, and onecount of interstate transportation of stolen goods.”174 Camp agreed totestify against Martin as part of a plea bargain. Her testimony reflecteda high tech employee’s worst nightmare resulting from innocent pen-pale-mail communications that took a sinister turn over time.

Camp was a chemist for IDEXX, a Maine-based veterinary prod-ucts manufacturer. She had signed a confidentiality and non-competeagreement at the outset of her employment. Camp became dissatisfiedwith IDEXX and came across a Web site for Wyoming DNA Vaccine(WDV). She electronically forwarded her resume and received an im-mediate response from Martin, the CEO of WDV. From early 1998through July 1998, Camp and Martin continuously communicated bye-mail about finding a way to work together. At first, Camp simplyforwarded IDEXX gossip to Martin; over time, however, Camp beganforwarding more significant and proprietary information by e-mail toMartin, including IDEXX strategic plans, IDEXX product problems,IDEXX pricing and testing information, and internal IDEXX legal in-formation to which Camp had gained access. In her final weeks withIDEXX, Camp even forwarded to Martin packages containing productsand information labeled as confidential. The Camp/Martin scheme onlycame to light by accident when Camp inadvertently sent an e-mailmeant for Martin to an executive at IDEXX.

The First Circuit dispatched Martin’s appeal with ease. The courtof appeals had no difficulty in holding that sufficient evidence sup-ported Martin’s conviction, noting repeated references in Camp’s e-mails to the effect that Camp and Martin knew Camp had been actingas a corporate spy. The court found that Camp and Martin had reachedan agreement to steal trade secrets in an effort to compete with IDEXX,thereby violating the Economic Espionage Act’s conspiracy provisions.The court also upheld Martin’s remaining convictions, finding that wireand mail fraud had been committed and noting that purely intellectualproperty was able to be used to meet the $5,000 value requirement forconspiracy to transport stolen tangible goods in interstate commerce.On the wire and mail fraud theories, the First Circuit held that confi-dential information constituted property.

Most important for purposes of this article, the court of appeals inMartin held that Camp’s e-mail communications and mail deposits re-flected a scheme to defraud IDEXX of Camp’s honest services under 18U.S.C. § 1346. The Martin court acknowledged that federal “courts have

174. Id. at 6.



been hesitant to impose federal mail and wire fraud liability upon everyemployee transgression, [pointing out that courts] have required ‘a fail-ure to disclose something which in the knowledge or contemplation ofthe employee poses an independent business risk to the employer’ orcreates ‘reasonably foreseeable economic harm’ to the employer.”175 Thecourt also acknowledged that it had previously held in United States v.Czubinski176 that merely examining confidential information for one’sown purposes did not rise to this level. Even so, the court in Martinconcluded, “[U]se of confidential information for ‘private purposes’ mayrise to the necessary level of self-dealing” under § 1346.177 The evidencein Martin rose to this level because Camp knew she had been breachingher fiduciary duty to IDEXX; her failure to disclose her communicationswith Martin posed “an independent business risk” and created “reason-ably foreseen economic harm” to IDEXX, in the First Circuit’s view.178

Camp had signed nondisclosure and non-compete agreements with ID-EXX and knew the consequences of her actions, as her own e-mailsshowed. Martin willfully participated in her wrongdoing since he tooknew of Camp’s agreements and had himself signed a similar confiden-tiality agreement as part of a research proposal that IDEXX had re-jected a year before the Camp/Martin e-mails began, the First Circuitstressed. Accordingly, the court affirmed Martin’s conviction.

F. VENDO CO. V. STONER

Martin reflects the frightening criminal consequences of pre-departure fiduciary misconduct. Another, older high tech tale, VendoCo. v. Stoner,179 depicts the equally grim civil implications of competingbefore leaving. The Stoner saga is recounted elsewhere in detail,180 butthe facts are straightforward. Stoner sold his vending-machine manu-facturing business to Vendo in 1959 and stayed on as an officer anddirector. Stoner became dissatisfied, however, when he was relegatedto the role of a figurehead, albeit with the title of president. In 1961,Stoner learned that two former Vendo employees were seeking to forma rival vending machine manufacturing company that later becameknown as Lektro-Vend. From 1961 to 1964, Stoner secretly supportedthis secret organization by financing Lektro-Vend’s activities, leasingits premises and paying its employees. Stoner and his cohorts built aprototype vending machine, successfully displayed it at a trade show,

175. 228 F.3d at 17 (quoting United States v. Sun-Diamond Growers of California,138 F.3d 961, 973 (D.C. Cir. 1998) (quoting United States v. Lemire, 720 F.2d 1327, 1337(D.C. Cir. 1983)).

176. 106 F.3d 1069 (1st Cir. 1997).177. 228 F.3d at 17.178. Id. at 18.179. 321 N.E.2d 1 (Ill. 1974).180. See William Lynch Schaller, Disloyalty and Distrust: The Eroding Fiduciary

Duties of Illinois Employees, 3 DEPAUL BUS. L.J. 1, 10–12 (1991).



then formally incorporated Lektro-Vend, and commenced business.Vendo was unaware of Stoner’s secret sponsorship of Lektro-Vend untilStoner resigned in 1969 from his position as an officer and employee ofVendo.

With this auspicious beginning, Stoner soon found himself living alife of litigation. The case was tried twice and appealed twice to theIllinois Appellate Court before it finally reached the Illinois SupremeCourt in 1974. In an opinion by Justice Walter Schaefer (who was long-regarded as one of the greatest state court judges in the United Statesin the twentieth century), the Illinois Supreme Court held that Stonerhad breached his fiduciary duties from the moment he began assistingthe formation of Lektro-Vend. The court could have based its decisionon Stoner’s business sale non-compete agreement, but the conduct wasso serious that the court decided the case on a more fundamentalground: an employee’s fiduciary duty of loyalty.181 The court rejectedStoner’s defense that he was only a figurehead and proceeded to affirma lost-profits award of over $7 million—a huge sum when awarded in1969 and upheld in 1974.182

However, the court in Stoner did not stop there. It went on to holdthat Stoner also was required to forfeit over $170,000 in salary earnedfrom the time he began assisting Lektro-Vend until his resignation.183

Moreover, the court made it clear that deterrence of fiduciary miscon-duct was the point of its decision, holding that Stoner forfeited his sal-ary as a matter of public policy, regardless of whether Vendo had suf-fered any injury. Stoner fought this result in federal court antitrustproceedings that went twice to the Seventh Circuit and twice to theU.S. Supreme Court, resulting in the Court’s opinion in Lektro-VendCorp. v. Vendo Corp.184 In the end, one of Stoner’s companies wentbankrupt,185 and collection proceedings continued until as late as1982.186 Stoner died in 1976 and thus never lived to see the end of theseventeen-year legal battle that followed his fateful decision to assistLektro-Vend. 187

3. SummaryBy any measure, Stoner was epic litigation, particularly for its

time, but that is exactly the point: Employee fiduciary duty disputescan trigger fierce litigation that is fueled by emotion as much as finan-cial desire (as in Stoner), which surely illustrates that courts do not

181. Id. at 46.182. Id. at 10–11.183. Id. at 11.184. 433 U.S. 623 (1977).185. See Lektro-Vend Corp. v. Vendo Corp., 500 F. Supp. 332, 344 (N.D. Ill. 1980),

aff’d, 660 F.2d 255 (7th Cir. 1981), cert. denied, 455 U.S. 921 (1982).186. See Vendo v. Stoner, 438 N.E.2d 933 (Ill. App. Ct. 1982).187. See Lektro-Vend Corp. 500 F. Supp. at 335.



take kindly to employees serving two masters.188 Martin, Chemfab, andDumsday make essentially the same point: Such conduct is simply dis-honest and implicates fundamental public policies that go to the veryheart of doing business in the United States. Full disclosure can providea meaningful defense, as Icom Systems shows, but even full disclosuremay not be enough in some instances.189 Only low-level employees pre-paring to compete seem to escape these rules, as in Pony Computer.Thus, employers and employees alike, in high tech industries as in allother businesses, should treat fiduciary duties as the third rail of thelaw: those who touch it may die—or at least may die before litigationends.

E. Nondisclosure, Intellectual Property Assignment, and HoldoverAgreement Claims against Employees1. General PrinciplesMany high tech employees are hired precisely for their ability to

create intellectual property, such as patented processes and copy-righted computer programs. Employers frequently require such em-ployees to execute nondisclosure agreements, which impose continuingconfidentiality obligations, and intellectual-property assignment agree-ments, which give employers title to all intellectual property createdby employees during their employment. These assignment agreementsincreasingly contain holdover or trailer clauses, which typically statethat for a limited period of time following departure, usually oneyear,190 intellectual property developed by a former employee belongsto the ex-employer.191

Nondisclosure agreements are usually enforceable without muchfanfare.192 For the most part, they simply make explicit an employee’scommon-law confidentiality duties that exist both during and afteremployment. A few jurisdictions have struggled with these agree-

188. See Vendo Co. v. Stoner, 321 N.E.2d 1, 9 (Ill. 1974) (stating that “Stoner had afoot in each camp”); Fowler v. Varian Assocs., Inc., 241 Cal. Rptr. 530 (Cal. Ct. App. 1987)(stating that “Fowler could not continue to serve two masters by postponing indefinitelythe decision whether to join Omega”).

189. See Bancroft-Whitney Co., 411 P.2d at 936 (holding that officers are required todisclose preparatory activities only when nondisclosure would be harmful to employer;“mere act of disclosur[e],” however, “cannot immunize officer from liability where hisconduct in other respects amounts to a breach of duty”).

190. See Am. Science & Eng’g, Inc. v. Kelly, 69 F. Supp. 2d 227 (D. Mass. 1999)(holding that the employee’s one-year holdover agreement resulted in separate but re-lated state and federal court proceedings); Universal Winding Co. v. Clarke, 108 F. Supp.329 (D. Conn. 1952) (stating that one-year trailer clause in employee assignment contractwas enforceable under Rhode Island law).

191. See Marc B. Hershovitz, Unhitching the Trailer Clause: The Rights of InventiveEmployees and Their Employers, 3 J. INTELL. PROP. L. 187 (1995).

192. See Terry Morehead Dworkin & Elletta Sagrey Callahan, Buying Silence, 36AM. BUS. L.J. 151 (1998) (reviewing more favorable treatment nondisclosure agreementsreceive as compared to non-competes).



ments, usually because they confuse them with non-compete clauses.This problem is reflected in Illinois, where cases erroneously likenednondisclosure requirements to non-compete restrictions,193 a mistakethe Illinois General Assembly attempted to put to rest by passing aIllinois Trade Secrets Act provision which explicitly states that non-disclosure agreements do not need geographic and time limitations tobe enforceable.194

Explicit employee intellectual-property assignment clauses are im-portant to avoid common law pitfalls. Unless hired to invent, ordinaryemployees usually own their inventions at common law, even if theyconceived and developed them while employed.195 In other words, em-ployment alone does not normally compel an employee to assign a pat-ent to an employer; the employer may just have a nonexclusive, non-transferable shop-right in routine employee invention situations, andthis assumes the employer can first show that the employee used theemployer’s materials or conceived the invention during workinghours.196 Only where an employee is hired to invent does the employeehave a duty to assign the patent to an employer,197 unless the employeeoccupied a special position of trust198 or implicitly agreed to assign pat-ents to the employer.199 An express employee-invention assignment

193. See AMP, Inc. v. Fleischhacker, 823 F.2d 1199 (7th Cir. 1987) (nondisclosureagreement lacking time and geographic limitations was void under Illinois law); Disherv. Fulgoni, 464 N.E.2d 639 (Ill. App. Ct. 1984) (same holding); Cincinnati Tool Steel Co.v. Breed, 482 N.E.2d 170 (Ill. App. Ct. 1985) (same holding).

194. See PepsiCo v. Redmond, 54 F.3d 1262, 1269 n.7, 1272 n.10 (7th Cir. 1995)(noting geographic and time restrictions are no longer necessary for nondisclosure agree-ments under explicit terms of the Illinois Trade Secret Act).

195. See Voith Hydro, Inc. v. Hydro West Group, Inc., No. C-96–1170 SC, 1997 WL154400, at *1 (N.D. Cal. 1997) (unless hired to invent, under Pennsylvania law an indi-vidual owns patent rights in the subject matter of which he is an inventor even thoughhe conceived of the subject matter or reduced it to practice during the course of employ-ment); National Dev. Co. v. Gray, 55 N.E.2d 783 (Mass. 1944) (stating that employee hiredfor noninventive services owns his inventions, even if they may have great value to hisemployer).

196. See United States v. Dubilier Condenser Corp., 289 U.S. 178, 188 (1932) (com-paring shop right with hired-to-invent situation); McElmurry v. Ark. Power & Light Co.,995 F.2d 1576 (Fed. Cir. 1993) (discussing shop right).

197. See Ingersoll-Rand Co. v. Ciavatta, 542 A.2d 879 (N.J. 1988) (reciting the gen-eral rule).

198. See Dowse v. Fed. Rubber Co., 254 F. 308 (N.D. Ill. 1918) (finding that inventorwas alter ego of corporation which the corporation’s life depended upon the inventor’spatent).

199. See Banks v. Unisys Corp., 228 F.3d 1357 (Fed. Cir. 2000) (employee’s refusalto execute assignment created question of fact precluding summary judgment overwhether employee impliedly agreed to assign patent); Daniel Orifice Fitting Co. v.Whalen, 18 Cal. Rptr. 791 (Cal. Ct. App. 1962) (defendant’s prior assignment of patentsto employer implied defendant was obliged to assign patent in question); Velsicol Corp.v. Hyman, 90 N.E.2d 717 (Ill. 1950) (employee’s prior assignment of other patents impliedduty to assign patent at issue); Bradley C. Wright, Employees May Own Key Inventions:Use of Employment Agreements Is the Only Way Companies Can Control Worker’s Inven-tions, NAT’L L.J., Dec. 18, 2000, at C1 (describing appropriate contractual measures em-ployers should take to secure ownership of employee inventions).



clause avoids these disputes,200 even though employee patent owner-ship acts may exempt patents unrelated to the prior employer’s affairsand for which no company time or resources were utilized.201 No specialcompensation is necessary to enforce employee-invention assignmentagreements, though many firms offer incentives to encourage inventiveactivities.202

The more significant question is whether post-employment trailerclauses can require employees to assign inventions purportedly con-ceived and/or reduced to practice after termination. The limited natureof trailer clause restrictions tends to make courts somewhat more re-ceptive to them than outright non-compete agreements, for the obviousreason that affected employees can remain in the industry under trailerclauses.203 Even so, courts often use non-compete tests of reasonable-ness to measure trailer clauses, holding such restrictions unenforceableif they extend beyond the protection the employer reasonably requires,if they prevent the inventor from seeking other employment, or if theyadversely impact the public.204 The critical issue is whether the em-ployer can show a proprietary interest tied to the trailer clause. Tradesecrets and confidential information are routinely recognized as suffi-cient for this purpose, and the New Jersey Supreme Court in Ingersoll-

200. See Speedplay, Inc. v. Bebob, Inc., 211 F.3d 1245 (Fed. Cir. 2000) (employmentagreement stating employee “conveys, transfers and assigns” all future inventions con-stituted a present assignment and covered later-developed inventions); Morgan Adhe-sives Co. v. Questel, 162 U.S.P.Q. (BNA) 61 (Ohio Com. Pl. 1969) (interpreting contractthat covered “all inventions made or conceived” during employment to cover inventionemployee conceived but never perfected during employment).

201. See Robert L. Gullette, State Legislation Governing Ownership Rights in In-ventions Under Employee Invention Assignments, 62 J. PAT. & TRADEMARK OFF. SOC’Y732, 732–33 (1980) (collecting state statutes); Evelyn D. Pisegna-Cook, Ownership Rightsof Employee Inventions: The Role of Preinvention Assignment Agreements and State Stat-utes, 2 U. BALT. INTELL. PROP. L.J. 163 (1994) (collecting state statutes); CAL. LAB CODE§§ 2860, 2870 to 2872; DEL. CODE ANN. TIT. 19, § 805 (1999); 765 ILL. COMP. STAT. Ch.765, §§ 1060/1 to 1060/2 (West 2001); KAN. STAT. ANN. § 44–130 (1999); MINN. STAT. ANN.§ 181.78 (West 2000); MONT. REV. STAT. § 41–211; N.C. GEN. STAT. §§ 66–57.1–66–57.2(West 2000); UTAH CODE ANN. §§ 34–39–1 to 34–39–3(2000); WASH. REV. CODE. ANN.§§ 49.44.140–49.44.150 (West 2000); Waterjet Tech., Inc. v. Flow Int’l. Corp., 996 P.2d 598(Wash. 2000) (construing WASH. REV. CODE ANN. § 49.44.140 as allowing employers togive notice of statutory invention ownership rights in employee invention agreements).

202. See Thomas R. Savitsky, Compensation for Employee Inventions, 73 J. PAT. &TRADEMARK OFF. SOC’Y. 645, 652 (1991) (surveying employee inventor compensationpractices and noting that 91% of responding companies said they provided fixed paymentas special compensation); Richard C. Witte & Eric W. Guttag, Employee Inventions, 71 J.PAT. & TRADEMARK OFF. SOC’Y. 467, 472 (1989) (noting there is no requirement in theUnited States that inventors be compensated for their inventions made at work).

203. See Universal Winding Co. v. Clarke, 108 F. Supp. 329 (D. Conn. 1952) (notingemployee was restricted only as to a very limited field of machine design under patentassignment trailer clause).

204. See Guth v. Minn. Mining & Mfg. Co., 72 F.2d 385 (7th Cir. 1934), cert. denied,294 U.S. 711 (1935) (voiding employee invention assignment agreement to the extent itlacked time and subject matter limitations); Dorr-Oliver, Inc. v. United States, 432 F.2d447 (Ct. Cl. 1970) (holding that one-year trailer clause did not cover employee inventionunrelated to matters he had worked on while employed).



Rand Co. v. Ciavatta205 expanded this list to include “highly special-ized, current information not generally known in the industry, createdand stimulated by the research environment furnished by the em-ployer, to which the employee has been ‘exposed’ and ‘enriched’ solelydue to his employment.”206 The court in Ciavatta recognized its stan-dard was imprecise but used a think-tank environment as an exampleof this latter category. Team raiding, of course, often presents exactlythis fact pattern.

Employee copyright ownership disputes can be equally complex. Ina true employment relationship, the employer owns copyrighted workproduct under the work-for-hire doctrine, absent an agreement to thecontrary, if the work was within the scope of employment.207 By con-trast, independent contractors typically own their copyrighted materialif no other contractual arrangement is in place.208 When an author’sstatus as an employee or independent contractor is unclear, courts eval-uate the issue under common-law agency principles, as the SupremeCourt commanded in Community for Creative Non-Violence v. Reid.209

Even though written assignment agreements moot this issue, post-departure scenarios can still create uncertainty. An employee who be-gins a copyrighted work before resigning may have to assign the endproduct, even if it is completed after departure, if the corporate oppor-tunity doctrine applies.210 Moreover, an employer that makes substan-tial contributions to a copyrighted work may make a joint authorshipclaim against an ex-employee.211

Employee trade secret ownership disputes also can arise. Mostcourts hold that trade secrets that are developed on the job belong tothe employer, but a few allow employees who create trade secrets touse or disclose them in subsequent jobs based on rules similar to those

205. 542 A.2d at 879.206. Id. at 894.207. See Miller v. CP Chems., Inc., 808 F. Supp. 1238 (D.S.C. 1992) (holding that

computer program prepared at home during off-hours, without direction or extra com-pensation from employer, was “work for hire” within the meaning of Copyright Act); Inre Simplified Info. Sys., Inc., 89 B.R. 538 (W.D. Pa. 1988) (company president’s computerprogram, compiled during off hours, constituted company property under the “work forhire” doctrine); Marshall v. Miles Labs., Inc., 647 F. Supp. 1326 (N.D. Ind. 1986) (holdingthat scientist-employee could not avoid “work for hire” doctrine merely by preparing thework during non-working hours or in a facility not controlled by the employer).

208. See Liu v. Price Waterhouse LLP, No. 97 CV 3093, 2001 WL 199823, at *1 (N.D.Ill. Feb. 28, 2001) (license may prevent derivative work author from claiming copyright).

209. 490 U.S. 730 (1989).210. See Robinson v. R&R Publishing, Inc., 943 F. Supp. 18 (D.D.C. 1996) (finding

that the corporate opportunity doctrine required an ex-employee to turnover to her for-mer employer a copyrighted medical standards book she authored).

211. See Ashton-Tate Corp. v. Ross, 916 F.2d 516 (9th Cir. 1990) (stating that jointwork requires each author to make an independently copyrightable contribution; mereideas alone are not sufficient); Aymes v. Bonelli, 980 F.2d 857 (2d Cir. 1992) (remandingfor consideration of employer’s joint work claim).



involved in employee patent ownership cases.212 Of course, employertrade secrets cannot be misappropriated by departing employees, evenabsent a written agreement, as a legion of cases hold. However, a writ-ten nondisclosure/assignment agreement always helps.213 Most impor-tant, new products prepared by employees after leaving may still be-long to the former employer if they were derived from the ex-employer’strade secrets.214 The sooner an employee comes up with a secret afterleaving, the more likely a court will hold it was misappropriated.215

2. CasesA. INGERSOLL-RAND CO. V. CIAVATTA

A natural starting point for analysis is whether the employer canshow a protected interest because without one the contract has nomeaning no matter what it says. For example, in Ingersoll-Rand Co. v.Ciavatta,216 Ciavatta, an engineer with extensive experience beforejoining Ingersoll-Rand, signed a holdover agreement stating that hewould assign to Ingersoll-Rand any intellectual property he made, con-ceived, developed, or perfected within one year after termination “ifconceived as a result of and . . . attributable to work done during suchemployment and relate[d] to a method, substance, machine, article ofmanufacture or improvements therein within the scope of [Ingersoll-Rand’s] business.”217 Within a few months of his termination, Ciavattaconceived an “invention, an elliptical metal tube designed to stabilizemine roofs.”218 Nine months after his termination, Ciavatta filed a pat-ent application on this device, and he ultimately received two patents

212. See MELVIN F. JAGER, TRADE SECRETS LAW § 8.01 (1999) (general discussion);ROGER M. MILGRIM, MILGRIM ON TRADE SECRETS §5.02[4][a] (1994) (collecting cases al-lowing employees to use unpatented discoveries); DTM Research, L.L.C. v. AT&T Corp.,No. 00–1450, 2001 WL 293674, at *1 (4th Cir. March 27, 2001) (holding, in a non-employee trade secret dispute, that fee simple ownership in its traditional property lawsense is not an element of a trade secret’s misappropriation claim).

213. See Coady v. Harpo, Inc., 719 N.E.2d 244 (Ill. App. Ct. 1999) (enforcing nondis-closure agreement by issuing injunction to prevent publication of book by former em-ployee of television personality Oprah Winfrey), leave to appeal denied, 724 N.E.2d 1267(Ill. 2000).

214. See Mangren Research, 87 F.3d at 944 (competitor misappropriated manufac-turer’s secret formula for producing mold release agent, even though the competitor useda slightly different formula, because the competitor could not have produced its productwithout using a secret derived from the manufacturer’s formula and provided by themanufacturer’s former employee).

215. See Syntex Opthalmics, Inc. v. Tsuestaki, 701 F.2d 677 (7th Cir. 1983) (citingthat new chemical compound developed by employee just four days after terminationbelonged to ex-employer); Gen. Signal Corp. v. Primary Flow Signal, Inc., Nos. CIV.A.85–0471B, CIV.A. 86–034B, 1987 WL 147798, at *1 (D.R.I. July 27, 1987) (flow meterinvention conceived five days after trailer clause expired belonged to ex-employer); Nat’lDev. Co. v. Gray, 55 N.E.2d 783 (Mass. 1944) (holding that idea developed by employeejust three months after termination belonged to ex-employer).

216. 542 A.2d at 879.217. Id. at 882.218. Id. at 883



relating to it. Ingersoll-Rand viewed Ciavatta’s stabilizer as a threat toIngersoll-Rand’s competing product and brought litigation to enforceCiavatta’s holdover agreement.

The New Jersey Supreme Court appreciated the need to balanceemployer and employee rights and even defined the employer’s rightsbroadly through the think-tank concept, as previously noted. Never-theless, the court ruled for Ciavatta, finding that he had developed theproduct based upon his general skill and knowledge and not based uponany research Ingersoll-Rand was then doing. It helped that Ingersoll-Rand’s technology had been highly publicized and that Ciavatta hadnot departed in opportunistic fashion. The court did not decide whetherthe holdover clause explicitly covered the stabilizer invention becausethe court found Ingersoll-Rand had no protected interest even if theagreement applied.

B. KAUMAGRAPH CO. V. STAMPAGRAPH CO.Another example of an employer that lacked a proprietary interest

is Kaumagraph Co. v. Stampagraph Co.219 The facts, somewhat sim-plified, showed that Chadwick had worked for William Briggs & Co.,an English firm whose founders had patented a process for makingtransfer stamps and embroidery patterns. Chadwick came to theUnited States and signed nondisclosure and non-compete agreementsupon joining Kaumagraph Company as an employee. He later left topursue competitive activities and was sued by Kaumagraph for tradesecret misappropriation. The court found that the process in questionwas revealed by the English patent and that, in fact, knowledge of theprocess had been brought to Kaumagraph rather than obtained fromit by Chadwick. Accordingly, the trade secret misappropriation claimwas rejected.

C. RIGGING INTERNATIONAL MAINTENANCE CO. V. GWIN

Kavanaugh may be an old case, but the principle it stands for re-mains a fabric of modern law as shown by Rigging International Main-tenance Co. v. Gwin.220 Prior to his employment with Rigging, Gwinhad worked for ten years as a foreman in charge of maintaining ste-vedoring cranes. Upon joining Rigging, Gwin signed a confidentialityand invention assignment agreement requiring him to assign any in-vention improvements to Rigging. Gwin came up with a twist-locksafety device for cranes after leaving Rigging, and Rigging sued to en-force the invention assignment agreement. The court rejected Rigging’sclaims, holding that Gwin had had knowledge of the basic principlesinvolved in the twist-lock device before joining Rigging and that Gwinhad learned no trade secrets from Rigging that assisted his subse-

219. 138 N.E. 485 (1923).220. 180 Cal. Rptr. 451 (Cal. Ct. App. 1982).



quent improvements. The court’s decision was made easier by thefact that Riggings had told Gwin on two occasions during his employ-ment that Riggings was not in the business of manufacturing. It alsohelped that Gwin had not been hired to invent.

D. GEORGIA-PACIFIC CORP. V. LIEBERAM

Even when an employer has proprietary interests, the inventionassignment agreement’s terms remain crucial, as shown by Georgia-Pacific Corp. v. Lieberam.221 Lieberam, a German national, came to theUnited States in 1985 on a special student visa that allowed him towork for Georgia-Pacific. He had been sent a letter referring to an em-ployee confidential information and assignment agreement before hearrived, but Lieberam apparently never signed it. He stayed six monthsand then returned to Germany. He returned to Georgia-Pacific in 1986and originated an improved condenser system, working on it at leastin part on Georgia-Pacific’s time. Georgia-Pacific at this point realizedLieberam had not signed an invention agreement, and the companytherefore had him do so as part of a permanent employment offer in1987. Lieberam returned to Germany when his visa expired, butGeorgia-Pacific brought him back in 1988 to develop a prototype of thecondenser system. Lieberam quit in 1988 when he realized Georgia-Pacific viewed itself as the owner of the condenser technology, and Lie-beram thereafter sought to patent the condenser system, leading toGeorgia-Pacific’s lawsuit.

On appeal following summary judgment in favor of Georgia-Pacific,the Eleventh Circuit concluded that the invention assignment agree-ment was sufficiently ambiguous to require a trial on the merits. Theinvention assignment agreement, reprinted in full at the end of thecourt of appeals’ opinion, stated that Lieberam would assign any in-vention, improvement, or discovery conceived or made “during [his] em-ployment by Georgia-Pacific or within six months immediately there-after”222 that related to the past or present business of Georgia-Pacific.The question was whether the “during [his] employment” language,agreed to in 1987, had been intended to apply retrospectively to coverLieberam’s prior employment or only prospectively—a distinction ofimportance in light of Lieberam’s contention that he had invented thecondenser system before signing the invention agreement in 1987. TheEleventh Circuit held that the agreement, when construed as a whole,was capable of being interpreted as having only prospective effect, asLieberam argued, due to the use of future-tense verbs. The court con-strued the ambiguity against Georgia-Pacific as the drafter and re-

221. 959 F.2d 901 (11th Cir. 1992).222. 959 F.2d at 909.



manded for a trial. Interestingly, the court did not simply hold that thestrict construction rule required judgment for the employee.223

E. VOITH HYDRO, INC. V. HYDRO WEST GROUP, INC.Similar contractual interpretation problems appeared in Voith Hy-

dro, Inc. v. Hydro West Group, Inc.224 An employee, Gokhman, soughta patent in 1985 on turbine flow wicket gates while employed by Allis-Chalmers, but the Patent and Trademark Office rejected the applica-tion in light of prior art. Allis-Chalmers abandoned the wicket conceptfor financial and efficiency reasons and then fired Gokhman as part ofa reduction in force shortly after the patent application denial. Voithlater purchased Allis-Chalmers’s hydro turbine business and took anassignment of Gokhman’s invention agreement. A few years later,Gokhman submitted a new flow turbine patent application, this timedisclosing runner blades to work in conjunction with the wicket gatesdisclosed in the 1985 application. The 1993 patent was issued to Gokh-man, and Voith sued to enforce the invention agreement as Allis-Chalmers’s assignee.

After a trial, a district court ruled in favor of Gokhman. The courtacknowledged that employee invention assignment agreements werecommonplace in manufacturing, research, and development compa-nies. Even though the court found Gokhman’s agreement enforceable,it sided with Gokhman because the agreement’s language did not applyto the 1993 patent. The court concluded that Gokhman had “conceivedof” the idea before joining Allis-Chalmers and that Gokhman had notdeveloped the patented flow turbine while employed by Allis-Chalmers.The court also pointed out that the prototype wicket gates had neverbeen refined or tested at Allis-Chalmers nor had computer calculationsfor corresponding runner blades been translated into a tangible formor tested. The court further noted that the flow turbine had not beendeveloped at Allis-Chalmers because the company had never put to-gether a working, tangible prototype either before or after Gokhmanleft.225 Thus, the narrow invention assignment agreement did not coverthe employee’s later invention, rendering the assignment agreementirrelevant.226

223. See New Britain Mach. Co. v. Yeo, 358 F.2d 397, 405 (6th Cir. 1966) (the lawdoes not favor covenants that place “a mortgage on a man’s brain, to bind all its futureproducts”; assignment agreement does not include future inventions and improvementsunless it so states), quoting DeLong Corp. v. Lucas, 176 F. Supp. 104, 127 (S.D.N.Y. 1959).

224. No. C-96–1170 SC, 1997 WL 154400, at *1 (N.D. Cal. March 26, 1997).225. See Mosser Indus., Inc. v. Hagar, 200 U.S.P.Q. (BNA) 608 (Pa. Com. Pl. 1978)

(invention “developed” where the elements were combined into a working prototype, notduring prior employment where individual elements were conceived).

226. Cf. Butler v. Continental Airlines, Inc., 31 S.W.2d 642 (Tex. Ct. App. 2000) (com-puter macros were literary works covered by Copyright Act; they were not “inventions”or “improvements” covered by employee’s invention assignment agreement).



F. GOLDWASSER V. SMITH CORONA CORP.Assuming a proprietary interest is shown and contract terms are

triggered, employee opportunism will not be well received. A pointedillustration is Goldwasser v. Smith Corona Corp.227 Goldwasser signedan agreement that required him to assign inventions to IBM if threeconditions were met: (1) he made or conceived the invention or ideawhile working for IBM; (2) he was working for IBM in positions involv-ing research, planning, and technical responsibilities; and (3) the in-vention or idea related to IBM’s actual or anticipated business. Whilean IBM employee, Goldwasser invented certain improvements in word-processing, and he eventually submitted software called PointWriter toIBM for consideration. After IBM had declined to market PointWriter,Goldwasser and his wife sought and received a patent on it. He quitIBM and one year later filed for a second patent as a continuation inpart of the first. Only the second patent was in issue in the subsequentinvention assignment litigation, and Goldwasser conceded that the in-vention embodied in the second patent had been conceived of and re-duced to practice while he had been an IBM employee.

The district court granted judgment in favor of IBM and orderedGoldwasser to assign the second patent. The court noted that employeeinvention assignment agreements were enforceable under applicableNew York law. The court then found that all three contractual criteriawere met: Goldwasser had conceived the invention while an IBM em-ployee, Goldwasser had held technical positions with IBM, and the soft-ware obviously related to IBM’s computer business. The court rejectedGoldwasser’s statute of limitations, laches, and estoppel defenses, rul-ing that IBM had promptly sued within two years of the second patent’sissuance and that IBM’s original rejection of PointWriter was irrele-vant since it owned PointWriter by virtue of the assignment agreement.

G. GENERAL SIGNAL CORP. V. PRIMARY FLOW SIGNAL, INC.Timing was also a key issue in General Signal Corp. v. Primary

Flow Signal, Inc.228 Halmi was an employee of General Signal fortwenty-five years and then resigned to form his own firm. During hisfifteenth year at General Signal, he signed an invention assignmentagreement that included a six-month trailer clause that covered pat-ents and ideas conceived by him and related to the actual or anticipatedbusiness of General Signal. Five days after the six-month restrictionexpired, Halmi conceived a flow meter invention that he subsequentlypatented. The court found that Halmi’s continued employment aftersigning the agreement constituted sufficient consideration underRhode Island law because he had been terminable at will. The court

227. 817 F. Supp. 263 (D. Conn. 1993).228. Nos. CIV.A. 85–0471B, CIV.A. 86–034B1987 WL 147798, at *1 (D.R.I. July 27,

1987).



then concluded that Halmi had conceived the flow meter inventionwhile employed by General Signal because Halmi failed to show thathe had undertaken on his own the painstaking and intricate testingprocess necessary to perfect a flow meter. Accordingly, the court orderedHalmi to assign the flow meter patent to General Signal and enjoinedhim from making, using, or selling the flow meter.

H. BROOKS V. BATES

Another illustration of the need for explicit assignments is Brooksv. Bates.229 The facts presented a common scenario: One party put upthe software, and the other put up the money. Bates authored five soft-ware programs and was doing business under the name KnowledgeEngineering, though his one-man firm was unincorporated. Batesneeded money, Brooks supplied it, and together they formed a corpo-ration called Knowledge Engineering, Inc. (KEI). Brooks prepared fivesoftware registrations, listing Bates as the author of each program, andBrooks—not Bates—signed these registrations. Brooks subsequentlydiscovered that Bates, while still an officer of KEI, had set up a rivalbusiness and had begun to deal directly with KEI’s customers.

The decision in Brooks limited itself to whether Brooks or Batesowned the software programs; unjust enrichment and breach of con-tract claims were left for later. On the software ownership question,the court granted summary judgment in favor of Bates, ruling that awritten assignment was necessary to transfer ownership from Bates toBrooks or KEI. The court found no such written agreement and refusedto stretch the copyright ownership transfer “by operation of law” pro-vision of the Copyright Act to cover the situation.230 Obviously, asBrooks demonstrates, written assignments can be particularly crucialin copyright ownership disputes involving high-tech employees.

I. AYMES V. BONELLI

The copyright work-for-hire and joint work doctrines came intoplay in Aymes v. Bonelli.231 Aymes, a computer programmer who gradu-ated from Cornell University’s School of Engineering in 1981, workedwith Island Swimming Sales’ computer systems from 1980 to 1982. Hewas hired by Bonelli, Island’s president, who was not a professionalprogrammer. Aymes wrote a program dubbed CSALIB for Island, butAymes severed his relationship with Island in 1982 when Bonelli cutAymes’s hours. A dispute arose over Aymes’s demand for past due com-pensation, and Aymes thereafter registered a copyright in his ownname for CSALIB. Aymes sued Island for copyright infringement, andIsland defended under the work-for-hire and joint authorship provi-sions of the Copyright Act.

229. 781 F. Supp. 202 (S.D.N.Y. 1991).230. 17 U.S.C. § 204(a) (1995).231. 980 F.2d 857 (2d Cir. 1992).



The Second Circuit, applying the Supreme Court’s Reid decision,found some support for Island’s work-for-hire defense in Island’s rightto control the means of CSALIB’s creation and Island’s right to assignother projects to Aymes. The court of appeals emphasized, however,that other factors supported Aymes’s independent contractor argu-ment, including Aymes’s level of skill needed to create CSALIB, Island’sdecision not to offer Aymes benefits, and Aymes’s payment of his socialsecurity taxes. These last two factors convinced the court to rule forAymes on the work-for-hire doctrine. The Second Circuit noted,“[E]very case since Reid that has applied the test has found the hiredparty to be an independent contractor where the hiring party failed toextend benefits or pay social security taxes.”232 The court of appealsremanded the joint work question, however, because the district courthad made no findings concerning Bonelli’s contribution to CSALIB. Onremand, the district court ruled that Aymes had sold CSALIB to Island,thereby precluding Aymes’s infringement claim and mooting Bonelli’sjoint authorship claim.233 The Second Circuit subsequently affirmedthis ruling.234

J. AVTEC SYSTEMS, INC. V. PEIFFER

A more complex employee work-for-hire dispute—with a very dif-ferent outcome from Aymes—was addressed in Avtec Systems, Inc. v.Peiffer.235 Peiffer worked for Avtec as a full-time employee from 1984to 1992. His job involved using computer programs to solve problemsand to produce simulations relating to satellite orbital analysis. In1985, Peiffer began developing an initial version of a program calledOrbit. He developed Orbit at home on his own computer equipment, onhis own initiative, and without Avtec’s knowledge. Peiffer spent ap-proximately 6,240 hours working on Orbit’s source code, for which hereceived no compensation from Avtec. In 1988, Peiffer demonstratedOrbit to Avtec’s president, and a slightly modified version of it was usedto help win a client for Avtec, resulting in a $5,000 bonus for Peiffer.The program, with some additional modifications, was also demon-strated to two other potential clients in 1989. Avtec lost interest inOrbit in 1989, however, and an Avtec supervisor introduced Peiffer toKisak-Kisak, Inc. (KKI). Peiffer later granted KKI an exclusive licenseto market Orbit. In 1992, Avtec asked Peiffer to demonstrate Orbit aspart of a NASA contract bid, but Peiffer used the old, uncorrected ver-

232. Id. at 863. But see MELVILLE B. NIMMER & DAVID NIMMER, 1 NIMMER ON COPY-RIGHT § 5.03[B][1][a], at 5–27 to 5–30 (criticizing Aymes as unduly emphasizing benefitsand taxes to the exclusion of other factors identified by the Supreme Court in Reid, andnoting subsequent cases that have disagreed with Aymes).

233. See Aymes v. Bonelli, 30 U.S.P.Q.2d (BNA) 1718 (S.D.N.Y. 1994).234. See Aymes v. Bonelli, 47 F.3d 23 (2d Cir. 1995).235. 21 F.3d 568 (4th Cir. 1994).



sion of Orbit, causing Avtec to lose the bid. Peiffer’s relationship withAvtec soured, and in 1992 Avtec registered for a copyright on the origi-nal version of Orbit and then sued Peiffer and KKI for copyright in-fringement, trade secret misappropriation, and breach of fiduciaryduty.

After a trial, the district court ruled in favor of Peiffer on the copy-right ownership claim but against him on the state law claims. Thecourt believed Peiffer had not created the original version of Orbitwithin the scope of his Avtec employment but nevertheless found theslightly modified version of Orbit was an Avtec trade secret that Peif-fer and KKI had misappropriated. The court likened this trade secretinterest to an employer’s shop-right in a patent. The court also foundPeiffer had breached his fiduciary duty in sabotaging the NASAopportunity.

The Fourth Circuit reversed, holding that Peiffer could not havemisappropriated Orbit if he owned the copyright for it and that patentshop-right principles were irrelevant. The court of appeals also gavethe district court guidance in interpreting the Supreme Court’s Reiddecision, explaining that for a work for hire to be established, it mustbe created by the employee acting “within the scope of his or her em-ployment.”236 To prove this scope issue, the Fourth Circuit instructed,Avtec had to show that (1) the work was of the type for which Peifferhad been hired to perform, (2) Peiffer’s creation of Orbit had occurredsubstantially within the authorized time and space limits of his job,and (3) Peiffer had been actuated at least in part by a purpose to serveAvtec’s interests.237 Because Peiffer plainly had been hired to performcomputer work, the second and third scope questions were the mainissues on remand.

The district court found in favor of Peiffer on the work-for-hireissues the second time around, though it acknowledged the factual is-sues were close. The huge number of hours that Peiffer had worked onhis own without compensation at his home outweighed the minimalhours he had spent at Avtec improving Orbit, let alone the minimal$5,000 bonus he had received. The fact that Avtec at one point had alsosaid forget this in reference to Orbit also weighed heavily in the court’sdecision for Peiffer on the copyright ownership issue. Since Avtec hadno ownership interest in Orbit, its copyright and trade secret claimswere rejected, as was its fiduciary duty claim for lack of damages proof.The district court therefore ordered Avtec to cancel its Orbit copyrightregistration. The Fourth Circuit subsequently affirmed in an unpub-lished order, largely making the point that copyright ownership had

236. Id. at 571 (quoting Community for Creative Non-Violence v. Reid, 490 U.S. 730,737–38 (1989)).

237. Id. at 571.



been vested in Peiffer the moment he created Orbit—which was outsidethe time and space constraints of his Avtec employment.238 The FourthCircuit stressed that any evidence showing Peiffer might have beenmotivated to serve Avtec’s interests related to incidents after the initialfixing of Orbit in a tangible medium at a time when Peiffer’s ownershiphad already been set under copyright law.

K. BROWN V. DSC COMMUNICATIONS CORP.A more novel example of an employee intellectual property own-

ership fight is Brown v. DSC Communications Corp.239 Brown had awritten agreement with his employer, DSC, in which he promised toreveal and assign to DSC any inventions or software relating to DSC’sbusiness or resulting from his work at DSC. Brown later came up witha computer solution for an industry-wide problem of outdated computercodes, which Brown claimed he had been working on for over twelveyears before joining DSC. Brown discussed his idea with DSC execu-tives and sought an agreement to develop his solution independently.Although the opinion is silent on the details, a news article reportedthat DSC allegedly offered Brown up to $2 million of any money savedby DSC and its customer, Motorola, plus fifty percent of the profits fromthe sale of the system to third parties.240 Brown reportedly demandedmore: $5 million in addition to fifty percent of the profits. Negotiationscollapsed and DSC demanded that Brown disclose his solution pursu-ant to his employment agreement obligations. When Brown refused,DSC fired him and sued for breach of contract. A Texas state court trialjudge issued an order requiring Brown to disclose his solution becauseBrown claimed he had never made any notes or written record describ-ing it. The Texas Court of Appeals affirmed the injunction for lack ofjurisdiction without reaching the merits.

L. REVERE TRANSDUCERS, INC. V. DEERE & CO.The value of nondisclosure agreements was recently evident in Re-

vere Transducers, Inc. v. Deere & Co.241 Deere became interested indeveloping and manufacturing a draft sensor device for measuring trac-tor plow depth and ground force resistance. Deere and Revere eventu-ally signed a nondisclosure agreement, and Revere set about develop-ing a sensor through a team of Revere employees that included Eckhartand Delfino, both of whom had signed agreements requiring disclosureand assignment to Revere of inventions as well as nondisclosure of Re-

238. 67 F.3d 293 (4th Cir. 1995).239. See Brown v. DSC Communications Corp., No. 05–97–01098-CV, 1998 WL

2366, at *1 (Tex. Ct. App. Jan. 6, 1998).240. See John S. Pratt & Peter Dosik, Whose Idea Is It? Company Sues Ex-Employee:

Former Employee’s Unwritten Idea to Update Computer Codes Is Focus of Current Liti-gation, NAT’L L. J., Oct. 20, 1998, at C16 (discussing Brown at the trial court level).

241. 595 N.W.2d 751 (Iowa 1999).



vere trade secrets. Revere never completely met Deere’s engineeringqualification tests and then ran into financial problems unrelated tothe sensor project, which resulted in employee layoffs. Eckhart andDelfino decided to quit and form their own firm, and they secretlysought to provide a slightly modified sensor device to Deere. Deere likedtheir new device, gave them an order, and cancelled the Revere project.

Revere later learned what happened and sued Eckhart and Delfinoin Connecticut federal court. That court issued an injunction againstEckhart and Delfino, and they subsequently settled with Revere for$60,000. In the meantime, Revere sued Deere in Iowa state court fortortious interference, civil conspiracy, and trade secret misappropria-tion. The Iowa Supreme Court upheld tortious interference and civilconspiracy compensatory damage awards against Deere of $350,000and $200,000, respectively, as well as an additional $450,000 in puni-tive damages against Deere. The court held that employee nondisclo-sure and invention assignment agreements were enforceable underIowa law and found sufficient evidence that Deere had known of theEckhart and Delfino agreements.

The key question was whether Eckhart and Delfino had violatedtheir agreements with Revere. The court found that they had becausethey had learned confidential sensor device information while Revereemployees; this information did not need to rise to the level of a tradesecret to be protected, the court concluded. The court concluded thatRevere’s sensor information had not been disclosed by prior art. Thecourt also ruled that simply because Eckhart and Delfino had presentedtheir idea to Revere and had had it rejected by Revere at one point didnot relieve them of their duty to refrain from using or disclosing Re-vere’s confidential information as required by their agreements. Fi-nally, the court refused any offset for the $60,000 settlement by Eckhartand Delfino on the basis that their settlement would likely cover claimsunrelated to those pressed against Deere.

3. SummaryIn short, courts have wide discretion to compel assignments of em-

ployee intellectual property, especially if an assignment agreement isin place and the subject matter relates to work for the past employer.A court can order an affirmative turnover of title, can prohibit use ofintellectual property, or both; a court can even order disclosure, as inBrown. On the other hand, courts are not likely to do anything untilthe former employer first shows that a proprietary interest is in jeop-ardy, as in Ciavatta, Kavanaugh, and Gwin, and even then the em-ployer must show the agreement covers the situation, which the em-ployer failed to do in Voith Hydro. Ambiguous agreements will simplygenerate trials, as in Lieberam, and this assumes the court does notinvoke the strict construction rule against the employer as drafter of



the document. Nondisclosure agreements represent only a modest im-position on employees and are usually routinely enforced, as RevereTransducers illustrates. The total absence of agreements spells longlitigation, as in Aymes and Peiffer. Moreover, Peiffer demonstrates thatthe interplay between copyright and state laws can be quite complexand counterintuitive, with the outcome turning on factual subtletiesthat are very difficult to predict in advance absent an agreement.

F. Other Potential Claims against EmployeesOther unfair competition principles can apply in employee depar-

ture scenarios, but these tend to have limited application. Antitrust,trademark, false advertising, deceptive trade practice, copyright, pat-ent, and RICO claims are not likely to apply in garden-variety employeedeparture scenarios.242 Rather, these laws can usually be invoked onlyin narrow circumstances, such as where an ex-employee falsely claimsthat his or her products are superior to those of the employee’s formerfirm. If an employee also happens to be a shareholder, particularly asignificant shareholder, fiduciary liability might be imposed on this ba-sis independent of the employment relationship.243 Idea misappropri-ation claims are another possibility.244 Employees, of course, are alsosubject to tortious interference liability like anyone else.245

242. See Israel Travel Advisory Serv., Inc. v. Israel Identity Tours, Inc., 61 F.3d 1250(7th Cir. 1995) (rejecting antitrust claims against ex-employees); Computer Care v. Serv.Sys. Enter., 982 F.2d 1063 (7th Cir. 1992) (finding trade dress infringement, but rejectingfalse advertising and trade secret misappropriation claims against ex-employee); Mid-west Grinding Co. v. Spitz, 976 F.2d 1016 (7th Cir. 1992) (rejecting RICO claims againstex-employees); Stamatakos Indus., Inc. v. King, 965 F.2d 469 (7th Cir. 1992) (rejectingantitrust claim against ex-employee); Liquid Air Corp. v. Rogers, 834 F.2d 1297 (7th Cir.1987) (allowing RICO claims against ex-employees); Cullen Elec. v. Cullen, 578 N.E.2d1058 (Ill. App. Ct. 1991) (despite similarity of company name selected by ex-employee,customers knew who was who, and therefore unfair competition confusion claim did notwarrant injunction).

243. See Hayes v. Olmsted & Assoc., Inc., No. CA A106401, 2001 WL 294294, at *1(Or. Ct. App. March 28, 2001) (terminated employee who settled employment claims waspermitted to bring separate minority oppression claims in his capacity as shareholder);See G & N Aircraft, Inc. v. Boehm, 743 N.E.2d 227 (Ind. 2001) (majority shareholder wasliable to minority shareholder for breach of fiduciary duty in reorganizing corporation’saffairs); Sletteland v. Roberts, 16 P.3d 1062 (Mont. 2001); see also William Lynch Schaller,Competing After Leaving: Fiduciary Duties of Closely Held Corporation ShareholdersAfter Hagshenas v. Gaylord, 84 ILL. B.J. 354 (1996) (discussing Illinois cases holding thatresignation of officer and director positions does not end liability for disloyalty whereperson continues to be equal or minority shareholder).

244. See Margreth Barrett, The “Law of Ideas” Reconsidered, 71 J. PAT. & TRADE-MARK OFF. SOC’Y. 691 (1989) (comprehensive review of idea claims under various federaland state law theories); Big Wins, NAT’L L. J., Oct. 2, 2000, at C16 (reporting $240 millionFlorida jury verdict against Walt Disney Co. for misappropriating multi-purpose sportscomplex idea).

245. See Mid-State Vending Serv., Inc. v. Rosen, 222 N.E.2d 99 (Ill. App. Ct. 1966)(rejecting tortious interference claim against ex-employee where customers were not so-licited, but instead, cancelled their contracts and then called ex-employee).



So-called techno-torts are an emerging area of concern.246 A dis-gruntled employee’s ability to damage an ex-employer by disseminatingfalse information over the Internet has vastly magnified the risks as-sociated with existing and former employees,247 especially those benton competition. No doubt, anonymity has led employees to think theycan get away with these scams, but employers have responded withJohn Doe actions and have uncovered employee identities through sub-poenas to Internet service providers.248 It is difficult to predict how thisarea of law will evolve, but courts surely will remain sensitive to legit-imate employer interests in preventing unauthorized and highly dam-aging disclosures by dissatisfied or vengeful employees.

Another route of recovery may be civil liability under computerfraud statutes. For example, in Shurgard Storage Centers, Inc. v. Safe-guard Self Storage, Inc.,249 a storage facility operator alleged that oneof its competitors had engaged in a systematic scheme to raid key em-ployees to obtain the storage facility firm’s trade secrets. The complaintalleged a violation of the Computer Fraud and Abuse Act,250 whichmakes it illegal to intentionally access a protected computer withoutauthorization or, in excess of authorized access, to obtain informationif the conduct involves an interstate or foreign communication.251 Thedistrict court in Shurgard Storage Centers ruled that the act is notlimited to hackers or other outsiders and found that a claim had beenstated against an ex-employee for taking trade secret information viaimproper computer access. This new avenue of relief could prove es-

246. See David E. Dukes & Michael W. Hogue, “Techno-Torts” Pose New Challengesfor Litigators: Internet Crimes Ranging from Hacking, Defamation and Complex MarketFraud Abound, NAT’L L. J., Oct. 9, 2000, at B11 (surveying various claims arising out ofemployees posting confidential information on the Internet); Jay Eisenhofer & Sidney S.Liebesman, Caught by the Net: What to Do if a Message Board Messes with Your Client,9 BUS. L. TODAY 40 (Sept./Oct. 2000) (surveying cases involving wrongful disclosure onthe Internet).

247. See Bruce T. Atkins, Note, Trading Secrets In the Information Age: Can TradeSecret Law Survive The Internet? 1996 U. ILL. L. REV. 1151 (1996) (describing Internetpublication scams).

248. See Jeffrey R. Elkin, Cybersmears: Dealing with Defamation on the Net, 9 BUS.L. TODAY 22, 24–25 (Jan./Feb. 2000) (describing Raytheon’s action against 21 “John Does”after confidential information about earnings and trade secrets was posted in chat rooms;Yahoo identified the chat room users, and four Raytheon employees resigned); FrankAlvarado, Bosses Win Right to Probe Disclosures: Florida Company Clams an Ex-ManagerPosted Inside Information on Internet, NAT’L L.J., Feb. 5, 2001, at B11 (describing courtorder allowing MasTec to serve discovery on former senior manager to determine whetherhe was behind message board postings on Yahoo and Raging Bull).

249. 119 F. Supp. 2d 1121 (W.D. Wash. 2000).250. 18 U.S.C. § 1030.251. See Shaw v. Toshiba Am. Info. Sys., Inc., 91 F. Supp. 2d 926 (E.D. Tex. 1999)

(manufacturer’s sale of laptop computers containing floppy-diskette controllers with al-legedly defective microcode was “transmission” within the meaning of the ComputerFraud and Abuse Act).



pecially potent, as the federal statute at issue in Shurgard StorageCenters appears to apply to any information, not just trade secrets.252

G. Third-Party Liability1. General PrinciplesVirtually all states recognize some form of third-party liability

when a new employer wrongfully retains an employee who is underbinding legal restrictions to a former employer. Sometimes these claimsare couched as tortious interference with contract; sometimes they arecast as civil conspiracy claims; sometimes they are called unfair com-petition; and sometimes they are captured under the aiding and abet-ting heading.253 Contributory infringement can also be asserted againstthird parties.254 Whatever the label, the new employer faces prolongeddiscovery and serious exposure in the form of compensatory and puni-tive damages if it is on notice that the new employee violated obliga-tions to the ex-employer.255 These claims can give rise to significantjudgments, as shown by the $3.3 million conspiracy verdict (beforetreble and attorney fees under a special Virginia statute) against anaccounting firm that raided twenty-five of the thirty-one employees ofa competitor in Feddeman & Co. v. Langan Associates.256

The main defense to such third-party claims is lack of knowledgeon the third party’s part. In tortious interference with contract claims,for example, the third party must be shown to have known of the con-tract. Similarly, in trade secret cases, the evidence must demonstrate

252. See Stephen R. Buckingham, Court Gives New Use to 1994 Law: Trade Secrets,NAT’L L.J., Feb. 5, 2001, at C11 (noting that the plain language of the Computer Fraudand Abuse Act does not require that information obtained from a protected computer riseto the level of a trade secret).

253. See Eastern Trading Co. v. Refco, Inc., 229 F.3d 617 (7th Cir. 2000) (one whoaids and abets a fraud is guilty of the tort of fraud; nothing is added by saying he is guiltyof the tort of aiding and abetting as well or instead); J.D. Edwards & Co. v. Podany, 168F.3d 1020 (7th Cir. 1999) (software consultant, who pronounced J.D. Edwards softwarea “piece of shit” without knowing enough about it to have an opinion, was guilty of tortiousinterference); Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476 (Ky. 1991) (usingcivil conspiracy and aiding and abetting labels interchangeably with respect to third-party liability for assisting employee disloyalty); Baty v. Protech Ins. Agency, 2000 WL1591006, at *1 (Tex. Ct. App. Oct. 26, 2000) (discussing tortious interference, civil con-spiracy and inducing breach of fiduciary duty claims in employee departure scenario),withdrawn and superseded on overruling of reh’g, 2001 WL 3344006, at *1 (Tex. Ct. App.Apr. 5, 2001); Thomas J. Leach, Civil Conspiracy: What’s the Use?, 54 U. MIAMI L. REV.1 (1999) (describing history of civil conspiracy laws in England and the United States).

254. See Carte P. Goodwin, Comment, Live in Concert . . . and Beyond: A New Stan-dard of Contributory Copyright Infringement, 13 EMORY INT’L L. REV. 345 (1999) (generaldiscussion of contributory copyright infringement).

255. See Computer Assocs. Int’l v. Altai, 982 F.2d 693 (2d Cir. 1992) (new employerwas on constructive notice that computer programmer misappropriated software tradesecrets); Campbell Soup Co. v. Conagra, 801 F. Supp. 1298 (D.N.J. 1991) (noting newemployer received notice letter regarding employee’s confidentiality obligations), rev’d onother grounds, 977 F.2d 86 (3d Cir. 1992).

256. 530 S.E.2d 668 (2000).



that the third party knew or should have known that the secrets werestolen. Direct evidence of third-party knowledge is often lacking, andthus many of these claims are proven inferentially.257 In addition, wheninterference with at-will employees is alleged, some courts impose aheightened proof showing, such as “substantial evidence that the de-fendant’s predominate or sole motive of the interference was to damagethe plaintiff.”258 Courts are generally receptive to defense pleas in at-will employee cases because, as Judge Learned Hand famously put it,“nobody in his own business may offer better terms to an employee,himself free to leave, is so extraordinary a doctrine, that we do not feelcalled upon to consider it at large.”259

2. CasesA. HIGH-TEK CONSULTING SERVICES V. BAR-NAHUM

Although third-party liability cases abound, several are illustra-tive. In High-Tek Consulting Services v. Bar-Nahum,260 a computer con-sulting company sued a former employee and a client, alleging the cli-ent had interfered with the consulting company’s contractualrelationship with its employee. As is often the case, the employer’s con-tract with its customer prohibited the customer from soliciting or hiringthe consulting firm’s employees. In this particular case the customerprevailed because the evidence established that the employee had quitthe consulting firm for personal reasons unrelated to the customer andhad subsequently been hired by the customer. Although summary judg-ment was granted in favor of the customer, in most cases such circum-stances would present a question of fact as to the true cause and effectrelationship between the quitting and immediate hiring.

B. AUTOMATED CONCEPT V. WEAVER

Similarly, in Automated Concepts, Inc. v. Weaver,261 a computerconsulting firm saw a key employee leave to join a competitor. Theemployee in question then solicited other key employees of his formeremployer’s knowledge-management practice to join him at the newfirm. The employee’s contract prohibited him from raiding his formerfellow employees, and the court found that proper claims were statedagainst the former employee for breach of contract and against the

257. See DSC v. Sokol Crystal Prods., 15 F.3d 1427 (7th Cir. 1994) (access to tradesecrets, plus substantial similarity of products, led to inference of misappropriation);Tower Oil & Tech. Co. v. Buckley, 425 N.E.2d 1060 (Ill. App. Ct. 1981) (circumstantialevidence was sufficient to prove tortious interference and civil conspiracy by new em-ployer who induced employee to breach restrictive covenant).

258. Condon Auto Sales & Serv., Inc. v. Crick, 604 N.W.2d 587, 601 (2000) (at-willemployee occupied non-fiduciary position; new employer had no plan or motive to damageformer employer).

259. Triangle Film Corp. v. Ancraft Pictures Corp., 250 F. 981, 983 (2d Cir. 1918).260. 578 N.E.2d 993 (Ill. App. Ct. 1991).261. No. 99 C 7599, 2000 WL 1134541, at *1 (N.D. Ill. Aug. 9, 2000).



new employer for tortious interference with contract and for tortiousinterference with prospective economic advantage.

C. PMC, INC. V. KADISHA

In another example of this exposure, the California Court of Ap-peal recently decided PMC, Inc. v. Kadisha.262 A former employer al-leged trade secret misappropriation and tortious interference withprospective economic advantage when a key employee allegedly mis-appropriated computer disks containing trade secret financial dataand specifications for molds and inserts. As one might expect, the for-mer employer sued the departing employee, but the former employeralso sued the officers, directors, and principal shareholders of the newemployer. The California Court of Appeal held that the officers, direc-tors, and principal shareholders were like to be liable based solely ontheir investment and control of the new employer if they knew or hadreason to know about misappropriation of the former employer’s tradesecrets. The result in Kadisha is certainly not surprising and in factconforms with the language of the UTSA.263 Kadisha is a good re-minder that the liability net can sweep very wide with respect to thirdparties that encourage or assist a jumping-ship employee in compet-itive wrongdoing.264

D. MONTGOMERY WARD HOLDING CORP. V. SEARS, ROEBUCK & CO.Still another variation on this theme is raiding to destroy a com-

petitor, as in Montgomery Ward Holding Corp. v. Sears, Roebuck &Co.265 In that case, the court issued a preliminary injunction to stopemployee raiding of a failing retailer. The facts revealed rare evidenceof a competitor luring away a rival’s employees in an apparent effortto hasten the target’s demise, rather than to simply secure vulnerableemployees uncertain about their future prospects. The competitor’sprivilege was overcome because of stray e-mails that suggested an im-proper, predatory motive. The case settled when Sears agreed not tosolicit Montgomery Ward management employees for the duration ofthe Chapter 11 proceedings and to pay $100,000 to cover Montgomery

262. 93 Cal. Rptr. 2d 663 (Cal. Ct. App. 2000).263. See UTSA, § 1(2)(i), 14 U.L.A. 541 (1980); James C. Lydon, The Deterrent Effect

of the Uniform Trade Secrets Act, 69 J. PAT. & TRADEMARK OFF. SOC’Y. 427, 431 (1987)(describing third-party liability under the UTSA); Miles, Inc. v. Cookson Am., Inc., 1994WL 676761, at *1 (Del. Ch. Nov. 15, 1994) (parent company that loaned $8 million tosubsidiary shortly before subsidiary’s employees used their ex-employee’s trade secretswas jointly and severally liable for trade secret misappropriation under Delaware versionof UTSA).

264. See Steelvest, Inc., 807 S.W.2d 476 (bank that financed startup by disloyal em-ployees was potentially liable for their conduct under civil conspiracy and/or aiding andabetting theories).

265. No. 97–1409 (Del. Bk. 1997).



Ward’s attorney fees and costs. However, Sears was allowed to pursuehourly and commissioned sales employees.266

E. IN RE JOTAN, INC.Facts somewhat similar to those in Montgomery Ward were pre-

sented in another bankruptcy case, In re Jotan, Inc.267 Thompson andBarnett, two Jotan employees with substantial customer contacts andaccess to confidential information, signed non-compete agreements. Jo-tan had slid into bankruptcy and sought to sell portions of its shippingbusiness to ESP, which signed a confidentiality agreement as part ofthe negotiations. Barnett—Jotan’s chief negotiator with ESP—andThompson and several other Jotan employees jumped ship to ESP onlya few weeks after the ESP/Jotan negotiations had commenced. Thebankruptcy court recognized that ESP’s mass raid severely diminishedthe value of Jotan, thereby harming Jotan’s creditors. The court alsoconcluded that the restrictive covenants of Thompson and Barnett werereasonable in view of their prior access to Jotan’s confidential infor-mation and customers. The court therefore enjoined ESP from employ-ing Barnett and Thompson and from encouraging other Jotan employ-ees to violate their employment contracts.

F. FORD MOTOR CO. V. LANE

Last, but certainly not least, is the remarkable decision in FordMotor Co. v. Lane.268 Ford objected to a student’s use of the Ford nameas part of his Web site domain name. The student, Lane, retaliated bythreatening to release confidential information he had apparently re-ceived from Ford employees and subsequently made good on this threatby posting articles on his Web site. The articles revealed Ford’s confi-dential strategies, quality control problems, and engineering blue-prints. When Ford threatened an injunction, Lane responded by post-ing forty-four additional documents on line, including materials withhigh competitive sensitivity.

Ford sued, and the district court issued a temporary restrainingorder enjoining Lane from destroying evidence and requiring Lane toidentify his sources. The district court’s temporary restraining orderalso blocked Lane from soliciting Ford employees to disclose trade se-crets and other confidential information belonging to Ford. At the pre-liminary injunction hearing, however, the district court changed itsmind, ruling that First Amendment “prior restraint” principles barredthe injunctive relief Ford was seeking to protect its trade secrets—eventhough the court conceded that Ford had more than made out a casefor actual and threatened violations of Michigan’s version of the UTSA.

266. Id. (TR. OF PROC., Aug. 25, 1997, at 1–2).267. 229 B.R. 218 (M.D. Fla. 1998).268. 86 F. Supp. 2d 711 (E.D. Mich. 2000).



Unfortunately, the case settled while on appeal, so no authoritativeprecedent arose from the case on the key First Amendment question.269

3. SummaryClearly, third parties court disaster when they approach a rival’s

employees with unfair competition in mind. If the new employer knowsa contract is being violated or other improper behavior is taking place,the new employer will be sucked into the storm unless it makes anaffirmative effort to end the wrongdoing. Indeed, the new employer mayactually face greater exposure than the employee in some instances.The employee may only confront breach of contract damages for violat-ing a non-complete, for example, but the new employer may be saddledwith open-ended punitive damages for tortious interference, as oc-curred in the analogous case of Revere Transducers, Inc. v. Deere &Co.,270 discussed earlier. Moreover, as a practical matter, the employeemay be judgment-proof; new employers can seldom say the same.

IV. Practical Considerations in Assessing Unfair CompetitionClaims against Ex-Employees

A. Former Employers’ ConsiderationsPreventing unfair competition arising from employee mobility re-

quires comprehensive planning. Confidentiality legends on materialsand computer screens, computer passwords, handbook warnings,premise-access restrictions, sign-in/sign-out procedures, and need-to-know distribution are always good ideas, as is an audit program.271 Anidea suggestion program should also be established to ensure employerownership of unsolicited ideas from employees who may later contestthese rights.272 Once in place, employers should insist on adherence tothese procedures. Of course, not all employers find comprehensive pro-tection worthwhile, so a careful balance must be struck between costsand benefits in adopting reasonable secrecy measures.273

As this discussion suggests, contractual protection can be and oftenis the single most important factor in combating ex-employees in the

269. Cf. Mark A. Lemley & Eugene Volokh, Freedom of Speech and Injunctions inIntellectual Property Cases, 48 DUKE L.J. 147 (1998) (analyzing First Amendment prin-ciples in intellectual property injunction cases).

270. 595 N.W.2d 751.271. See William Lynch Schaller, Protecting Your Trade Secrets in Illinois, 3 ILL.

MFR’S J. 1 (1998) (reviewing confidentiality procedures); Roger Norman Coe, KeepingTrade Secrets Secret, 76 J. PAT. & TRADEMARK OFF. SOC’Y. 833 (1994) (same).

272. See Lewis v. Am. Airlines, Inc., 678 N.E.2d 728 (Ill. App. Ct. 1997) (employeesuggestion program gave employer ownership of flexible door idea and allowed employerto deny employee compensation); Ronald B. Coolley, An Update: Employee SuggestionPrograms, 69 J. PAT. & TRADEMARK OFF. SOC’Y. 503 (1987) (reviewing potential elementsof employee idea suggestion programs).

273. See Rockwell Graphic Sys., Inc. v. DEV Indus., Inc., 925 F.2d 174 (7th Cir. 1991)(emphasizing that only reasonable secrecy measures are necessary to preserve tradesecret rights).



marketplace. Courts can fashion relief even in the absence of a contract,but such relief tends to be stingy and only reluctantly granted on afairly compelling showing. Thus, all employers should ensure that ex-ecutives and key employees are subject to appropriate agreements tai-lored to the duties of the particular employee, preferably one that in-cludes a choice-of-law designation.274 Using the same form contract forall employees eases administration but runs the risk of invalidation onover-breadth grounds in some courts.275 An employer also should notautomatically assume that tendering overly broad agreements is aharmless mistake; in some jurisdictions, terminating employees for re-fusing to sign void non-compete agreements can give rise to claimsagainst employers.276

When contractual protection for key players is lacking, and evenwhen it is in place, exit interviews are important. An exit interviewmay present the last opportunity to secure an agreement, and such aface-to-face meeting always provides the chance to have the employeereaffirm ethical and legal obligations bearing on post-employment ac-tivities.277 The exit interview should be documented, and a signed me-morialization should be obtained if possible. Indeed, an employee’srefusal to sign exit papers acknowledging basic common-law or con-tractual duties may create a powerful inference of impending wrong-doing to support declaratory and injunctive relief.278

Interviewing other employees is also a good idea when a key em-ployee leaves. Some remaining employees may be friendly with the ex-employee and may even be operating as moles, lurking behind to assistthe departed employee as part of a larger plot;279 they likely will resist

274. See Vencor, Inc. v. Webb, 33 F.3d 840 (7th Cir. 1994) (Illinois public policy didnot preclude enforcement of Kentucky choice of law provision in employee non-compete).

275. See Telxon Corp. v. Hoffman, 720 F. Supp. 657 (N.D. Ill. 1989) (criticizing em-ployer’s use of identical non-competes for all employees, regardless of the individual’sparticular responsibilities or stature).

276. See D’Sa v. Playhut, Inc., 102 Cal. Rptr. 2d 495 (Cal. Ct. App. 2000) (employeesmay claim wrongful discharge under California law when terminated for refusing to signnoncompete agreements); Dymock v. Norwest Safety Protected Equip., 2001 WL 123352,at *1 (Or. Ct. App. Feb. 14, 2001) (similar holding under Oregon law).

277. See Vermont Microsystems, Inc. v. Autodesk, Inc., 88 F.3d 142 (2d Cir. 1996)(noting employee was reminded of his confidentiality obligations in two separate exitinterviews), on later appeal, 138 F.3d 449 (2d Cir. 1998); PCX Corp. v. Ross, 522 N.E.2d1333 (Ill. App. Ct. 1988) (noting company departed from its exit interview policy by in-stead having just “a brief conversation” with employee who was leaving); ReinhardtPrinting Co. v. Feld, 490 N.E.2d 1302 (Ill. App. Ct. 1986) (employee was vague at exitinterview about her future plans).

278. Cf. MBL (USA) Corp. v. Diekman, 445 N.E.2d 418 (Ill. App. Ct. 1983) (plaintiffbrought suit when ex-employee ignored letter demanding compliance with confidentialityagreement and requesting disclosure of ex-employee’s recent designs and other businessactivities).

279. See United States v. Martin, 228 F.3d 1 (1st Cir. 2000) (describing employeewho acted as a “spy” in passing company trade secrets to competitor); United States v.



an informal interview and may insist upon having a co-worker present,assuming they do not simply quit when confronted.280 Other employeesmay be more forthcoming. Indeed, on occasion, loyal employees whohave remained silent in the face of wrongdoing become eager to sharetheir knowledge when suspicious employees depart.281 Those left be-hind can provide invaluable firsthand information about conspiratorialmisconduct.

Because departing employees seldom announce their competitiveintentions, other investigative steps may also be prudent. In additionto interviewing employees, an employer should consider reviewing com-puter information, examining telephone records, contacting customers,and hiring investigators to probe current and former employees’ activ-ities—all of which can reveal surprising information.282 In any event,

Andreas, 216 F.3d 645 (7th Cir. 2000) (describing Mark Whitacre’s activities as a govern-ment mole in secretly recording conversations between competitors conspiring to violatefederal antitrust laws); Food Lion, Inc. v. Capital Cities/ABC, Inc., 194 F.3d 505 (4th Cir.1999) (television investigators secured employment with grocery store chain target toconduct expose); Huntington Life Sciences, Inc. v. Rokke, 986 F. Supp. 982 (E.D. Va. 1997)(animal rights organization investigator secured employment with animal testing firmto conduct expose); Harllee v. Professional Servs. Indus., Inc., 619 So.2d 298, 302 (Fla.Dist. Ct. App. 1993) (Gersten, J., dissenting) (pointing out that when fifty-seven employ-ees moved to a competitor in a short time, one stayed behind and advised a customerthat his current employer could no longer do the job, but said his “team” could do it atthe new employer); Stevens-Davis Co. v. Mather & Co., 1923 WL 3289, at *1 (Ill. App.Ct. 1923) (firm planted its employees at rival to acquire secrets); Robert Manor, CorporateSpy Case Unfolds in Lawsuit: Fruit of the Loom Worker Admits Sharing Secrets, CHI.TRIB., April 8, 2001, Sec. 5, at 1 (describing recent Illinois federal court trade secretmisappropriation action based upon a Fruit of the Loom employee’s alleged admissionthat she was secretly passing confidential business reports to a former co-worker whohad joined rival Gildan Activewear in Montreal); Dean Starkman, Secrets and Lies: TheDual Career of a Corporate Spy, WALL ST. J., Oct. 23, 1997, at B1 (describing eight-yearscheme in which Avery Dennison employee passed $50 million in secrets to overseas com-petitor in return for $150,000); ADAM L. PENENBERG & MARC BARRY, SPOOKED: ESPIONAGEIN CORPORATE AMERICA (2000) (book-length treatment of the Avery Dennison case).

280. See Epilepsy Foundation of Northeast Ohio, 331 NLRB No. 92, 164 L.R.R.M.(BNA) 1233, 2000 WL 967066, at *1 (July 10, 2000) (employers must afford non-unionizedemployees the right to have a co-worker present at an investigatory interview which theemployee reasonably believes might result in disciplinary action).

281. See Radiac Abrasives v. Diamond Tech., 532 N.E.2d 428 (Ill. App. Ct. 1988)(employees who remained loyal testified against former co-workers who were secretlycompeting before resigning).

282. See Pony Computer, Inc., 162 F.3d 991 (noting employer discovered employee’sefforts on behalf of competitor by examining employee’s work telephone records); LouisVuitton v. Lee, 875 F.2d 584 (7th Cir. 1989) (commenting on private party’s use of aninvestigator discredited in an earlier, unrelated federal criminal “sting” operation); Fra-ser v. Nationwide Mut. Ins. Co., No. 98-CV-6726, 2001 WL 290656, at *1 (E.D. Pa. March27, 2001) (employer did not violate federal and Pennsylvania Wiretap Acts and StoredCommunications Acts in accessing and reviewing stored e-mails; these laws only applyto interception of communications in transit); Frank W. Winne and Son, Inc. v. Palmer,No. CIV.A . 91–2239, 1991 WL 155819, at *1 (E.D. Pa. Aug. 7, 1991) (court found no tradesecret misappropriation where competitor searched plaintiff’s garbage and reconstructedcustomer lists from discarded invoices); Johnson v. K-Mart Corp., 723 N.E.2d 1192 (Ill.App. Ct. 2000) (invasion of privacy claim sustained where employer had investigatorspose as employees); Davis v. John Crane, Inc., 633 N.E.2d 929 (Ill. App. Ct. 1994) (use of



such steps are probably a good idea simply as a matter of competitiveintelligence: High tech employees from rival firms often retain social andprofessional ties, and they tend to talk.283 Of course, questionable inves-tigative steps can result in invasion of privacy or malicious prosecutioncharges, to name just two,284 not to mention negative publicity.285

If a former employer is aware of an ex-employee’s new activities witha competitor, a warning letter may be in order. Notice letters need to becarefully analyzed, as they can give rise to liability claims against theformer employer if they overstate rights, defame the ex-employee, orotherwise make wrongful accusations.286 Nevertheless, notice letters can

outside drug testing firm, and use of separate investigation firm, to uncover on-premisesdrug use at employer’s work site; handbook and defamation claims rejected); Teresa But-ler, The FCRA and Workplace Investigations, 15 LAB. LAW. 391 (2000) (discussingpossiblethird-party investigator liability under the Fair Credit Reporting Act for employmentinvestigations); Geanne Rosenberg, The Big Push Into Law-Related Business Investiga-tion Practices, NAT’L L.J., Oct. 9, 2000, at B7 (noting typical investigation of a companyand key executives costs about $15,000).

283. See generally JOHN J. MCGONAGLE & CAROLYN M. VELLA, PROTECTING YOURCOMPANY AGAINST COMPETITIVE INTELLIGENCE (1998) (describing the “cloaking” pro-gram); PENENBERG & BARRY, supra note 279 (describing various corporate espionagemethods); BORIS PARAD, COMMERCIAL ESPIONAGE: 79 WAYS COMPETITORS CAN GET ANYBUSINESS SECRETS IN ANY COUNTRY (1997) (describing various corporate espionagemethods).

284. See Malik v. Carrier Corp., 202 F.3d 97 (2d Cir. 2000) (rejecting negligent in-vestigation claim in federal employment discrimination claim context); Dawson v. NewYork Life Ins. Co., 932 F. Supp. 1509 (N.D. Ill. 1996) (jury could find life insurer’s decisionto use its own employees to investigate manager’s role in failing to supervise an agent’sfraudulent misconduct, rather than retaining others to conduct an independent investi-gation, made its investigation recklessly insufficient for defamation purposes); Dopp v.Fairfax Consultants, 771 F. Supp. 494 (D. Puerto Rico 1990) (rejecting claim that privateinvestigator acted improperly); Rodgers v. Peoples Gas, Light & Coke Co., 733 N.E.2d835 (Ill. App. Ct. 2000) (employer conspired with government investigators to findgrounds to fire employee); BRYAN BURROUGH, VENDETTA: AMERICAN EXPRESS AND THESMEARING OF EDMOND SAFRA (1992) (detailed discussion of corporate espionage campaignto discredit business rival); Margaret J. Grover & Lauren S. Antonio, Workplace Inves-tigations: A Practical Approach, 30 BRIEF 8 (2000) (summarizing workplace investigationtechniques and potential claims).

285. See Glenn R. Simpson, Investigative Firm Played a Role in Microsoft Case: IGIComes under Scrutiny in Attempt to Purchase Lobbying Group’s Trash, WALL ST. J., June19, 2000, at A48 (reporting Silicon Valley trash-buying incident, where InvestigativeGroup International leased office space in target’s building to avoid trespassing charge);Glenn R. Simpson, U.S. Corporate Spy Firms Face Overseas Rival, WALL ST. J., Oct. 31,2000, at B1 (describing business problems of investigative firms Kroll-O’Gara,PricewaterhouseCoopers, Investigative Group International and Control Risks Group);Raytheon Co. Settles Corporate Spy Case with AGES Group, WALL ST. J., May 13, 1999,at A18 (reporting multi-million dollar settlement arising out of Raytheon’s alleged use ofWackenhut investigators to eavesdrop and steal confidential documents in order to un-dermine AGES’ bid for a $450 million military contract).

286. See Gardner v. Senior Assisted Living, Inc., 731 N.E.2d 350 (Ill. App. Ct. 2000)(former employer’s notice letters to customers, accusing ex-employee of trade secret mis-appropriation, were defamatory); Zdeb v. Baxter Int’l, Inc., 697 N.E.2d 425 (Ill. App. Ct.1998) (affirming $8 million jury verdict based on employer’s lack of good faith in sendingnotice letter asserting intellectual property rights in ex-employee’s invention); Schuler v.Abbott Labs., 639 N.E.2d 144 (Ill. App. Ct.. 1993) (employer’s notice letters threateninginjunctions, sent to ex-employee but not prospective employers, did not constitute tortious



prove critical where the ex-employee and the new employer embark upona course of wrongdoing in violation of the letter; such conduct may evenbe deemed willful for purposes of punitive damages and attorney fees.287

Notice letters also may defeat laches defenses, especially when the de-fendant responds by promising to behave.288 On a practical level, too,notice letters sometimes trigger a favorable, perhaps limited, responsefrom the new employer, which may take steps to ensure the new em-ployee’s activities are in compliance with legal obligations to the formeremployer. Even well written notice letters have a hidden downside: Thenew employer may ask the former employer to identify the trade secretsin issue,289 something the former employer may not be eager to do.

Above all else, when a valued employee departs, the former em-ployer’s management should put together an action plan.290 This mayinclude simply assigning someone to monitor the ex-employee’s activ-ities; it may include a publicity campaign; it may include a prophylacticretention program, like giving contracts or raises to remaining employ-ees; it may include litigation planning; or it may include all of the afore-mentioned. Indeed, in certain cases, where a departing executive or keyemployee is dissatisfied but not disloyal, the employer should seriouslythink about attempting to rehire the individual;291 after all, good people

interference); Collincini v. Honeywell, Inc., 601 A.2d 292 (Pa. Super. Ct. 1991) (threat-ening letter to new employer resulted in $500,000 verdict, $400,000 of which was punitivedamages); Voorhees v. Guyan Mach. Co., 446 S.E.2d 672 (W. Va. 1994) (ex-employer whotried to enforce non-compete lacked justification and therefore was liable for interferencewith new employment, resulting in $75,000 in compensatory damages and $75,000 inpunitive damages); Lucio Guerrero, Man Falsely Accused as Sex Predator Sues: WinnetkaResident Claims His Former Boss Spread Lies, CHI. SUN-TIMES, Oct. 11, 2000, at 10(reporting recently filed Illinois case in which ex-employee sued former employer fordefamation for posting fliers saying ex-employee was a convicted sexual predator, alleg-edly because former employer was angry that ex-employee joined a competitor followinga pay dispute).

287. See Mangren Research, 87 F.3d 937 (affirming punitive damages and attorney’sfees awards against defendant for willful and malicious trade secret misappropriation);Miles, Inc. v. Cookson Am., Inc., 1994 WL 676761, at *1 (Del. Ch. Nov. 15, 1994) (awardingplaintiff’s fees under Delaware version of UTSA for willful and malicious misappropri-ation where defendants used plaintiff’s trade secrets despite notice letters); Tower Oil &Tech. Co. v. Buckley, 425 N.E.2d 1060 (Ill. App. Ct. 1981) (punitive damages assessedagainst new employer that ignored former employer’s notice letter).

288. See Buckley, 425 N.E.2d 1060 (rejecting laches defense where defendant ad-vised plaintiff he was taking steps to comply with his restrictive covenant in response toplaintiff’s notice letter).

289. See Glenayre Elecs. v. Sandahl, 830 F. Supp. 1149 (C.D. Ill. 1993) (noting plain-tiff sent a letter to defendant reminding him of his confidentiality agreement; defendantresponded with a letter of his own, stating he possessed no such information and re-questing plaintiff to identify the information he possessed).

290. See Anurag Sharma & Idalene F. Kesner, When an Executive Defects, 75 HARV.BUS. R. 18 (1997) (discussing comprehensive planning for company responding to keyemployee defections to competitors).

291. SEE GREGORY ZUCKERMAN, CS FIRST BOSTON LURES DEFECTING EXECUTIVESBACK FROM BARCLAYS, WALL ST. J., Feb. 22, 2001, at C1 (describing announced departure



are hard to find, and keeping them from the competition may be worththe risk—but it is a risk, one which some employers prefer to avoid byimmediately ushering unhappy employees out the door.292

From a legal standpoint, the most important thing to remember increating an action plan is that emergency injunction litigation must begiven the highest priority. Courts are reluctant enough as it is to re-strict employee mobility; they are rarely willing to grant injunctive re-lief to a former employer that sleeps on its rights. In this context, thepassage of a few weeks or months may mean the difference betweensuccess and failure when it comes to injunctive relief.293 The formeremployer should also consider obtaining an evidence preservation orderas early as possible,294 if not a site inspection order295 or even an exparte civil search and seizure order.296

Apart from proceeding as quickly as possible against ex-employees,a former employer has to decide whether to join a new employer in thesame action or to sue the new employer in a separate action. The lawis unclear in many jurisdictions as to whether the new employer is anindispensable party. If so, this may complicate matters by defeatingdiversity jurisdiction or by bringing in a deep pocket that is better able

and sudden return of forty CS First Boston senior bond executives when CS First Bostontopped Barclays Bank’s competing offers).

292. See Gates Rubber Co. v. Bando American, 798 F. Supp. 1499, 1503 n.1 (D. Colo.1992) (noting employer had policy of asking employees who sought competitive employ-ment to immediately clear out their office).

293. See Cortland Line Co., Inc. v. Vincent, 48 U.S.P.Q. 2d (BNA) 1684 (N.D.N.Y.1998) (plaintiff’s delay of six months after learning defendant intended to use trade se-crets required denial of injunctive relief); Samuel Bingham Co. v. Maron, 651 F. Supp.102 (N.D. Ill. 1986) (plaintiff’s delay of three months after learning defendant violatedhis employment non-compete required denial of injunctive relief); Electronic SupportSys., Inc. v. Schattke, 388 N.E.2d 63 (Ill. App. Ct. 1979) (plaintiff’s delay of five months,after sending cease and desist letter concerning defendant’s employment non-competeviolation, required denial of injunctive relief); William Lynch Schaller, Some PreliminaryThoughts About Preliminary Injunctions, 85 ILL. B. J. 12 (1997) (noting danger of unduedelay in seeking interim injunctive relief).

294. See Mpct Solutions Corp. v. Methe, 1999 WL 495115, at *1 (N.D. Ill. July 2,1999) (ex parte evidence preservation order granted at outset of case).

295. See Gates Rubber Co. v. Bando Chem. Indus., Ltd., 167 F.R.D. 90 (D. Colo. 1996)(discussing massive site inspection order in employee trade secret misappropriationcase); Chemfab Corp. v. Integrated Liner Techs, Inc., 693 N.Y.S. 2d 752 (N.Y. App. Div.1999) (noting stipulated inspection of both parties’ manufacturing facilities by an inde-pendent expert who concluded no trade secrets had been appropriated),

296. See Vector Research, Inc. v. Howard & Howard Attorneys, PC, 76 F.3d 692 (6thCir. 1996) (attorneys were federal agents for Bivens purposes in executing ex parte searchand seizure order in copyright case previously reversed in First Tech. Safety Sys., Inc. v.Depinet, 11 F.3d 641 (6th Cir. 1993)); American Can Co. v. Mansukhani, 742 F.2d 314(7th Cir. 1984) (reversing ex parte search and seizure order in trade secret case); JohnFlynn Rooney, Judge to Sit Out 3 Months: Ethics Panel, CHI. DAILY L. BULLETIN, April2, 2001, at 1 (describing three-month suspension of state trial court judge for improperlygranting a preliminary injunction, barring seizure of property, without includingrequiredfindings of fact).



to fight the litigation. A separate tortious interference action againstthe new employer may make sense in some instances from tactical andjurisdictional perspectives.297 For example, attorney fees incurred insuccessfully prosecuting former employees in one suit may count asdamages in a later tortious interference action against the new em-ployer, a calculation that is difficult to make in a single suit againstboth.298 There is no right answer here.

Nonetheless, the ex-employer should not throw caution to thewind. Litigation is expensive and intrusive, and it might even result ininadvertent disclosure of trade secrets or confidential informationthrough the litigation process itself.299 In addition, unsuccessful liti-gation against one employee may bar the employer from proceedingagainst other employees, a risk that may counsel in favor of settlementin some cases.300 Moreover, some parts of an action plan—like public-ity—may succeed in the marketplace but backfire in the courthouse,

297. Cf. Desnick v. American Broad. Co., 233 F.3d 514, (7th Cir. 2000) (noting em-ployer sued former employee in state court for defamation and obtained a judgment, andthen sued ABC television network in federal court for subsequent expose involving em-ployee); Revere Transducers, Inc. v. Deere & Co., 595 N.W.2d 751 (Iowa 1999) (formeremployer sued ex-employees in Connecticut federal court and their customer in Iowastate court).

298. See Phil Crowley Steel Corp. v. Sharon Steel Corp., 702 F.2d 719 (8th Cir. 1983)(attorneys’ fees incurred in underlying breach of contract action were recoverable in sub-sequent tortious interference action against third party); National Wrecking Co. v. Cole-man, 487 N.E.2d 1164 (Ill. App. Ct. 1985) (same holding).

299. See Cacique, Inc. v. Robert Reiser & Co., Inc., 169 F.3d 619 (9th Cir. 1999)(barring discovery directed to non-party’s trade secrets); Hoechst Diafoil Co v. Nan YaPlastics Corp., 174 F.3d 411 (4th Cir. 1999) (discussing impact of inadvertent trade secretdisclosure in public court filing); Trandes Corp. v. Guy F. Atkinson Co., 996 F.2d 655 (4thCir. 1993) (noting reluctance of plaintiff’s president to reveal trade secrets during cross-examination by defense counsel at trial); Brown Bag Software v. Symatec Corp., 960 F.2d1465 (9th Cir. 1992) (discussing risk of inevitable though inadvertent trade secret disclo-sure by in-house counsel in a protective order setting); Crane Plastics Co. v. Louisiana-Pacific Corp., 119 F. Supp. 2d 749 (S.D. Ohio 2000) (discussing standard rules governingwhether and under what circumstances confidential information may be shared duringlitigation); Simon Property Group, L.P. v. mySimon, Inc., 194 F.R.D. 639 (S.D. Ind. 2000)(establishing protective order protocol, including appointment of an independent expertserving as an officer of the court, for reviewing employees’ deleted computer files in trade-mark action); Jerold S. Solovy and Robert Byman, Discovery: An Ounce of Prevention,NAT’L L.J., March 19, 2001, at A12 (general discussion of trade secret disclosure risksposed by litigation); William Lynch Schaller, Protecting Trade Secrets During Litigation:Policies and Procedures, 88 ILL. B. J. 260 (2000) (general discussion of trade secret dis-closure risks posed by litigation); Robert J. Jacobson, Protecting Discovery By Copyright,71 J. PAT. & TRADEMARK OFF. SOC’Y. 483 (1989) (discussing availability of copyrightprotection to prevent “discovery sharing” when courts refuse to provide sufficient tradesecret protective order relief).

300. See Service Sys. Corp. v. Van Bortel, 528 N.E.2d 378 (Ill. App. Ct. 1988) (federalcourt finding that employer had no protectible interest to justify employee non-competecollaterally estopped employer from pursuing non-compete injunction against another,similarly situated employee).



as is often the case when a business tries to put a positive spin onemployee defections.301

Pursuing criminal charges is a final consideration for the formeremployer. Many states have criminal statutes governing trade secrettheft, and federal criminal trade secret legislation emerged in 1996with the passage of the Economic Espionage Act.302 Computer crimesand ordinary theft charges are also available, as are many other poten-tial charges like wire fraud, mail fraud, and interstate transportationof stolen property.303 However, criminal proceedings are no panacea;prosecutors usually take their time, and the ex-employer’s trade secretsmay be further jeopardized by defense requests for extensive disclosurein the criminal case.304 Criminal proceedings may also result in defen-dants asserting their Fifth Amendment rights or seeking a stay of civilproceedings pending the outcome of the criminal case.305 Furthermore,

301. See Calvin Klein Trademark Trust v. Wachner, 198 F.R.D. 53 (S.D.N.Y. 2000)(attorney-client privilege did not cover communications between law firm and public re-lations firm, and work product doctrine did not cover public relations advice to the extentit revealed strategy for dealing with effects of litigation on client’s customers); CharlesP. Young v. Leuser, 485 N.E.2d 541 (Ill. App. Ct. 1985) (employer’s publicity campaign,stating that loss of sixteen employees to competitor would not affect employer’s operation,showed lack of irreparable harm in injunction case); Mark Pendergrast, How To Keep aCorporate Secret, WALL ST. J., Feb. 20, 2001, at A22 (describing Kentucky Fried Chicken’strade secret lawsuit against Cherry Stucker, who found fried chicken recipe that turnedout not to be the original Colonel Harland Sanders’ recipe, and attendant negative pub-licity); Joseph T. Hallinan, Conseco Is Suing Investment Officer After He Resigned, WALL.ST. J., Oct. 16, 2000, at B20 (employer publicly announced departing employee’s replace-ment, only to see replacement resign as well); Lee Gomes, Oracle Ex-President CriticizesFormer Employer, WALL ST. J., Aug. 24, 2000, at B12 (reporting Oracle ex-president RayLane’s harsh criticism of Oracle following his abrupt departure); William M. Carley, TiesThat Bind: CEO Gets Hard Lesson in How Not to Keep His Top Lieutenants; InternationalPaper’s Chief, Frustrated by Poaching, Pushed Non-Compete Pact, WALL ST. J., Feb. 11,1998, at A1 (front-page negative publicity over fallout within International Paper andrelated lawsuit, referenced in footnote 124 supra, over non-competes signed by executiveMark Suwyn and others).

302. See FBI Sting Captures New York Man Who Stole Trade Secrets from MasterCardand Offered Them for Sale to Visa, �http://www.cybercrime.gov/Estrada.htm� (visitedApril 2, 2001) (federal government press release announcing arrest of Fausto Estrada forallegedly stealing MasterCard secrets, including a business alliance proposal valued inexcess of $1 billion); San Francisco Man Arrested on Charges of Trade Secret Theft,�http://cybercrime.gov/morch.htm� (visited Dec. 1, 2000) (federal government press re-lease announcing arrest of Peter Morch, a citizen of Canada and Denmark, for trade secrettheft while serving as a software engineer at Cisco Systems in California).

303. See Martin, 228 F.3d 1 (upholding convictions for wire fraud, mail fraud, con-spiracy to steal trade secrets and conspiracy to transport stolen property in interstatecommerce).

304. See United States v. Hsu, 155 F.3d 189 (3d Cir. 1998) (remanding defense re-quest for trade secret information in Economic Espionage Act case), on remand, 185F.R.D. 192 (E.D. Pa. 1999) (extensive discussion of how to review and redact trade secretdocuments); Frances A. McMorris, Corporate-Spy Case Rebounds on Bristol, WALL ST.J., Feb 2, 1998, at B7 (because Bristol-Myers Squibb’s real trade secrets were used asbait in FBI sting operation, district court ordered prosecutors to turn over to defendantsand their lawyers the very documents the defendants were accused of stealing).

305. See United States v. Kordel, 397 U.S. 1 (1970) (Fifth Amendment privilege iswaived when party fails to invoke it in civil proceedings); LaSalle Bank Lake View v.



unsuccessful criminal charges may result in malicious prosecutioncharges by defendants.306

B. New Employer’s ConsiderationsNot surprisingly, the new employer’s planning is the mirror image

of the old employer’s planning. It goes without saying that the newemployer should immediately exercise control over contested employ-ees to prevent them from making admissions or threats307 and to pre-vent them from destroying evidence.308 It also goes without saying thata new employer should demand a copy of any contractual restrictionsbefore hiring an employee. In addition, the new employer should securerepresentations and warranties that the employee will comply with allpreexisting obligations owed to former employers. If contractual re-strictions are broad and binding, the new employer should considercontacting the old employer to negotiate carve outs. If contractual re-strictions are limited to nondisclosure or trailer clause obligations, thenew employer should consider clean-room procedures so that the newemployer can prove that no trade secrets were stolen, no restricted cus-tomers were contacted, inventions were developed solely at the newfirm, and the like.309 Proving a negative is always difficult, yet it is an

Seguban, 54 F.3d 387 (7th Cir. 1995) (noting availability of stay of civil proceedings pend-ing criminal proceedings); Trustees of Plumbers and Pipefitters v. Transworld Mech., Inc.,886 F. Supp. 1134 (S.D.N.Y. 1995) (staying civil case pending criminal case alleging samewrongful conduct); Joseph N. Hosteny and Ronald C. Kamp, Corporate Espionage: Pro-tecting Trade Secrets, ACCA DOCKET, Vol. 17, No. 1, at 18 (Jan./Feb. 1999) (noting riskof civil case being stayed when parallel criminal litigation is ongoing).

306. See Swick v. Liautaud, 662 N.E.2d 1238 (Ill. 1996) (malicious prosecution claimfollowing dismissal of theft charges against ex-employee).

307. See Hamer Holding Group v. Elmore, 560 N.E.2d 907 (Ill. App. Ct. 1990) (em-ployee threatened to advise clients of employer wrongdoing and told employer he was“prepared to go down in flames and take everyone else with him”).

308. See Ill. Tool Works, Inc. v. Metro Mark Prods., Ltd., 43 F. Supp. 2d 951 (N.D.Ill. 1999) (granting sanctions request for violation of computer evidence preservationorder in trade secret misappropriation case); Lexis-Nexis v. Beer, 41 F. Supp. 2d 950 (D.Minn. 1999) (discussing computer evidence preservation order violation by ex-employee);Mpct Solutions Corp., 1999 WL 495115, at *1 (granting preliminary injunction as sanc-tion for ex-employee’s violation of computer evidence preservation order); Gates Rubber,167 F.R.D. 90 (employee evidence destruction resulted in years of satellite litigation andmillions of dollars in fees).

309. See Sega Enters. Ltd. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1993) (describing“clean room” procedures with respect to software disassembly, where programmers areprovided only with the functional specifications for the desired program); DSC Commu-nications Corp. v. DGI Techs., Inc., 898 F. Supp. 1183 (N.D. Tex. 1995) (describing soft-ware “clean room” procedure involving two teams of developers, with one team disassem-bling the code and functional aspects, and the other using descriptions of functionalaspects of the code to write a competing product’s code); Agrimerica v. Mathes, 557 N.E.2d357 (Ill. App. Ct. 1990) (finding tortious interference against new employer based, in part,upon new employer’s failure to direct new employee not to call ex-employer’s customerscovered by non-solicitation covenant); G. Gervaise Davis, III, Scope of Protection ofComputer-Based Works: Reverse Engineering, Clean Rooms and Decompilation, 370PLI/PAT 115, 151 (1993) (emphasizing use of a lawyer as a filter between those doingdisassembly and those writing a new program, including the lawyer’s role in documenting“clean room” procedures for later use as evidence).



important defense to employee wrongful competition claims, espe-cially trade secret inevitable disclosure charges.310 “Superficial andinadequate” steps will not suffice, as the Second Circuit emphasizedin Autodesk.311

Another consideration is hiring counsel or, more precisely, separatecounsel for defendants. Presenting a unified front in court through asingle attorney is preferable but not always possible or practical. Sepa-rate counsel may be required if actual or potential conflicts exist be-tween the employee and the new employer. This costly step may benecessary if the new employer suspects the employee has pilfered se-crets, for instance, or it may be necessary if the new employer wantsto keep open its option to terminate the employee as part of a settlementwith the ex-employer.312 Separate counsel may also be necessary tonegotiate an indemnity/defense agreement between the new employerand the employee, unless such an agreement is already in place. Addingto the uncertainty is the fact that in some jurisdictions a new em-ployer’s offer to pay indemnity or defense is itself suspect if not a formof tortious interference.313 To be sure, separate counsel should be re-tained if the employer thinks criminal charges may be lurking understate or federal laws;314 separate deals may need to be made with pros-

310. See Computer Assoc. Int’l v. Altai, 982 F.2d 693 (2d Cir. 1992) (new employer’sfailure to monitor new employee’s software development activities supported inferenceof constructive notice of employee’s misappropriation of former employer’s trade secrets);Union Carbide Corp v. UGI Corp., 731 F.2d 1186 (5th Cir. 1984) (inevitable disclosuresof trade secrets established in part by new employer’s failure to take precautions to keeptargeted ex-employee from attending key meetings concerning his ex-employer).

311. Vermont Microsystems, Inc. v. Autodesk, Inc., 88 F.3d 142, 145 (2d Cir. 1996)(quoting district court’s criticism of new employer’s response to trade secret misappro-priation notices from competitor).

312. See Vencor, Inc. v. Webb, 33 F.3d 840 (7th Cir. 1994) (noting new employerterminated employee after former employer initiated non-compete litigation, but holdingthat termination did not moot litigation).

313. See National Bus. Servs., Inc. v. Wright, 2 F. Supp. 2d 701 (E.D. Pa. 1998) (newemployer’s indemnification of employee minimized employee’s loss and thus was a factorin favor of enforcing non-compete); Curtis 1000, Inc. v. Pierce, 905 F. Supp. 898 (D. Kan.1995) (indemnification promise supported tortious interference claim concerning em-ployee non-compete); Texlon v. Hoffman, 720 F. Supp. 657 (N.D. Ill. 1989) (new employer’sindemnification of employee minimized employee’s potential loss and thus was a factorin favor of ex-employer’s injunctive relief request); Ecolab, Inc. v. K.P. Laundry Mach.,Inc., 656 F. Supp. 894 (S.D.N.Y. 1987) (new employer’s indemnification agreement andlarge salaries were used to encourage employees to violate their non-compete duties toex-employer); In re Jotan, Inc., 229 B.R. 218 (M.D. Fla. 1998) (new employer’s indemnityagreement influenced court’s decision to enjoin new employer from raiding bankruptcompetitor’s key employees); Saforo & Assoc., Inc. v. Porocel Corp., 991 S.W.2d 117 (Ark.1999) (presence of indemnity agreement supported finding that trade secret misappro-priation was willful); Melo-Tone Vending, Inc. v. Sherry, Inc., 656 N.E.2d 312 (Mass. App.Ct. 1995) (indemnification agreement supported tortious interference charge againstcompeting firm).

314. See Steven Kowal, When Government Agents Take Aim: How to Handle an “Am-bush,” 30 BRIEF 8 (Winter 2001) (noting that corporate attorneys should consider whetherexecutives’ constitutional rights may be at risk during criminal investigation interviewsby government agents).



ecutors depending on who turns out to be the target defendant and whoturns out to be the flipper.315

The new employer and the challenged employees should also con-sider filing a declaratory judgment action in a friendly forum, like Cali-fornia, if possible. Notice letters can create a sufficient threat to justifya preemptive strike, and parallel actions may result in a favorablevenue.316 International Business Machines v. Bajorek317 and Applica-tion Group, Inc. v. Hunter Group, Inc.318 plainly illustrate this strategy,albeit with mixed results. Mirror-image declaratory judgment actionsare not favored,319 and federal district courts have discretion to dismissthem,320 but trial courts frequently invoke the first-filed rule even if inerror.321 Hence, a race to the courthouse should be considered in theabsence of a contractual forum-selection clause.322 In addition, a pre-emptive declaratory judgment may make sense to deflect inevitabledisclosure charges.323 The defense may also be able to force the ex-employer to litigate in multiple proceedings if personal or subject mat-ter jurisdiction is lacking.324

315. See Martin, 228 F.3d 1 (upholding Economic Espionage Act conviction wherean indicted employee testified for the government that she passed company secrets to anoutsider).

316. See EMC Corp. v. Norand Corp., 89 F.3d 807 (Fed. Cir. 1996) (patentee’s threatto pursue legal recourse if it was not satisfied with the outcome of licensing negotiationscreated a reasonable apprehension of litigation that justified anticipatory declaratoryjudgment action); Phillips Plastics Corp. v. Kato Hatsujou Kabushiki Kaisha, 57 F.3d1051 (Fed. Cir. 1995) (defendant carefully refrained from threatening patent infringe-ment suit in attempting to open license negotiations, and thus no controversy existed tojustify anticipatory declaratory judgment action); Millennium Products, Inc. v. GravityBoarding Co., Inc., 127 F. Supp. 2d 974 (N.D. Ill. 2000) (trademark holder’s threat toinitiate litigation within seven days if a license could not be agreed upon justified antic-ipatory declaratory judgment action); Application Group, Inc. v. Hunter Group, Inc., 72Cal. Rptr. 2d 73 (Cal. Ct. App. 1998) (declaratory judgment action based in part on non-compete notice letters); Arthur Young & Co. v. Bremer, 554 N.E.2d 671 (Ill. App. Ct. 1990)(dismissing Illinois restrictive covenant enforcement action in favor of California declar-atory judgment action filed by twelve ex-employees who joined rival).

317. 191 F.3d 1033 (9th Cir. 1999).318. 72 Cal. Rptr. 2d 73.319. See Tempco Elec. Heater Corp. v. Omega Eng’g, Inc., 819 F.2d 746 (7th Cir. 1987).320. See Wilton v. Seven Falls Co., 515 U.S. 277 (1995).321. See Stewart Title Guar. Co. v. Cadle Co., 74 F.3d 835 (7th Cir. 1996) (reversing

district court’s summary dismissal of case pursuant to first-filed rule).322. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991) (enforcing forum

selection clause calling for litigation in Florida); M/S Bremen v. Zapata Offshore Oil Co.,407 U.S. 1 (1972) (enforcing forum selection clause calling for litigation in a foreign fo-rum); Design Strategy Corp. v. Nghiem, 14 F. Supp. 2d 298 (S.D.N.Y. 1998) (upholdingNew York forum selection clause, but then enforcing arbitration clause in computer con-sultant’s employment contract in action brought by former employer against Torontocomputer consultant/employee).

323. See Robert Manor, Court Asked to OK New OMC Chief, CHIC. SUN-TIMES, Sept.27, 1997, at 30 (describing preemptive declaratory judgment action brought by DavidJones, a 20-year employee who was fired as president of a Brunswick division and thenoffered CEO position at rival Outboard Marine six weeks later).

324. See Cleveland Hair Clinic, Inc. v. Puig, 200 F.3d 1063 (7th Cir. 2000) (affirmingsanctions award arising out of forum shopping between state and federal courts); Gold-



The new employer should also examine its insurance coverage andpromptly notify its carriers when sued. Business tort claims may becovered under defamation or advertising injury clauses.325 An insurer’sduty to defend is typically fairly broad; all claims may be covered fordefense purposes if just one is.326 Employee unfair-competition claimscan be quite expensive to defend, and shifting the defense burden canbring welcome financial relief, though choice of counsel may presentissues. If the new employer plans to counterclaim against the formeremployer—say for abuse of process, sham litigation, or monopoliza-tion327—a deal may need to be struck with the insurer to allocate feesand costs between defense and counterclaim expenses.

C. New Employee’s ConsiderationsEmployees caught between warring employers may have their

own agendas, though for the most part they overlap with the newemployer’s position. Ex-employees may find it wise to settle on theirown, as the employees did for $60,000 in Revere Transducers, Inc. v.Deere & Co.,328 thereby avoiding the $1,000,000 hit later taken bythird-party-interfering Deere. Employees faced with significant exposuremay also wish to pursue personal bankruptcy to escape contractual lia-bilities, though non-compete injunctions and other non-contractual lia-bilities may not go away.329 Alternatively, they may need asset-protection

man Marcus, Inc. v. Goldman, No. 99 CIV. 11130, 2000 WL 297169, at *1 (S.D.N.Y. March21, 2000) (court had subject matter jurisdiction over software copyright and trade secretclaims, but supplemental jurisdiction did not cover common law mismanagement andfraud claims arising out of the same business breakup that triggered the software andtrade secret claims); CIC Corp., Inc. v. AIM Tech Corp., 32 F. Supp. 2d 425 (S.D. Tex.1998) (pre-departure fiduciary duty claims and post-departure Lanham Act claimsagainst ex-employee did not arise out of common nucleus of operative facts; federal courttherefore lacked subject matter jurisdiction over pre-departure claims).

325. See Crum & Forster Corp. v. Resolution Trust Co., 620 N.E.2d 1073 (Ill. 1993)(ex-employer’s business tort claims, for unfair competition in connection with its agentsestablishing their own business, were not covered by agent’s professional liability insur-ance policy); Winklevoss Consultants, Inc. v. Fed. Ins. Co., 991 F. Supp. 1024 (N.D. Ill.1998) (insured software developer’s advertising injury policy did not cover trade secretmisappropriation); Merchants Co. v. American Motors Ins. Co., 794 F. Supp. 611 (S.D.Miss. 1992) (insurer had duty to defend trade secret claim); McDonald’s Corp. v. AmericanMotorists Ins. Co., 2001 WL 488824 (Ill. App. Ct. May 2, 2001); Blanketing IntellectualRisk, CFO MAGAZINE, at 16 (May 2000) (describing AON Corp.’s new “risk-transfer ser-vice” that offers blanket protection of intellectual property assets).

326. See David A. Gauntlett, Insurance Coverage of Intellectual Property Assets, §§6.01–6.03 (exhaustive discussion insurer’s duty to defend).

327. See WorldCom, Inc. v. Transcend Allegiance, Inc., 1998 Dist. LEXIS 2693 (N.D.Ill. March 4, 1998) (dismissing monopolization, sham litigation, and unfair competitioncounterclaims arising out of lawsuit to enforce employee non-competes).

328. 595 N.W.2d 751 (Iowa 1991).329. See In re Udell, 18 F.3d 403 (7th Cir. 1993) (permitting injunctive relief to en-

force bankrupt employee’s non compete); In re Frain, 230 F.3d 1014 (7th Cir. 2000) (in-terpreting § 523(a)(4) of the Bankruptcy Code as precluding debtor discharge only fortraditional fiduciary duties recognized in advance of a breach); In re Brown, 237 B.R. 740



advice,330 as exemplified by the employee who lost a fiduciary duty com-petition claim in E.J. McKernan Co. v. Gregory331 but then protectedhis house from attachment in subsequent proceedings.332 Apart fromprotecting their own interests in negotiating indemnity and criminalmatters, employees may also have wrongful discharge, discrimination,or other claims against their former employers that new employers maynot be interested in funding. The reverse may also be true: Employeesmay have claims against new employers for fraudulent hiring or breachof contract. Of course, an employee may really own inventions or soft-ware, making arm’s-length negotiations between the employee and newemployer imperative.

A final practical consideration is voluntary arbitration. At times,pre-dispute arbitration clauses can be beneficial.333 At other times, pre-dispute arbitration clauses, which were inserted in the employee’s con-tract during a friendlier time, may later prove troublesome. Althoughthe Supreme Court recently held in Circuit City Stores, Inc. v. Adams334

that most employment claims can be arbitrated under the Federal Ar-bitration Act, excessive procedural costs may void arbitration of employ-ment claims in some situations.335 A question may also arise as towhether courts or arbitrators are empowered to issue injunctive relief.336

(C.D. Cal. 1999) (state court judgment finding ex-employee guilty of “evil motive” in in-tentional trade secret theft case constituted non-dischargeable debt under § 523(a)(4) ofthe Bankruptcy Code).

330. See United States v. Lee, 232 F.3d 556 (7th Cir. 2000) (holding that wife couldassert innocent owner defense to government’s forfeiture action with respect to Floridahome wife and convicted husband held in tenancy by the entirety).

331. 623 N.E.2d 981 (Ill. App. Ct. 1993). But see Premier Property Management, Inc.v. Chavez, 728 N.E.2d 476 (Ill. 2000) (discussing current status of Illinois law governingtenancies by the entirety and fraudulent transfers and noting that Gregory has beensuperceded by statute).

332. See id. (Illinois home held in tenancy by the entirety could not be attached tosatisfy judgment against employee/home owner).

333. See Peoples Security Life Ins. Co. v. Monumental Life Ins. Co., 991 F.2d 141(4th Cir. 1993) (arbitral award of $9,700,000 upheld in employee raiding/trade secretcase).

334. 2001 WL 273205, at *1 (U.S. Mar. 21, 2001).335. See Green Tree Financial Corp. v. Randolph, 121 S. Ct. 513 (2000) (noting the

possibility that significant arbitration costs could preclude a litigant from vindicatingfederal statutory rights); McCoy v. Superior Court, 104 Cal. Rptr. 2d 504 (Cal. Ct. App.2001) (law firm could not enforce arbitration agreement against former file clerk, sincefile clerk was required to pay half of arbitration costs, which could require $400 per hourand a deposit of $8,000).

336. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Lauer, 49 F.3d 323 (7th Cir.1995) (a district court may compel arbitration only if arbitration, as agreed by the parties,is to be held in the judicial district where the court is located); QAI, Inc. v. Sprint Com-munications Co., 120 F. Supp. 2d 1218 (C.D.Cal. 2000) (when an arbitration agreementdesignates the site for arbitration, the proper venue for an application seeking injunctiverelief pending arbitration is the district where arbitration will take place); Vascular andGen. Surgical Assoc. v. Loiterman, 599 N.E.2d 1246 (Ill. App. Ct. 1992) (because AmericanArbitration Association rules authorized arbitrators to provide equitable relief, and be-



In addition, even when arbitrators are authorized to issue injunctiverelief, the arbitration provision may fail to provide for judicial injunc-tions pending arbitration, leaving the employer at risk until an arbi-tration panel can be convened.337 Even if the arbitration clause ad-dresses this contingency, it may still be problematic to the extent thatthe employer is entitled to seek judicial relief while the employee isnot.338 Furthermore, discovery is not a given unless the arbitrationclause provides for it, 339 yet extensive discovery is often critical whenan employee’s misconduct has been carefully concealed. Finally andespecially important, a pre-dispute arbitration provision with the em-ployee may not require the new employer to arbitrate, leaving the oldemployer to fight on two fronts.340 Thus, a post-dispute arbitrationclause, voluntarily negotiated among all three parties (the former em-ployer, the new employer, and the employee) with appropriate discoveryand injunctive relief language, is the optimal approach, but good luckgetting it: The parties will likely not be on friendly terms.

The complexity of these considerations and the uncertain outcomesthey can produce can be seen in the bitter battle between CapsonicGroup and Andrew Swick, a former employee, in the related decisionsin Capsonic Group v. Swick341 and Swick v. Liautaud.342 Capsonic de-

cause parties incorporated AAA rules in non-compete provision, arbitrator properly en-forced two-year covenant running from the day of relief).

337. Compare Merrill Lynch, Pierce, Fenner & Smith v. Salvano, 999 F.2d 211 (7thCir. 1993) (allowing pre-arbitration injunction to maintain the status quo); SG CowenSecs. Corp. v. Messih, 224 F.3d 79 (2d Cir. 2000) (injunctive relief is permitted to maintainthe status quo, if the movant satisfied traditional preliminary injunction criteria); Amer-ican Express Fin. Advisors, Inc. v. Scott, 955 F. Supp. 688 (N.D. Tex. 1996) (followingSalvano) with Merrill Lynch, Pierce, Fenner & Smith v. Hovey, 726 F.2d 1286 (8th Cir.1984) (holding that pre-arbitration preliminary injunction is not available as a matter oflaw).

338. See Armendariz v. Foundation Health Psychcare Servs., Inc., 6 P.3d 669 (2000)(agreement giving employer, but not employee, choice to pursue arbitration was void);Stirlen v. SuperCuts, Inc., 60 Cal. Rptr. 2d 138 (1997) (agreement allowing employer toseek judicial relief to protect intellectual property and to enforce high-level executive’snon-compete, while giving executive no right to avoid arbitration, was void); Robert HalfInt’l, Inc. v. Thompson, 1999 WL 138849, at *1 (N.D. Ill. March 5, 1999) (discussingtension between arbitration clause and judicial injunction clause in employee non-compete agreement).

339. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) (limited dis-covery is a component of the simplicity, informality and expedition of arbitration); SeanT. Carnathan, Discovery in Arbitration? Well, It Depends, 10 BUS. L. TODAY 22(March/April 2001) (collecting cases for and against discovery in arbitration).

340. Cf. Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524 (5th Cir. 2000)(plaintiff brought arbitration claim against defendant contract party and state court tor-tious interference claim against non-contract parties; non-contract parties successfullycompelled plaintiff to sue them in a single arbitration with defendant contract party,requiring dismissal of court action against non-contract parties).

341. 537 N.E.2d 1378 (Ill. App. Ct. 1989).342. 662 N.E.2d 1238 (Ill. 1996).



signed automation systems to manufacture insert molding, a then rela-tively new process by which metal inserts were molded into plastic bod-ies to create one solid piece—a process Capsonic had sought to protectin prior litigation against other former employees in Capsonic Groupv. Plas-Met Corp.343 Swick signed a two-year non-compete when hejoined Capsonic in 1985 as a maintenance engineer, and Swick rosethrough the ranks to become manager of Capsonic’s automation de-partment in 1987. Swick had substantial responsibilities for designingautomated production systems and had substantial contact with cus-tomers. A headhunter approached Swick in 1988 on behalf of Altair, aCapsonic competitor, and Swick accepted in October 1988. Instead ofimmediately resigning, Swick engaged in egregious espionage, photo-graphing Capsonic machinery and keeping possession of Capsonicparts, designs, and documents outside of Capsonic’s offices. Capsoniclearned of Swick’s activities, and Swick returned the photographs onNovember 9, 1988, but kept a second set for himself. During severalmeetings with his Capsonic supervisors, Swick falsely denied havingaccepted another position.

On November 10, at the request of Capsonic, the local police ob-tained a warrant and searched Swick’s home. The police found blue-prints, drawings, and parts relating to Capsonic’s machinery and ma-terials. The police were unable to recover all of the documents, theremainder of which Swick would later destroy. The state’s attorneycharged Swick with theft of property several days later, and Capsonicinitiated civil litigation on November 14. The trial court granted a tem-porary restraining order on November 15, barring Swick from workingfor Altair or from revealing Capsonic business information. Followinga four-day evidentiary hearing, the trial court on December 14 denieda preliminary injunction and dissolved the temporary restraining or-der, and the Illinois Appellate Court subsequently affirmed this ruling.In the meantime, the state’s attorney decided not to prosecute Swickand nol-prossed the charges, which was a type of voluntary dismissalthat would allow the state’s attorney to reopen the case at a later timebut did not, in and of itself, signify a finding of guilt or innocence bythe state’s attorney.

Non-action by the state’s attorney opened the door to maliciousprosecution and other charges by Swick against Capsonic and its offi-cers; Swick filed the litigation on January 23, 1989, a few weeks afterhe had joined Altair. Swick did not deny the misconduct outlined abovebut instead sought to excuse it through a series of non-sequiturs, in-cluding the following: (1) after the police had searched Swick’s home,he finally admitted to Capsonic he had accepted another job; (2) Cap-

343. 361 N.E.2d 41 (Ill. App. Ct. 1977) (profit sharing forfeiture-for-competitionclause could not be used to support injunctive relief).



sonic’s officers then threatened Swick that he would never work in theindustry again, that he would not be able to get a job, and that Swick’sname would be in the press; (3) Capsonic retaliated against him fortaking another job by having the state’s attorney pursue theft charges;and (4) Capsonic made him sign a confession stating he had taken thephotographs without authorization, knowing the equipment he hadbeen photocopying represented trade secrets and intellectual property.Swick also defended his actions with additional non-sequiturs by claim-ing that (1) he had told several Capsonic co-workers—but obviously notCapsonic’s officers—that he had accepted Altair’s employment offer;(2) there was no company rule prohibiting taking pictures; (3) otheremployees routinely took home drawings and other documents; and(4) there was no company procedure to keep track of who had whichdocuments. In other words, Swick argued that his preposterous lack ofcommon sense justified his overwhelming misconduct, and it worked:The jury awarded Swick $5,000 in compensatory damages as well as$250,000 in punitive damages against Capsonic and $400,000 in pu-nitive damages against one of Capsonic’s officers.

The Illinois Supreme Court affirmed in part and reversed in part.The court found that Swick had failed to prove malicious prosecution,because he had relied solely on the nol-pros without proving the reasonsfor it, but remanded the issue for further proof. The court also reversedthe trial court’s directed verdicts in favor of the defense on Swick’s falselight and defamation charges arising out of newspaper stories concern-ing the criminal and civil charges Capsonic had brought, holding thesewere viable claims based upon a written statement Capsonic had givento the press. The court did, however, reject Swick’s tortious interferencewith contract and tortious interference with lawful competition claimson the ground that Swick had started work with Altair on the agreeddate at the agreed salary. Finally, the court rejected Swick’s claim forintentional infliction of emotional distress, which rested on Swick’s al-leged fear of Capsonic’s threats because Capsonic had made good onsimilar threats against others—an apparent reference to Capsonic’s1977 Plas-met litigation against other employees. The court noted thatno evidence suggested Capsonic had referenced this unrelated litiga-tion in making its threats against Swick.

As the Swick case shows, jumping-ship claims and counterclaimscan lead to protracted proceedings with unpredictable results. Formeremployers, new employers, and employees caught between can drownin oceans of criminal and civil proceedings ending in ruined reputationsand huge damage awards. Even with careful planning, events can spi-ral out of control, leaving everyone worse for the wear. Such disastersare almost guaranteed when emotions run high and crucial actions aretaken quickly, as in Swick. Still, quick action is imperative, placing allconcerned on the horns of a dilemma in these cases.



V. ConclusionEven though the novelty of high tech firms has warn off for many

investors,344 there is no denying that the unique nature of high techbusiness networks encourages employees to routinely jump ship. Justbecause high tech work is new and novel, it does not follow that thelaw provides some kind of high tech safe harbor; indeed, quite the op-posite can be true, as exemplified by the recent Napster, MP3.com, andReimerdes decisions.345 The most that can be said for high tech em-ployees is that in some instances the rapid evolution and obsolescenceof information and technology provides an opening to defend on theground that the material in question has lost its competitive value andhence deserves little or no legal protection. This is often a difficult andexpensive defense to mount, and it is unlikely to prevail if the circum-stances otherwise show wrongdoing on an employee’s part.

Courts have properly emphasized that employees are humans whoneed to earn a living, but corporate employers have rights, too. Afterall, as Judge Posner once reminded in another context, “[a] corporationis not a thing; it is a network of human beings.”346 It is precisely becausefundamental but competing interests are at stake that these cases aredifficult to assess and even more difficult to resolve. Thus, employersand employees in high tech industries must pay careful attention towell settled employee unfair competition principles because they applywith full force in this setting. To ignore or overlook these rules can bea catastrophic error.

344. See Scott Thurm, Multiple Exposure: The Broader Slowdown Isn’t the OnlyCause of Tech Industry’s Ills: After Decade as Avid Buyers, Big Customers Now Face LessPressure to Upgrade, WALL ST. J., March 21, 2001 (arguing that high tech stock marketcollapse is due to fundamental market conditions and not just the bursting of the hightech bubble); Greg Ip, Silver Lining: Amid Devastation, Many Still See Gains In BurstTech Bubble, WALL ST. J., March 20, 2001, at A1 (commenting that billions of dollarshave been lost as a result of high tech stock market collapse); E.S. Browning & Greg Ip,Reality Check: Here Are Six Myths that Drove the Boom in Technology Stocks, WALL. ST.J., Oct. 16, 2000, at A1 (arguing high tech companies are subject to same market forcesas other firms).

345. See A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001) (affirm-ing preliminary injunction against Napster prohibiting copyright infringement relatingto MusicShare program allowing users to locate digital copies of sound recordings onthe Internet); UMG Recordings Inc. v. MP3.com Inc., 56 U.S.P.Q.2d (BNA) 1376(S.D.N.Y. 2000) (awarding approximately $118 million for willful copyright infringe-ment for copying and distribution of music files); Universal City Studios Inc. v. Rei-merdes, 111 F. Supp. 2d 294 (S.D.N.Y. 2000) (granting permanent injunction againston-line journalist who posted a program designed to decrypt digital versatile diskscontaining copyrighted movies).

346. Louis Vuitton, 875 F.2d at 590.


107

How the Americans withDisabilities Act’s Prohibition onPre-Employment-Offer Disability-Related Questions Violates theFirst Amendment

Tung Yin*

I. IntroductionIn October 1992, John Otero applied for a job in the nighttime

receiving department of a Wal-Mart store in Las Cruces, New Mexico.Otero had lost his right arm below the elbow, but this was not imme-diately apparent.1 During Otero’s interview, he was asked, “ ‘What cur-rent or past medical problems might limit your ability to do a job?’ ”2

When Otero replied that he was missing part of his arm, the inter-viewer asked him “how he lost his arm, how much of his arm he hadleft, and [whether] he was able to still use his arm.”3

Wal-Mart subsequently declined to hire Otero, ostensibly on theground that he had been “rude” during his interview.4 Otero respondedwith a suit under the Americans with Disabilities Act (ADA),5 allegingdiscrimination on the ground that he was disabled.6 The jury agreedwith Otero and awarded him $7,500 in compensatory damages and$50,000 in punitive damages for unlawful discrimination. Additionally,the jury awarded to Otero $100,000 in punitive damages in compen-sation for the questions Wal-Mart asked during the interview; the mereasking of the questions violated section 12112(d)(2) of the ADA.7

In its post-trial motions, Wal-Mart argued that punitive damageswere not warranted for the asking of the questions because the inter-

* Tung Yin is an associate at Munger, Tolles & Olson LLP in Los Angeles, California.He received a J.D. in 1995 from the University of California at Berkeley. He thanks JoeLee and Eugene Volokh for their helpful comments on earlier drafts; any errors or omissionsare his, and the views expressed in this article should not be imputed to anyone else.

1. See EEOC v. Wal-Mart Stores, Inc., 11 F. Supp. 2d 1313, 1317, 1328 (D.N.M.1998); see also Scott Sandlin, Wal-Mart Loses Disability Lawsuit, ALBUQUERQUE J., Feb.25, 1997, at C3.

2. Wal-Mart Stores, 11 F. Supp. 2d at 1317.3. Id. at 1320–21.4. Id. at 1321.5. 42 U.S.C. § 12101 et seq. (1994).6. Wal-Mart Stores, 11 F. Supp. 2d at 1317.7. See 42 U.S.C. § 12112(d)(2) (1994); 29 C.F.R. §§ 1630.13(a), 1630.14(a), (b)

(2000).



viewers were not its agents, that there had been no evidence of injuryto support an award of exemplary damages, that the amount of punitivedamages was excessive, and that there had been no evidence of actualdamages.8 The district court considered and rejected each of these ar-guments. As to the last argument—that Otero had failed to prove dam-ages resulting from the asking of the prohibited questions—the courtheld, “Since the asking of an unlawful inquiry would rarely result inserious damage to an interviewee, a requirement of compensatory dam-age as a prerequisite to awarding punitive damages would rendermeaningless the ADA’s prohibition against pre-employment medicalinquiries.”9

What Wal-Mart did not argue, however, was that section 12112(d)(2)was an invalid infringement of its First Amendment rights.10 This omis-sion was odd, considering that Wal-Mart was penalized twice as muchfor asking the disability-related question as it was in punitive damagesfor the act of discrimination. Could the First Amendment have savedWal-Mart $100,000? Certainly, the district court would have had to ex-plain how speech that “rarely result[s] in serious damage” could havebeen restricted under the First Amendment.11

Curiously, while scholars have endlessly debated whether TitleVII’s prohibition on sexually harassing speech violates the FirstAmendment,12 remarkably little has been said about the ADA’s pro-

8. Wal-Mart Stores, 11 F. Supp. 2d at 1324, 1326.9. Id. at 1326; see also Cossette v. Minn. Power & Light, 188 F.3d 964, 969 (8th

Cir. 1999); Fredenburg v. Contra Costa County Dep’t of Health Servs., 172 F.3d 1176,1182 (9th Cir. 1999) (“[P]laintiffs need not prove that they are qualified individuals witha disability in order to bring claims challenging the scope of medical examinations underthe ADA.”); Griffin v. Steeltek, Inc., 160 F.3d 591, 595 (10th Cir. 1998) (holding that the“applicant need not make a showing that he or she is disabled or perceived as having adisability” to prevail). But see Armstrong v. Turner Indus., Inc., 141 F.3d 554, 558 (5thCir. 1998) (finding that “in the context of this case, Armstrong has not demonstrated anyinjury redressable by damages, and he lacks standing to seek declaratory and injunctiverelief” under 42 U.S.C. § 12112(d)(2)).

10. Employers almost never seem to raise such free speech defenses in employmentharassment cases, and this case was no exception. See, e.g., Eugene Volokh, Freedom ofSpeech and Appellate Review in Workplace Harassment Cases, 90 NW. U. L. REV. 1009,1029 & n.85 (1996).

11. Wal-Mart Stores, 11 F. Supp. 2d at 1326.12. See, e.g., WALTER K. OLSON, THE EXCUSE FACTORY: HOW EMPLOYMENT LAW IS

PARALYZING THE AMERICAN WORKPLACE 250–51, 259 (1996); Kingsley R. Browne, TitleVII as Censorship: Hostile-Environment Harassment and the First Amendment, 52 OHIOST. L.J. 481 (1991); Jules B. Gerard, The First Amendment in a Hostile Environment: APrimer on Free Speech and Sexual Harassment, 68 NOTRE DAME L. REV. 1003 (1993);Suzanne Sangree, Title VII Prohibitions Against Hostile Environment Sexual Harass-ment and the First Amendment: No Collision in Sight, 47 RUTGERS L. REV. 461 (1995);Marcy Strauss, Sexist Speech in the Workplace, 25 HARV. C.R.-C.L. L. REV. 1 (1990);Nadine Strossen, Regulating Workplace Sexual Harassment and Upholding the FirstAmendment-Avoiding a Collision, 37 VILL. L. REV. 757 (1992); Eugene Volokh, ThinkingAhead About Freedom of Speech and Hostile Work Environment Harassment, 17 BERKE-LEY J. EMP. & LAB. L. 305 (1996); Eugene Volokh, How Harassment Law Restricts


How the ADA Violates the First Amendment 109

hibition on the asking of disability-related questions.13 This is all themore strange when one considers the volume of writing devoted to at-tacking the ADA.14

This article suggests that, while the issue is by no means certain,there is a real likelihood that section 12112(d)(2) violates the FirstAmendment. Section 12112(d)(2) restricts a certain class of speech byemployers—disability-related questions during interviews—and pun-ishes employers who violate the restriction without regard to whetherthe employer actually discriminated against the applicant. To analyzethe nature of the conflict, it is necessary to consider a number of sub-issues: (1) What type of speech is a disability-related question in thecontext of a job interview? (2) Depending on the type of speech, whatlevel of protection does the First Amendment accord? (3) What are theinterests behind the ADA? (4) Do these interests justify the ADA’s re-striction on free speech? (5) Does the prohibition on disability-relatedquestions fall within an exception to the First Amendment?

This article proposes a new approach that should further theADA’s goal of reducing or eliminating discrimination against the dis-abled while at the same time expressing more deference to FirstAmendment principles. An employer should not be prohibited fromasking any disability-related questions; however, an employer’s ask-ing of disability-related questions is admissible as evidence that theemployer may have discriminated against the plaintiff.

Free Speech, 47 RUTGERS L. REV. 563 (1995); Amy Horton, Comment, Of Supervision,Centerfolds and Censorship: Sexual Harassment, The First Amendment, and the Contoursof Title VII, 46 U. MIAMI L. REV. 403 (1991); Jessica M. Karner, Comment, PoliticalSpeech, Sexual Harassment, and a Captive Workforce, 83 CALIF. L. REV. 637 (1995); Eu-gene Volokh, Comment, Freedom of Speech and Workplace Harassment, 39 UCLA L. REV.1791 (1992) [hereinafter Volokh, Workplace Harassment].

13. One recent student comment was published in 1999, but it did not analyze theFirst Amendment implications of Section 12112(d)(2). See Natalie R. Azinger, Comment,Too Healthy to Sue Under the ADA? The Controversy Over Pre-Offer Medical Inquiriesand Tests, 25 J. CORP. L. 193 (1999).

14. RICHARD A. EPSTEIN, FORBIDDEN GROUNDS: THE CASE AGAINST EMPLOYMENTDISCRIMINATION LAWS 492–93 (1992) (arguing that the ADA benefits some disabledworkers at the expense of others); PHILIP K. HOWARD, THE DEATH OF COMMON SENSE:HOW LAW IS SUFFOCATING AMERICA 144 (1994) (criticizing the ADA for giving disabledpersons a potential claim to sit in the emergency exit row of airplanes); OLSON, supranote 12, at 87 (“Far from being any rational step toward integrating this group into theproductive economy, ADA was a venture into freelance social reconstruction inspired bythe kind of overwrought identity politics that ran wild in the 1970s and 1980s.”); StevenB. Epstein, In Search of a Bright Line: Determining When an Employer’s Financial Hard-ship Becomes “Undue” Under the Americans with Disabilities Act, 48 VAND. L. REV. 391,397 (1995); Sue A. Krenek, Beyond Reasonable Accommodation, 72 TEX. L. REV. 1969,1971–73 (1994); Christopher J. Willis, Title I of the Americans with Disabilities Act: Dis-abling the Disabled, 25 CUMB. L. REV. 715 (1994–1995); Janelle Carter, Eastwood Blasts“Frivolous” ADA Suits, L.A. DAILY J., May 19, 2000, at 4 (describing actor Clint East-wood’s efforts to urge Congress to amend the ADA).



II. Background on Section 12112(d)(2) of the ADAA. Overview of the ADA

Enacted in 1990, the ADA is a direct descendant of the Rehabili-tation Act of 1973, which prohibits discrimination against a “qualifiedindividual with a disability,”15 including those regarded as disabled, butapplies only to federal agencies,16 recipients of federal funds,17 and fed-eral contractors (and subcontractors).18 The Rehabilitation Act also re-quires certain federal contractors to implement affirmative action pro-grams to benefit the disabled.19

However, the Rehabilitation Act does not reach private employerswho do not conduct business with the federal government. Moreover,the act does not provide a private right of action against federal con-tractors who violate its provisions.20 The ADA was enacted to addressthese perceived gaps in the protection of the disabled, whom Congressconcluded were “a discrete and insular minority who have been facedwith restrictions and limitations, subjected to a history of purposefulunequal treatment, and relegated to a position of political powerless-ness in our society.”21 The former President Bush lists the enactmentof the ADA among his greatest domestic accomplishments.22

Like the Rehabilitation Act, the ADA protects from discriminationall qualified individuals with disabilities. A qualified individual with adisability is a person “with a physical or mental disability who, with orwithout reasonable accommodation, can perform the essential func-tions of the position that he or she holds or desires.”23

The ADA defines a disability as a “physical or mental impairmentthat substantially limits one or more of the major life activities.”24 Areasonable accommodation is defined as

(A) making existing facilities used by employees readily accessible toand usable by individuals with disabilities; and(B) job restructuring, part-time or modified work schedules, reassign-ment to a vacant position, acquisition or modification of equipmentor devices, appropriate adjustment or modifications of examinations,

15. 29 U.S.C. § 794 (1994).16. 29 U.S.C. § 791 (1994).17. 29 U.S.C. § 793 (1994).18. 29 U.S.C. § 794. See generally Robert E. Rains, A Pre-History of the Americans

with Disabilities Act and Some Initial Thoughts as to Its Constitutional Implications, 11ST. LOUIS U. PUB. L. REV. 185 (1992).

19. 29 U.S.C. § 793; 41 C.F.R. § 60–741.1 (2000).20. See Johnston v. Horne, 875 F.2d 1415, 1420–21 (9th Cir. 1989).21. 42 U.S.C. § 12101(a)(7).22. See, e.g., OLSON, supra note 12, at 99, 101.23. RICHARD J. SIMMONS, EMPLOYMENT DISCRIMINATION AND EEO PRACTICE MAN-

UAL § 10.4(c)(1), at 394 (6th ed. 1999).24. 42 U.S.C. § 12102(2) (1994); 29 C.F.R. § 1630.2(i) (2000).



training materials or policies, the provision of qualified readers orinterpreters, and other similar accommodations for individuals withdisabilities.25

Thus, a person who suffers from a physical or mental disability thatsubstantially impairs a major life activity, but who can neverthelessperform the essential functions of the job, cannot be denied the job orpromotion that he or she seeks because of the disability.

B. The ADA’s Framework for Asking Disability-RelatedQuestionsAs noted earlier, section 12112(d)(2) of the ADA specifically pro-

hibits employers from asking disability-related questions during inter-views.26 The purpose of this prohibition is, as the Equal EmploymentOpportunity Commission (EEOC) has stated, to “ensure that an appli-cant’s possible hidden disability (including a prior history of a disabil-ity) is not considered before the employer evaluates an applicant’s non-medical qualifications.”27 Thus, the employment application frameworkcontemplated by the ADA—and implemented by the EEOC—consistsof three stages: (1) interview, (2) post-offer, and (3) employment.

At the interview stage, the employer may not ask any disability-related questions.28 However, the employer is allowed to ask questions“about an applicant’s ability to perform specific job functions” and “mayask applicants to describe how they would perform job tasks.”29 Forexample, if a wheelchair-bound person applies for a position as a fire-fighter, the employer is entitled to ask the applicant to describe how hewill perform the job task of rescuing victims from a burning building.

If the employer wants to ask disability-related questions, it mustmake a conditional offer, and it may not single out a particular applicantfor such questioning; rather, all applicants given conditional offers mustbe asked the same questions.30 A conditional job offer is one that is realbut contingent on the applicant’s response to disability-related questionsor the results of a medical examination.31 To ensure that such an offeris not illusory, the EEOC has mandated that the employer must have“evaluated all relevant non-medical information which it reasonablycould have obtained and analyzed prior to giving the offer.”32

25. 42 U.S.C. § 12111(9) (2000).26. 42 U.S.C. § 12112(d)(2); 29 C.F.R. §§ 1630.13(a), 1630.14(a), (b).27. EEOC, ADA Enforcement Guidance: Preemployment Disability-Related Ques-

tions and Medical Examinations, at 2 (Oct. 10, 1995) [hereinafter ADA EnforcementGuidance].

28. The employer is also barred from conducting medical examinations at this pre-offer stage, but that is an issue outside the scope addressed in this article.

29. ADA Enforcement Guidance, supra note 27, at 2 (emphasis in original).30. Id. at 12.31. Id.32. Id. at 11.



Once employed, the employee is again protected from being askeddisability-related questions.33 What is a disability-related question?The EEOC defines it as a question “that is likely to elicit informationabout a disability.”34 For example, the question “Do you suffer from aphysical or mental impairment that substantially impairs a major lifeactivity?” is obviously likely to elicit information about a disability.

However, the ADA provision is not so limited in scope. A questionthat is “closely related to disability” is also prohibited.35 A question isnot disability-related “if there are many possible answers to a questionand only some of those answers would contain disability-related infor-mation.”36 What is a question that is closely related to disability? Atthe extremes, it is clear when a question is closely related to disability.For example, asking whether an applicant is infected with HIV obvi-ously would run afoul of the ADA provision because an affirmative re-sponse would indicate that the applicant suffers from HIV, which is adisability.37 Similarly, the question “Do you have a high school di-ploma?” is obviously not likely to elicit information about a disabilitybecause the only answers it would elicit are “yes” or “no,” neither ofwhich provides any insight into potential disabilities. In between thosetwo extremes, however, is a wide range of questions that may be likelyto elicit information about conditions; the question is, which of the con-ditions, if any, constitutes a disability. Unfortunately, the EEOC hasprovided little guidance on this point.

Careful scrutiny of the EEOC’s guidance is as likely to engenderconfusion as enlightenment. According to the EEOC, an employer maylawfully ask an applicant, “ ‘How well can you handle stress?’ ” and“ ‘Do you work better or worse under pressure?’ ”38 However, the sameemployer will be in trouble if it asks the following series of questions:

(1) “Do you ever get ill from stress?”(2) “Does stress affect your ability to be productive?” and(3) “Have you ever been unable to ‘cope’ with work-related

stress?”39

The latter series of questions, the EEOC has explained, “is likelyto elicit information as to whether an applicant has a substantiallylimiting psychological impairment.”40 Yet, the EEOC has also explained

33. See 42 U.S.C. § 12112(d)(4)(A); 29 C.F.R. § 1630.14(c).34. ADA Enforcement Guidance, supra note 27, at 2.35. Id.36. Id.37. See Bragdon v. Abbott, 524 U.S. 624, 641 (1998).38. See Frank C. Morris, Jr. et al., Equal Employment Opportunity Commission’s

Enforcement Guidance: Preemployment Disability-Related Inquiries and Medical Ex-aminations Under the ADA, C932 ALI-ABA 375, 378 (July 21, 1994) (discussing theEEOC’s May 19, 1994 enforcement guidance).

39. Id.40. Id.



that the earlier set of questions is not likely to elicit information as towhether an applicant has a substantially limiting impairment because“many individuals who do not handle stress/pressure well do not havea disability.”41 There is no apparent rationale to explain what is sub-stantively different about the two sets of questions.

Further analysis of the ADA’s definition of a disability yields morequestions. A major life activity must be substantially impaired in orderfor the person to have a disability.42 However, it is hard to assess whatis a major life activity. According to the EEOC, major life activitiesinclude “ ‘caring for oneself, performing manual tasks, walking, seeing,hearing, speaking, breathing, learning, working,’ . . . sitting, standing,lifting, reaching,” thinking, concentrating,43 interacting with others,sleeping, and eating.44 Various courts have held or suggested that ma-jor life activities include reproducing45 and even running!46

The list is so long and definitive that one wonders whether thereare any activities that do not constitute major life activities. Yet, in thatregard, there are. “[C]aring for others” is not a major life activity47 noris “get[ting] a good night’s sleep.”48 Furthermore, driving and shoppingare not major life activities.49 Traveling by airplane is not a major lifeactivity,50 but traveling is.51

The end result must be confusing to employers. There appears tobe a presumption that an activity is a major life activity, and as tothose activities that are not, there is no easy explanation as to whythey are not.

C. Self-Identification for Affirmative Action PurposesBecause the ADA was enacted for the purpose of helping disabled

workers, it contains an affirmative action provision. Under this provi-sion, an employer can invite applicants to volunteer to identify them-selves as having disabilities, provided that the information is used tobenefit such applicants.52 Employers may choose to benefit applicants

41. Id.42. 42 U.S.C. § 12102(2).43. But see Pack v. Kmart Corp., 166 F.3d 1300, 1305 (10th Cir. 1999).44. See 29 C.F.R. § 1630.2(i) & Appendix; EEOC Compl. Man. (BNA) § 902.3(b), at

15; EEOC, EEOC Enforcement Guidance on the Americans with Disabilities Act andPsychiatric Disabilities 4 (Mar. 25, 1997); EEOC, Instructions for Field Offices: AnalyzingADA Charges After Supreme Court Decisions Addressing “Disability” and “Qualified” 8(1999).

45. Bragdon, 524 U.S. at 638.46. See Sutton v. United Airlines, Inc., 527 U.S. 471, 487 (1999) (dicta).47. Krauel v. Iowa Methodist Med. Ctr., 95 F.3d 674, 677 (8th Cir. 1996).48. Sarko v. Penn-Del Directory Co., 968 F. Supp. 1026, 1034 n.8 (E.D. Pa. 1997).49. Colwell v. Suffolk County Police Dep’t, 158 F.3d 635, 642 (2d Cir. 1998).50. Schultz v. Spraylat Corp., 866 F. Supp. 1535, 1538 (C.D. Cal. 1994) (applying

the California analog of the ADA).51. See Kralik v. Durbin, 130 F.3d 76, 79 (3d Cir. 1997).52. ADA Enforcement Guidance, supra note 27, at 12.



with disabilities for two reasons: (1) there is an applicable federal, state,or local law requiring such affirmative action; or (2) the employer isvoluntarily benefiting such applicants.

In other words, a question that would ordinarily be prohibited un-der the ADA—such as “Do you have a disability that requires a rea-sonable accommodation?”—would instead be permissible if it is askedwith a particular purpose in mind: affirmative action, as opposed tocuriosity or discrimination. As will be demonstrated later, this affir-mative action provision has important consequences for the defensibi-lity of section 12112(d)(2).

III. The First Amendment and the ADAA. Categorizing Disability-Related Questions

The first step in analyzing whether section 12112(d)(2) violates theFirst Amendment is to determine what category of speech is affectedby the restriction. The spectrum of speech, in terms of level of protectionaccorded by the First Amendment, range from low-value/unprotectedspeech, such as obscenities and fighting words, to commercial speechto normal, non-commercial speech. Low-value speech can be heavily reg-ulated with little interference from the First Amendment.53 Disability-related questions that do not fall within any of these categories shouldbe sufficiently uncontroversial such that no analysis is necessary.54

Most of the time, disability-related questions during employmentinterviews are characterized as commercial speech, which is speechthat does “ ‘no more than propose a commercial transaction.’ ”55 Aprototypical example of commercial speech is an advertisement inwhich the advertiser proposes to sell a service or a product at a certainprice.56

The fact that the interviewer is asking a question, as opposed tomaking a statement, does not strip the speech of First Amendmentprotection. The view that presupposes that the First Amendment pro-tects only the making of assertions as opposed to inquiries has not been

53. See Chaplinsky v. N.H., 315 U.S. 568, 572 (1942) (explaining fighting words);Miller v. Cal., 413 U.S. 15, 24 (1973) (describing obscenity); Brandenburg v. Ohio, 395U.S. 444, 446–47 (1969) (citing advocacy of illegal action); Milkovich v. Lorain JournalCo., 497 U.S. 1, 18 (1990) (depicting defamation). But see R.A.V. v. City of St. Paul, Min-neapolis, 505 U.S. 377, 384 (1992) (holding that such speech can be regulated, but not ona content-based discrimination “unrelated to [its] distinctively proscribable content”).

54. To the extent that someone with an exceptional imagination could perhapscome up with a disability-related question that could rise to the level of, say, obscenity,such a hypothetical question would be so far outside the norm that little can be inferredfrom the fact that it could possibly be suppressed constitutionally.

55. Virginia State Bd. v. Virginia Citizens Consumer Council, 425 U.S. 748, 762(1976). But see Rodney A. Smolla, Rethinking First Amendment Assumptions About Rac-ist and Sexist Speech, 47 WASH. & LEE L. REV. 171, 186–87 (1990) (arguing that trans-actional speech should be accorded little or no constitutional protection).

56. See Virginia State Bd., 425 U.S. at 761.



accepted by courts. For example, a district court has held that on-campus military recruitment, including the process of conducting jobinterviews, is commercial speech.57 The court reasoned, “[T]he purposeof recruiting is to reach an agreement under which services will beexchanged for compensation.”58

Similarly, the Fifth Circuit has held that a desire by attorneys tointerview jurors about their just-completed trial was “not without FirstAmendment significance.”59 Although the court ultimately concludedthat this First Amendment interest was insufficient to warrant infring-ing the jurors’ interest in privacy,60 the court was apparently untrou-bled by the fact that the lawyers intended only to ask questions.

More generally, the Supreme Court has suggested in dicta inBranzburg v. Hayes that the act of news gathering, as opposed to newsreporting, is protected by the First Amendment: “[W]ithout some pro-tection for seeking out the news, freedom of the press would be evis-cerated.”61 It is difficult to generalize the Branzburg decision, as thecentral issue in that case was whether professional journalists couldclaim a privilege not to disclose the identities of confidential sourcesbefore a grand jury; the asserted basis was that such disclosure wouldmake the journalists’ informants “refuse or be reluctant to furnishnewsworthy information in the future.”62 Moreover, the First Amend-ment interests involving journalists were no doubt weightier than thoseinvolving employers in the context of job interviews.63 Nevertheless,the essence of the interest is similar. In each, the inquirer’s ultimategoal is to speak on some protected topic: public discourse in the case ofthe journalist, commercial speech in the case of the interviewer. In or-der to reach that goal, the inquirer must first ask questions to obtainneeded information.

Thus, a disability-related question during an employment inter-view is, at a minimum, commercial speech. It is part of the process ofproposing the commercial transaction of employment, which consistsof the employee’s offer of labor in exchange for the employer’s offer ofcompensation. Put another way, just as the question “Will you buy Xfor $Y?” is functionally equivalent to the statement “I will sell X for$Y,” a disability-related question can be an attempt to gauge the qualityof labor being offered by the applicant.

57. Nomi v. Regents for Univ. of Minn., 796 F. Supp. 412, 417 (D. Minn. 1992),vacated as moot, 5 F.3d 332 (8th Cir. 1993).

58. Id.59. Haeberle v. Texas Int’l Airlines, 739 F.2d 1019, 1022 (5th Cir. 1984).60. Id.61. 408 U.S. 665, 681 (1972).62. Id. at 682.63. Gibson v. Florida Legislative Investigation Comm’n, 372 U.S. 539, 546 (1968)

(stating that strict scrutiny is the proper standard of government action that affectsfreedom of the press).



This is not to say that disability-related questions never rise abovecommercial speech. Speech that rises above commercial transactions isaccorded full First Amendment protection despite its commercial con-text. For example, in the landmark case of New York Times Co. v. Sul-livan,64 the Supreme Court held that the First Amendment requiredpublic officials alleging defamation to prove that the publisher actedwith “actual malice”—notwithstanding the fact that the allegedly de-famatory publication in question was an advertisement in the New YorkTimes.65

With a little imagination, one can envision a context in which adisability-related question rises above a mere proposal for a commercialtransaction. Suppose that an applicant asks an interviewer, “What arethe greatest challenges facing the firm?” and the interviewer, havingrecently spent a large amount of money (or what the interviewer per-ceived to be a large amount of money),66 responds with something alongthe lines of

I run a small business, I don’t have economies of scale, but this Amer-icans with Disabilities Act imposes ridiculous burdens on me. I mean,if an applicant with some bizarre disability comes in, suddenly I haveto spend thousands of dollars to make accommodations. I can’t tell ifyou have a disability; you look healthy. Do you have one? Never mind.That’s the greatest burden facing my business: complying with thismicro-management by the government.

It is apparent that here, the disability-related question is not partof the interviewer’s commercial transaction proposal concerning the ap-plicant’s labor, but rather is part of noncommercial speech—in thisinstance, the speech is about the desirability of this particular govern-ment regulation.

B. Disability-Related Questions as Commercial SpeechAs noted above, a disability-related question posed during an in-

terview will most often be characterized as commercial speech. Becausecommercial speech is deemed to be a lower value of speech than publicdiscourse, the government can regulate it more easily than the lattertype of speech.

64. 376 U.S. 254 (1964).65. Id. at 256–57, 279–80.66. However, according to the Job Accommodation Network (JAN), which is part

of the President’s Committee on Employment of People with Disabilities, almost half ofall accommodations for the disabled impose no costs on employers. See Ralph Black,Hiring Lawyers with Disabilities, CAL. LAW., June 1991, at 74. JAN’s information mayonly measure the cost of accommodations based on fiscal outlays, as opposed to lost rev-enue based on, for example, extended breaks or other impacts on productivity.



Under Central Hudson Gas & Electric Corp. v. Public Service Com-mission,67 a three-part test is used to determine whether a prohibitionon commercial speech is constitutionally valid. As a threshold matter,however, the reviewing court is to consider whether the proscribedspeech is misleading or related to unlawful activity; if either, there isno general restriction on governmental power.68 If the speech is neithermisleading nor related to unlawful activity, then a prohibition will bevalid if it directly advances a substantial interest and the substantialinterest would not “be served as well by a more limited restriction oncommercial speech.”69

1. Misleading or Related to Unlawful ActivityArticulating a rationale for why disability-related questions are

misleading is, for all intensive purposes, an insurmountable task. Like-wise, questions cannot be deemed illegal merely based on the fact thatthey are disability-related.70

One cannot defend the ADA prohibition on pre-offer disability-related questions by asserting that such questions are themselves re-lated to unlawful activity. While it would be unlawful to propose illegalactivity such as discriminating on the basis of gender in the guise ofcommercial advertising, an issue essentially decided in PittsburghPress Co. v. Pittsburgh Commission on Human Relations,71 that holdingcannot be applied to justify section 12112(d)(2). In Pittsburgh Press, theSupreme Court upheld a municipal ordinance that prohibited news-papers from carrying job advertisements in so-called sex-designatedcolumns against a First Amendment challenge.72 Essentially, the news-papers were carrying job advertisements in entire columns that weredesignated for men only, for women only, or for either.73 The Court heldthat the job advertisements were “classic examples of commercialspeech”74 and explained,

Any First Amendment interest which might be served by advertis-ing an ordinary commercial proposal and which might arguably out-

67. 447 U.S. 557 (1980). The long-term viability of this test was recently called intoquestion by 44 Liquormart, Inc. v. R.I., 517 U.S. 484 (1996). In that case, a number ofJustices indicated dissatisfaction with the Central Hudson test, although no majorityemerged to abandon the test yet.

68. Central Hudson, 447 U.S. at 563–64.69. Id. at 564.70. By substituting “misleading” for “false,” one can use the analysis described

earlier with regard to defamation in the form of opinions. In other words, a question couldarguably be misleading if it implied inaccurate or misleading facts. However, in thiscontext, it is difficult to see how a disability-related question could imply inaccurate ormisleading facts.

71. 413 U.S. 376 (1973).72. Id. at 387–89.73. Id. at 381 n.7.74. Id. at 385.



weigh the governmental interest supporting the regulation is alto-gether absent when the commercial activity itself is illegal and therestriction on advertising is incidental to a valid limitation on eco-nomic activity.75

This holding does not mean that the First Amendment has no bearingon the ADA, and it does not support a conclusion that disability-relatedquestions can be restricted because they relate to an unlawful activity:discrimination against the disabled.

First, Pittsburgh Press was predicated on an understanding thatcommercial speech had no First Amendment protection based on Val-entine v. Chrestensen.76 Subsequent cases, however, have rejected thatabsolutist position and have instead accorded commercial speech somedegree of First Amendment protection.77

More importantly, the nexus between the proscribed speech andthe harm to be avoided is apparent in Pittsburgh Press. The prohibitedspeech invited the submissions of applications in a way that discrimi-nated against women.78 If women had looked through all of the ads,they would have found that women accountants were worth $6,000while male accountants were worth $10,000.79 Moreover, many womenwould likely not have searched through want ads designated solely formales and thus would have excluded themselves from applying forthose jobs. Thus, the segregated job announcements achieved the effectof sex discrimination. For that reason, the Court analogized the ban toone forbidding newspapers from publishing “a want ad proposing a saleof narcotics or soliciting prostitutes.”80

The EEOC itself appears to understand this distinction, at leastwith regard to age discrimination claims under the Age Discriminationin Employment Act of 1967 (ADEA).81 It has explained that help-wantednotices that contain terms or phrases like “age 25 to 35” and “recentcollege graduate” can be discriminatory.82 The EEOC has stressed, how-ever, that whether a job advertisement runs afoul of the ADEA is de-pendent on “an examination not only of the language used in the adver-tisement but also the context in which it is used to determine whetherpersons in the protected age group would be discouraged from apply-ing.”83 In other words, an age-related question violates the ADEA if it

75. Id. at 389.76. 316 U.S. 52, 54–55 (1942).77. See, e.g., Rubin v. Coors Brewing Co., 514 U.S. 476, 481 (1995); City of Cincin-

nati v. Discovery Network, Inc., 507 U.S. 410, 422 (1993); Central Hudson, 447 U.S. at564; Virginia State Bd., 425 U.S. at 762.

78. Pittsburgh Press, 413 U.S. at 387–88.79. Id. at 392 (appendix).80. Id. at 388.81. 29 U.S.C. § 621 (1994).82. 29 C.F.R. § 1625.4(a) (2000).83. See EEOC, Policy Guide on Job Advertising and Pre-Employment Inquiries Un-

der ADEA, 405 Fair Empl. Prac. Man. (BNA) 4027, 4028 (July 3, 1989) (emphasis added)[hereinafter ADEA Pre-Employment Inquiries].



is likely to deter an older worker from applying for a job or a promotion,thereby effectively accomplishing discrimination, much in the sameway that an employer can constructively discharge an employee by cre-ating a hostile work environment so that the employee resigns.84

Thus, the type of commercial speech under analysis in PittsburghPress presented the same general issues as those presented by black-mail and other such crimes involving speech as conduct85 or speech forwhich specific subject matter is unlawful. Because disability-relatedquestions do not necessarily raise any of those issues, Pittsburgh Press,to the extent that its holding remains good law, cannot justify the ex-istence of section 12112(d)(2).

This is true for a number of reasons. By itself, a disability-relatedquestion—even on an application form—does not automatically detera person from applying for a position; the employer might be askingsuch a question, for example, so that it can implement an affirmativeaction program.86 If the question arises during a job interview, then theapplicant has obviously not been deterred from applying for the posi-tion. Moreover, while an openly hostile disability-related question—something along the lines of “Are you a worthless cripple? ‘Cause wehave no use for a cripple”—might dissuade an applicant from pursuingthe position, it is difficult to see how an innocuous question such as “Inoticed you’re wearing a cast on your leg. Hopefully it will heal all right.You’re not expecting any problems, are you?” would have such an effect.Yet, the latter question is one that the EEOC has identified as violatingsection 12112(d)(2).87

2. Substantial Government InterestThe purpose of the ADA is to eliminate discrimination against

qualified disabled workers.88 This is almost certainly a substantial gov-

84. A constructive discharge occurs when the employer creates such an intolerableand/or discriminatory work environment that any reasonable person would quit. See, e.g.,Jordan v. Clark, 847 F.2d 1368, 1377 n.10 (9th Cir. 1988).

85. See generally Kent Greenawalt, Criminal Coercion and Freedom of Speech, 78NW. U. L. REV. 1081, 1111–17 (1983); see also NRLB v. Gissel Packing Co., 395 U.S. 575,618 (1969) (holding that “a threat of retaliation based on misrepresentation and coercion[is] without the protection of the First Amendment”); X-Men Sec., Inc. v. Pataki, 196 F.3d56, 69 (2d Cir. 1999) (noting in dicta that threats of coercion are outside First Amendmentprotection); Rankin v. McPherson, 483 U.S. 378, 386–87 (1987) (noting in dicta that “astatement that amounted to a threat to kill the President would not be protected by theFirst Amendment”).

86. A job advertisement seeking “healthy” or “nondisabled” applicants, on the otherhand, would have the effect of potentially deterring qualified disabled applicants fromapplying for the position. Cf. Dothard v. Rawlinson, 433 U.S. 321, 330–31 (1977) (notingthat height and weight specifications may have discouraged females from applying fromthe jobs at issue). Title VII prohibits this type of advertising with regard to race, color,religion, sex, and national origin, except where justified as a bona fide occupational qual-ification. See 42 U.S.C. § 2000e-3(b) (1994).

87. See ADA Enforcement Guidance, supra note 27, at 5.88. See, e.g., 42 U.S.C. § 12101(b)(1) (stating that the ADA was enacted “to provide

a clear and comprehensive national mandate for the elimination of discriminationagainst



ernment interest, considering the Supreme Court has held that thereis substantial interest in the elimination of discrimination against vari-ous other subgroups.89 As former President Bush noted in reluctantlyvetoing the 1990 Civil Rights Act, “ ‘Discrimination, whether on thebasis of race, national origin, sex, religion, or disability, is worse thanwrong. It is a fundamental evil that tears at the fabric of our society,and one that all Americans should and must oppose.’ ”90

To be sure, a disability may not be a suspect classification,91 not-withstanding Congress’s declaration that the disabled are “a discreteand insular minority”92—a phrase obviously intended to evoke the fa-mous footnote four of United States v. Carolene Products Co.93 Regard-less, the requirement that there be a substantial interest is not difficultto satisfy, which is apparent when one considers other interests thathave been deemed substantial: helping parents control how childrenlearn about birth control,94 reducing the demand for gambling by localresidents (but not tourists),95 preventing visual blight,96 and prevent-ing brewers from engaging in “strength wars.”97 It is difficult to believethat an interest in eliminating discrimination against the disabledwould not be deemed substantial if it were compared to those interests.

3. Direct Advancement of the Substantial InterestThe next part of the commercial speech test is that the commercial

speech restriction must “directly advance” the asserted government in-terest.98 Thus, for the ADA to be valid, the prohibition on disability-related questions during interviews must directly advance the goal ofeliminating discrimination against the disabled.

individuals with disabilities”); H.R. REP. NO. 101–485 (II), at 22–23 (1990), reprinted in1990 U.S.C.C.A.N. 303, 304.

89. See Ohio Civil Rights Comm’n v. Dayton Christian Schools, Inc., 477 U.S. 619,628 (1986) (gender); Alfred L. Snapp & Son, Inc. v. P.R., ex rel. Barez, 458 U.S. 592, 609(1982) (foreign temporary laborers); Bob Jones Univ. v. U.S., 461 U.S. 574, 595 (1983)(race).

90. EPSTEIN, supra note 14, at 3 (quoting Veto message of President George H.W.Bush, Oct. 22, 1990).

91. See e.g., City of Cleburne v. Cleburne Living Ctr., Inc., 473 U.S. 432, 450 (1985)(holding that mental retardation was not a suspect classification).

92. 42 U.S.C. § 12101(a)(7).93. 304 U.S. 144, 153 n.4 (1938). This footnote is widely regarded as the most fa-

mous footnote in constitutional law and as the basis for the current multi-tier approachto varying levels of scrutiny of alleged deprivations of the right to equal protection of thelaws. See generally ROBERT H. BORK, THE TEMPTING OF AMERICA 58–61 (1990); JESSEH. CHOPER, JUDICIAL REVIEW AND THE NATIONAL POLITICAL PROCESS 75 (1980); JOHNHART ELY, DEMOCRACY AND DISTRUST 75–77 (1980).

94. Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 70 (1983).95. Posadas de P.R. Assocs. v. Tourism Co., 478 U.S. 328, 342 (1986).96. City of Cincinnati, 507 U.S. at 417.97. Rubin, 514 U.S. at 483–84.98. Central Hudson, 447 U.S. at 564.



Whether a restriction directly advances a substantial interest hasbeen determined in a number of different ways. In Edenfield v. Fane,99

the Supreme Court held that the government had to “demonstrate thatthe harms it recites are real and that its restriction will in fact alleviatethem to a material degree.”100 Thus, the Court struck down a Floridaban on in-person solicitation of prospective clients of certified publicaccountants on the ground that there was no evidence in the record(anecdotal or otherwise) showing that such solicitation “create[d] thedangers of fraud, overreaching, or compromised independence,” whichwere the asserted interests.101 Since there was no demonstrated causalconnection between the type of speech that was restricted and theharms sought to be avoided, the regulation did not directly advance theinterests.102

Similarly, in Bolger v. Youngs Drug Products Corp., the SupremeCourt struck down a federal statute prohibiting the unsolicited mailingto contraceptive advertisements.103 The government had asserted thatthe statute directly advanced the interests of shielding “recipients ofmail from materials that they are likely to find offensive” and of helpingparents “control the manner in which their children become informed[about sensitive and important subjects such as] birth control.”104 TheCourt discounted the first interest but accepted the second as substan-tial.105 Nevertheless, the Court held that the statute “provide[d] onlythe most limited incremental support for the interest asserted.”106

On the other hand, in United States v. Edge Broadcasting Co., theSupreme Court upheld a congressional ban on all radio and televisionadvertising of lotteries from radio or television stations in states thatprohibited lotteries while allowing such advertisements if broadcastedby stations located in states that allowed lotteries.107 The respondent,a radio station located in a lottery-prohibited state but whose broadcastwas largely received by citizens of a lottery state, challenged the re-striction on an as-applied basis. The Court held that the Central Hud-son “direct advancement” factor should have been considered on a facialbasis, not as applied, in consideration of the regulation’s impact on theparty, challenging it would be deferred to the last factor.108

By characterizing Congress’s interest as that of supporting the pol-icies of lottery-prohibited states while not interfering with those of the

99. 507 U.S. 761 (1993).100. Id. at 771.101. Id.102. Id.103. 463 U.S. at 60.104. Id. at 60.105. Id. at 70, 73.106. Id. at 73.107. 509 U.S. 418, 435–36 (1993).108. Id. at 427–28.



lottery states, the Court was able to conclude that the regulation underchallenge directly advanced both interests, especially since Congresscould have simply banned all lottery advertising, even in lotterystates.109 Edge, however, fails to provide much illumination for evalu-ating the constitutionality of section 12112(d)(2) because the decisionin Edge rested principally on the fact that “[t]he statute was designedto regulate advertising about an activity that had been deemed illegalin the jurisdiction in which the broadcaster was located.”110 In otherwords, Edge can really be seen as a special application of PittsburghPress in a situation where an activity is legal in one state but illegal ina neighboring state. In that situation, where it may not be possible tocraft a rule that satisfies the interests of both states with perfect ac-curacy, Congress is free to enact a rule that has some over-breadth butthat fully supports the interest of the state that deems the activityillegal.111 Edge therefore has little application to section 12112(d)(2),which does not advertise illegal activity.

Does the ADA restriction directly advance the substantial interestin eradicating discrimination against the disabled? The ADA prohibi-tion on interview-stage disability-related questions does not, by itself,eliminate discrimination against the disabled, except to the extent thata particular interviewer otherwise uses such questions to harass theapplicant.112 This justification succeeds only if there are a substantialnumber of interviewers who create hostile work environments throughharassing disability-related questions.

There are two ways, however, in which the prohibition may reducediscrimination against the disabled. First, by prohibiting the asking ofdisability-related questions, the ADA prevents employers from learn-ing about some disabilities until after a conditional offer has beengiven. Of course, this benefit occurs only when the disability is one thatis not readily apparent during an interview; for example, an employercan obviously detect that an applicant is disabled if the applicant is ina wheelchair.113 If the employer does not know that the applicant isdisabled, then the employer will be unable to discriminate on the basisof that disability. In other words, section 12112(d)(2) may preserve theasymmetry of knowledge of a disability.

109. Id. at 428.110. See 44 Liquormart, Inc., 517 U.S. at 509.111. Edge Broadcasting, 509 U.S. at 435.112. It is unsettled whether the ADA protects workers against disability-related ha-

rassment, as opposed to discrimination. See, e.g., Vollmert v. Wisconsin Dep’t of Transp.,197 F.3d 293, 297 (7th Cir. 1999) (assuming without deciding that it does); Cannice v.Norwest Bank Iowa N.A., 189 F.3d 723, 725 (8th Cir. 1999); Frank S. Ravitch, BeyondReasonable Accommodation: The Availability & Structure of a Cause of Action for WorkplaceHarassment Under the Americans with Disabilities Act, 15 CARDOZO L. REV. 1475 (1994).

113. The wheelchair-bound applicant may also, however, have other disabilities thatare not apparent and that would remain concealed from the employer.



Second, the provision makes it easier for a disabled plaintiff toprove that he or she experienced discrimination. It does so by puttingthe employer in the position of having to eliminate all other reasons fordeclining to hire the applicant before asking questions that reveal dis-abilities. The EEOC explains, “If the employer rejects the applicantafter a disability-related question . . . investigators will closely scruti-nize whether the rejection was based on the results of that question.”114

After all, if the purported reason were the real reason for the rejection,why wouldn’t the employer reject the applicant on that basis earlier?115

In other words, section 12112(d)(2) provides a litigation advantageto ADA plaintiffs. A rational employer will perceive that the risk of anadverse verdict, if it discriminates against a disabled person, has in-creased because a jury will discount legitimate reasons for decliningthe applicant as pre-textual—otherwise, the employer would not havegiven a conditional offer. One expects that an employer, acting strictlyout of rational motives, discriminates against a disabled person when-ever the cost of reasonable accommodation exceeds the expected cost ofdiscrimination.116

One might therefore argue that ADA prohibition on disability-related questions advances the substantial interest of eliminating dis-crimination against the disabled by increasing the expected cost of dis-crimination. By making it more likely that the discriminating employerwill be found liable in a lawsuit, the ADA provision correspondinglyincreases the expected cost of such discrimination, which in turn makesthe rational employer willing to accept more expensive accommoda-tions than without the provision. This in turn makes the employer lesslikely to discriminate against the disabled.

However, it seems unlikely that section 12112(d)(2) would beviewed as directly advancing the goal of eliminating disability-baseddiscrimination. Congress has adduced no evidence that the asking ofdisability-related questions by employers, in fact, results in discrim-ination against the disabled.117 While the litigation advantage de-scribed earlier might lead to decreased discrimination, the degree ofdecrease is unknown and hence has most likely not been demon-strated to be material or more than merely incremental.118 The com-

114. ADA Enforcement Guidance, supra note 27, at 2.115. There is a significant exception where “an employer cannot reasonably obtain

and evaluate all non-medical information at the pre-offer stage.” See ADA EnforcementGuidance, supra note 12, at 18. For example, the EEOC has noted that a law enforcementagency might not be able to administer polygraph tests to all applicants; it would there-fore be entitled to give an offer conditioned on passing the polygraph exam. Id.

116. One should be careful to note that the cost of accommodation includes not onlyactual expenditure of funds, but also any decrease in productivity on the part of thedisabled employee attributable to the accommodation.

117. See 44 Liquormart, 517 U.S. at 505 (“[W]ithout any findings of fact, or indeedany evidentiary support whatsoever, we cannot agree with the assertion that the [com-mercial speech restriction] will significantly advance the State’s interest”).

118. See Edenfield, 507 U.S. at 771; Bolger, 463 U.S. at 73.



mercial speech precedents therefore strongly suggest that section12112(d)(2) does not directly advance the goal of eliminating discrim-ination against the disabled.

4. End-Means FitThe final test for assessing the validity of a commercial speech

regulation is whether there is a reasonable fit between the end and themeans sought to reach the end. Alternatively, the Supreme Court willconsider whether the regulation is no more extensive than necessaryto further the asserted interest. Unfortunately, as with the previousfactor, the Court’s opinions have not produced a clear and consistentunderstanding of how tight the fit must be to justify a regulation ofcommercial speech.

For example, in City of Cincinnati v. Discovery Network, Inc.,119

the Court struck down a city ordinance that prohibited the posting ofcommercial handbills as applied to news racks of free magazines con-sisting mostly of advertisements for the publishers’ services.120 The cityhad asserted an interest in preventing visual blight, but the meanschosen to implement that interest were insufficient. For one thing, thecity did not attempt to regulate the size, shape, appearance, or numberof news racks, which suggested that it had not “carefully calculated thecosts and benefits associated with the burden on speech imposed by itsprohibition.”121 More importantly, because the prohibition was appliedonly to magazines deemed to contain commercial, as opposed to news-worthy, content, the prohibition applied to only sixty-two news racks inthe city, leaving 1,500 to 2,000 news racks containing newspapers un-touched. The Court agreed with the lower courts’ characterizations ofthis benefit as “minute” and “paltry.”122

Significantly, the Court rejected the city’s argument that because“every decrease in the number of [news racks] necessarily effect[ed] anincrease in safety and an improvement in the attractiveness of the city-scape,”123 the city could take an incremental, marginal step toward itsasserted goal by selectively eliminating a small number of news rackscontaining commercial handbills. The city’s premise, the Court noted,was that “the fact that assertedly more valuable publications [were]allowed to use news racks [did] not undermine its judgment that itsesthetic and safety interests [were] stronger than the interest in allow-ing commercial speakers to have similar access to the reading pub-

119. 507 U.S. at 410.120. Id. at 412.121. Id. at 410.122. Id. at 418.123. Id.



lic.”124 This premise could not support the argument because it “seri-ously underestimate[d] the value of commercial speech.”125

Similarly, in Central Hudson Gas & Electric Co. v. Public ServiceCommission,126 the Supreme Court held that a state public utility com-mission’s prohibition on all advertising promoting the use of electricitywas more extensive than necessary to further the asserted interest ofconserving energy because the commission could have restricted theformat or content of the advertising inserts that Central Hudsonwanted to use. The burden, the Court held, was on the government toshow that more limited regulations would be ineffective at achievingthe asserted interest.127

In Rubin v. Coors Brewing Co.,128 the Supreme Court struck downa federal statute prohibiting beer labels from displaying the alcoholcontent of the beverage. The government asserted an interest in pre-venting brewers from waging a “strength war.”129 Coors pointed outthat Congress could have (1) “directly limit[ed] the alcohol content ofbeers,” (2) “prohibit[ed] marketing efforts emphasizing high alcoholstrength,” or (3) “limit[ed] the labeling ban only to malt liquors,” whichwere more susceptible to strength wars.130 The Court held that theavailability of these other options, “all of which could advance the Gov-ernment’s asserted interest in a manner less intrusive to respondent’sFirst Amendment rights, indicate[d] that [the regulation was] moreextensive than necessary.”131

Not all cases, however, have held the government to such exactingstandards. In United States v. Edge Broadcasting Co.,132 the SupremeCourt held that only a “reasonable” fit was required, not a “perfect”one.133 Moreover, the Court would not “require that the Governmentmake progress on every front before it can make progress on anyfront.”134 In Board of Trustees v. Fox, the Court explained that it wouldnot require the government to show that the commercial speech wasthe least restrictive measure; rather, the test was whether the restric-tion was “substantially excessive, disregarding ‘far less restrictive andmore precise means.’ ”135

124. Id. at 419.125. 507 U.S. at 419.126. 447 U.S. at 557.127. Id. at 571.128. 514 U.S. at 476.129. Id. at 483–84.130. Id. at 490–91.131. Id. at 491.132. 509 U.S. at 418.133. Id. at 429.134. Id. at 434.135. 492 U.S. 469, 478 (1989).



The variety of precedents makes it challenging to say with com-plete confidence whether section 12112(d)(2) violates the First Amend-ment.136 Nevertheless, the overarching principle that can be drawnfrom the cases is that a commercial speech restriction that is over-inclusive to a significant degree will be struck down. The term over-inclusive means that the restriction burdens speech not related to theasserted substantial interest.137

For example, the restriction in Rubin, which barred alcohol brew-ers from displaying the alcohol content of their beverages in the interestof preventing brewers from waging strength wars, was over-inclusive.The only speech relevant to the asserted interest would have been la-bels announcing alcohol content that was sufficiently high so as to at-tract drinkers based on the strength of the beverage. A beverage forwhich the label indicated that it was of low alcohol content, on the otherhand, could hardly have been expected to lead to a strength war. Yet,this latter label was swept up within the statute’s ban. Because thestatute indiscriminately banned such commercial speech that was un-related to the asserted goal, it was predictably struck down.

Similarly, in Central Hudson, the Public Service Commission hadordered electric utilities to stop advertising anything that “promot[ed]the use of electricity” in the interest of complying with the nationalpolicy of conserving energy. The Supreme Court concluded that this banwas severely over-inclusive, as it prohibited, among other things, ad-vertising of energy-efficient products as well as services “that wouldconsume roughly the same amount of energy as do alternativesources.”138 The order “reache[d] all promotional advertising, regard-less of the impact of the touted service on overall energy use,” and itsuppressed “information about electric devices or services that wouldcause no net increase in total energy use.”139 The Court held that therewas no showing “that a more limited restriction on the content of pro-motional advertising would not serve adequately the State’s interest.”

The statute in Bolger, which prohibited all unsolicited mailings ofcontraceptive advertisements in the interest of helping parents controlwhen their children learned about birth control, was over-inclusive be-cause it restricted the mailing of some advertisements that perhaps no

136. First Amendment scholar Robert Post has described this and other parts of theCentral Hudson test as “astonishingly abstract.” See Robert Post, The ConstitutionalStatus of Commercial Speech, 48 UCLA L. REV. 1, 48 (2000).

137. One would generally expect underinclusiveness alone not to justify the strikingdown of a commercial speech restriction, as the Court has indicated that a legislatureneed not address all aspects of a problem at once. Nevertheless, a severely underinclusivestatute, such as the one in Discovery Network, may advance the asserted goal so little asto be struck down. But this is more of a failure to satisfy the third requirement of thecommercial speech test—direct advancement of the asserted goal—and not so much afailure to demonstrate an end-means fit.

138. Central Hudson, 447 U.S. at 570.139. Id.



one would have objected to and some advertisements that certain par-ents would not have objected to and that could have been thrown awayby parents who had objected to them.140 This statute was also struckdown.

Merely because a statute is over-inclusive does not mean that itwill be struck down. Consider, for example, the restriction in EdgeBroadcasting, which prohibited radio stations in lottery-prohibitedstates from carrying lottery advertisements for neighboring states.141

This statute was both over-inclusive and under-inclusive: Some listen-ers in lottery states were deprived of hearing lottery advertisements onsome stations (those in lottery-prohibited states), while other listenersin lottery-prohibited states were able to be exposed to lottery adver-tisements on other stations (those in lottery states). This restrictionwas nevertheless upheld. The difference between Edge Broadcasting,on the one hand, and Rubin and Central Hudson, on the other hand,seems to be that the statute in the former actually minimized the over-all degree of over- and under-inclusiveness with respect to the interestsof both states. That is, a rule prohibiting any lottery advertisements inany state would be broadly over-inclusive because it would affect nu-merous persons in lottery states while only slightly improving theunder-inclusiveness problem for persons in lottery prohibited statesnear the border of a lottery state. Similarly, a rule allowing any lotteryadvertisements would be significantly under-inclusive because it wouldfail to address the interests of the lottery-prohibited states.

With that understanding in mind, consider the degree of over-inclusiveness of section 12112(d)(2). In one way, the statute is grosslyover-broad relative to the asserted goal of eliminating discriminationagainst the disabled because it completely suppresses all pre-offerdisability-related questions even though the asking and answering ofsome of those questions could pertain to disability discrimination.Rubin and Central Hudson suggest that such a blanket ban would beunconstitutional, particularly when the asserted goal could be ad-vanced without the restriction on speech—in the case of Rubin, by di-rectly regulating the maximum alcohol content of beverages; in the caseof the ADA, by making it unlawful to discriminate against the disabled.

Yet, in another way, the statute is not terribly over-broad. It is atemporary blanket ban on disability-related questions, one that is liftedafter the employer gives a conditional offer. With the other speech re-strictions discussed earlier, the proscribed speech is completely forbid-den at all times, and there is nothing that the would-be speaker can doto lift the restriction. This, however, is not the case with section12112(d)(2).

140. Bolger, 463 U.S. at 60.141. Edge Broadcasting, 509 U.S. at 435–36.



Nevertheless, the fact that section 12112(d)(2) differs from the in-valid statutes in this way does not mean that it is automatically valid.Section 12112(d)(2) is still a restriction on commercial speech that ismore extensive than necessary. The interest in eliminating discrimi-nation against the disabled would be served equally well if there wereno damages available for a violation of section 12112(d)(2). Because thisis so, the availability of damages for the asking of a disability-relatedquestion infringes a speaker’s First Amendment rights. To see how thisis so, consider the following four scenarios.

A. APPLICANT NOT DISABLED

The first scenario consists of a non-disabled applicant who is askeda disability-related question. In some circuits, such an applicant canrecover in this situation even though the applicant will be unable tomake out a prima facie case for having been discriminated against inviolation of the ADA.142

However, if the applicant is not disabled within the meaning of theADA, then it is difficult to see how punishing the employer for askingthe applicant a disability-related question serves the interest of elimi-nating discrimination against the disabled. Unlike a disabled applicant,a non-disabled person is not likely to make false statements in responseto a disability-related question because the non-disabled applicant hasno incentive but to respond truthfully to such inquiries. After all, notbeing disabled is, all things equal, likely to be perceived as preferable tobeing disabled—that being the central premise of the ADA. A disabledapplicant, on the other hand, may fear that a truthful response to suchan inquiry will lead the employer to discriminate against him or her. Asa result, the disabled applicant may feel trapped into falsely answeringthe disability-related question. Later on, the employer might terminatethe disabled employee ostensibly due to perceived misconduct in the formof the false answers.143 The non-disabled applicant, however, does notface this trap and therefore does not need to be protected from it.144

142. The Fifth Circuit recently became the first federal appellate court to hold thatdisability-related harassment, as opposed to outright discrimination, is prohibited by theADA. See Flowers v. Southern Regional Physician Servs., Inc., 2001 WL 314603, at *1(5th Cir. Mar. 30, 2001); Fox v. General Motors Corp., 2001 WL 369669, at *1 (4th Cir.Apr. 13, 2001). See also Cossette, 188 F.3d at 969; Griffin v. Steeltek, Inc., 160 F.3d 591,595 (10th Cir. 1998). The Ninth Circuit’s opinion in Fredenburg, 172 F.3d at 1182, whichallowed a non-disabled applicant to recover damages for having been forced to undergoan interview stage medical examination, suggests that it too would allow a non-disabledperson to recover damages based being asked a disability-related question.

143. Cf. Downs v. Massachusetts Bay Transp. Auth., 13 F. Supp. 2d 130, 140–41 (D.Mass. 1998) (holding that a disabled applicant’s false responses to a disability-relatedquestion is not misconduct justifying denial of employment).

144. Cf. id. A possible exception occurs if the non-disabled person answered adisability-related question in such a way that the employer incorrectly concluded thatthe applicant was disabled. However, to the extent that the employer’s motive is at issue,this is the same as if the applicant were “regarded as disabled.” Depending on whether



One might argue that the purpose of damages is to enforce theprohibition and that, without the provision of damages, the prohibitionwill be ineffective. This justification, however, applies the wrong anal-ysis. Section 12112(d)(2) exists to achieve the goal of eliminating dis-crimination against the disabled; one manner is to deter the employerfrom engaging in discrimination.145 Deterring an employer from en-gaging in discrimination, however, is quite different from deterring anemployer from merely asking disability-related questions. Thus, theproper inquiry is whether the absence of damages to enforce any vio-lation of section 12112(d)(2) suffered by non-disabled applicants willrender the ADA less effective.

It is difficult to see how this will be so. If employers knew that theywould not be subject to liability under section 12112(d)(2) if they wereto ask disability-related questions of non-disabled applicants, theywould hardly be expected to ask such questions of everyone becausethey would still have to factor in the consequences of asking such aquestion of a disabled person. Because many disabilities are not im-mediately apparent, an employer who asks a disability-related questionof an apparently non-disabled person may learn, to the employer’s cha-grin, that the applicant is indeed disabled.

B. APPLICANT DISABLED BUT HIRED

The second scenario consists of a disabled applicant who is askeda disability-related question but who successfully obtains the positionsought. In this scenario, one would be hard-pressed to argue that theapplicant was injured in any meaningful way by the asking of the ques-tion. How, one wonders, does allowing such an applicant to recoverdamages based on being asked a disability-related question helpachieve the result of eliminating discrimination against the disabled?

The incongruity of punishing such an employer is apparent whenone considers that, had the same employer asked the same questionwith the express goal of implementing an affirmative action plan tobenefit the disabled, the question could have been permissible.146 Thisdemonstrates that, under the current structure of the ADA, the em-ployer’s motive is crucial in establishing whether the asking of thequestion retards or advances the goal of eliminating discriminationagainst the disabled. If that is so, however, then the same goal is notadvanced by punishing an employer who, while not asking the questionwith the intent of implementing an affirmative action plan, in fact doesnot discriminate in hiring a qualified disabled person.

the applicant were qualified with or without a reasonable accommodation for the per-ceived disability, this situation would be the same as one of the following three scenarios.

145. 42 U.S.C. § 12112(d)(2).146. See supra Part II.C.



Indeed, it is difficult to understand how section 12112(d)(2) couldallow the recovery of damages against an employer who asks adisability-related question but nevertheless hires a disabled applicant,given that courts routinely hold that a decision maker who hires a per-son in a protected category and who shortly thereafter takes an adverseaction against the person is presumed not to have discriminatedagainst the person.147 These courts reason quite rationally that

[o]ne is quickly drawn to the realization that “[c]laims that employeranimus exists in termination but not in hiring seems irrational.”From the standpoint of the putative discriminator, “[i]t hardly makessense to hire workers from a group one dislikes (thereby incurringthe psychological costs of associating with them), only to fire themonce they are on the job.”148

To be sure, one would expect very few instances in which a disabledperson who is hired by an employer sues the employer for having askeda disability-related question. Nevertheless, the analytic incongruity ofthis scenario suggests that there is something seriously wrong with areading of section 12112(d)(2) that allows recovery based on the mereasking of a disability-related question without regard to whether theapplicant has actually suffered disability discrimination.

More importantly, if one cannot defend the availability of damagesunder section 12112(d)(2) in this scenario, then one cannot do so in theprevious or following scenario either. The crucial problem in all three ofthese scenarios is that the plaintiff is allowed to recover damages againstan employer despite not having been discriminated against by the em-ployer. The fact that there was no discrimination—whether the appli-cant was not disabled, was hired, or was not qualified—is immaterial.

C. APPLICANT DISABLED BUT NOT QUALIFIED WITH OR WITHOUT

REASONABLE ACCOMMODATION

The third scenario consists of a disabled person who is not qualifiedfor the position, either with or without a reasonable accommodation,and who is asked a disability-related question. A disabled applicantwho is not qualified with or without a reasonable accommodation hasnot been discriminated against on the basis of a disability when theapplicant suffers an adverse employment decision. Thus, the asking ofa disability-related question of such an applicant during the interviewis not the cause of the adverse decision.

This is true even if the disability would have remained hidden if ithad not been for the asking of the questions. For example, narcolepsy,

147. See, e.g., Bradley v. Harcourt, Brace & Co., 104 F.3d 267, 270–71 (9th Cir. 1996);Buhrmaster v. Overnite Transp. Co., 61 F.3d 461, 464 (6th Cir. 1995); Lowe v. J.B. HuntTransp., Inc., 963 F.2d 173, 175 (8th Cir. 1992); Proud v. Stone, 945 F.2d 796, 797 (4thCir. 1991). But see Waldron v. SL Indust., Inc., 56 F.3d 491, 495 n.6 (3d Cir. 1995).

148. Proud, 945 F.2d at 797.



if untreated, is a disability that one would think disqualifies an appli-cant from being, among other things, an ambulance driver. The em-ployer could ask the disability-related question after giving a condi-tional offer; given that the applicant in fact would not be qualified withor without a reasonable accommodation, the employer is justified inwithdrawing the conditional offer.

Moreover, the litigation advantage that section 12112(d)(2) normallyprovides to disabled plaintiffs is of no use to such an applicant. As dis-cussed earlier, by requiring employers to delay their questions until afterextending a conditional offer, section 12112(d)(2) allows the EEOC andsubsequent fact finders to “closely scrutinize whether the rejection wasbased on the results of that question.”149 In this scenario, however, theemployer can offer up front that the adverse decision was based on thedisability, and section 12112(d)(2) is thus simply irrelevant.

D. APPLICANT DISABLED AND DISCRIMINATED AGAINST

The final scenario consists of a plaintiff like John Otero—that is,someone who was qualified with or without a reasonable accommoda-tion but was not hired and was asked a disability-related question dur-ing his interview.150 Among all of the scenarios set forth, this one comesthe closest to establishing a coherent theory of injury. The applicantmay have been discriminated against on the basis of a disability, andworse yet, that discrimination may have been facilitated by the askingof the question.

There are actually two permutations of this scenario. The first oc-curs when a plaintiff is able to prove that he or she was discriminatedagainst and seeks to recover additional damages for the asking of thequestion.151 The second occurs when a plaintiff is unable to prove thathe or she was discriminated against, although he or she might be ableto do so if given the luxury of the litigation advantage that section12112(d)(2) is designed to provide.

i. Can plaintiffs prove discrimination without section 12112(d)(2)’slitigation advantage?

A more difficult situation arises if the plaintiff is qualified for theposition with or without a reasonable accommodation but is not hired.Proponents of section 12112(d)(2) contend that the prohibition is nec-essary for plaintiffs to be able to prove that they were discriminatedagainst.152 Still, proponents are almost certainly overstating their po-sition. When an employer violates section 12112(d)(2) by asking adisability-related question during an interview, the goal of preventingemployers from learning about disabilities has been frustrated, and the

149. See ADA Enforcement Guidance, supra note 27, at 2.150. Wal-Mart Stores, 11 F. Supp. 2d at 1317.151. John Otero falls within this subcategory.152. ADA Enforcement Guidance, supra note 27; Azinger, supra note 13, at 193.



applicant is denied the litigation advantage. Yet, plaintiffs can succeedin proving that they experienced discrimination despite the fact thatthey did not receive conditional offers and John Otero did.

How do such plaintiffs go about proving that they experienced dis-crimination? They generally use the burden-shifting approach that wasdeveloped in McDonnell Douglas Corp. v. Green153 and was subse-quently refined in Texas Department of Community Affairs v. Bur-dine154 and St. Mary’s Honor Center v. Hicks.155

Under this well known approach, the plaintiff in a Title VII dis-crimination case must prove a prima facie case. If the plaintiff succeedsin doing so, then the defendant must present a legitimate, nondiscrim-inatory justification for the adverse decision.156 If the defendant suc-ceeds in doing that, the plaintiff must prove that the justification of-fered by the defendant was a mere pretext for discrimination.157

To prove a prima facie case, the plaintiff must prove

(i) that he belongs to a [protected class]; (ii) that he applied and wasqualified for a job for which the employer was seeking applicants; (iii)that, despite his qualifications, he was rejected; and (iv) that, afterhis rejection, the position remained open and the employer continuedto seek applicants from persons of complainant’s qualifications.158

Obviously, this is not a rigid and inflexible formula; for example, thefourth prong need not be restricted to situations where the employercontinued to seek applications.

For the purpose of this article, it is significant that the SupremeCourt explained, “The prima facie case serves an important function inthe litigation: it eliminates the most common nondiscriminatory rea-sons for the plaintiff’s rejection.”159 This, of course, is the same reasonused to justify section 12112(d)(2)’s prohibition on pre-offer disability-related questions.

Of course, the ADA plaintiff stands in a better position than a TitleVII plaintiff because section 12112(d)(2), if obeyed by the employer, re-sults in the ADA plaintiff being given a conditional offer. A racial dis-crimination plaintiff, on the other hand, does not have the luxury ofhaving a conditional offer extended before the employer is allowed toask questions that reveal the applicant’s race. Nevertheless, plaintiffswho raise discrimination claims other than disability have not beencompletely unable to prove or have unreasonable difficulty in proving

153. 411 U.S. 792 (1973).154. 450 U.S. 248 (1981).155. 509 U.S. 502 (1993).156. Burdine, 450 U.S. at 248.157. See, e.g., id. at 254.158. McDonnell Douglas, 411 U.S. at 802.159. Burdine, 450 U.S. at 253–54 (citing Teamsters v. United States, 431 U.S. 324,

358 & n.44 (1977)).



that they were discriminated against on the basis of other protectedclassifications.160

The EEOC’s approach to age-related questions demonstrates thata greater sensitivity to free speech rights can be compatible with em-ployee rights. As interpreted by the EEOC, the ADEA does not prohibitemployers from asking an applicant for his birthdate, which in turnwill reveal the applicant’s age.161 Rather, if such a question is askedand the applicant subsequently receives an adverse employment deci-sion, the EEOC will scrutinize the decision to see if the applicant wasimpermissibly discriminated against on the basis of age.162 This is a farmore sensible approach, as it focuses on the prohibited activity: agediscrimination. It also suggests, if not demonstrates, that the EEOCdoes not need the litigation advantage of a conditional offer to establishthat discrimination has occurred.163

Admittedly, the protected classification of age (i.e., those personsaged forty and older) is readily apparent once one moves away from themargin—the employer probably does not need to ask a sixty-five-year-old for his birthday to realize that the applicant is an older person.Thus, one could argue that a purpose of section 12112(d)(2) is to preventemployers from learning of hidden disabilities. Even that justificationfails to explain why a person whose disability is obvious and apparentcan recover for being asked a disability-related question. After all, asthe First Circuit has noted, “[t]he ADA does not require an employerto wear blinders to a known disability at the pre-offer stage, but permitsan ‘interactive process’ beneficial to both the employer and applicant.”164

There is no indication that the McDonnell Douglas burden-shiftingapproach is ineffective for the ADA.165 For example, in Gonzalez v. San-doval County,166 the plaintiff alleged that he had been terminated as asheriff’s deputy because he suffered from the Epstein-Barr virus andfrom chronic fatigue syndrome. The defendant argued that it had ter-minated the plaintiff because he was untruthful, insubordinate, and

160. See, e.g., Graber v. Litton Guidance & Control Systems, Case No. LC 031 387(Aug. 11, 1998) ($2.21 million verdict for gender, ancestry, and religious discrimination);BARI-ELLEN ROBERTS & JACK E. WHITE, ROBERTS V. TEXACO: A TRUE STORY OF RACEAND CORPORATE AMERICA (1998) (documenting the development of a landmark class-action discrimination suit against Texaco).

161. ADEA Pre-Employment Inquiries, supra note 83, at 4032.162. Id.163. See also 29 C.F.R. § 1605.3(b) (2001) (setting forth the EEOC’s position regard-

ing pre-offer questions that would reveal an applicant’s need for a religious accommo-dation; based on such questions, the EEOC will infer discrimination, to be rebutted bythe employer).

164. Grenier v. Cyanamid Plastics, Inc., 70 F.3d 667, 676 (1st Cir. 1995).165. McDonnell Douglas, 411 U.S. at 792.166. 2 F. Supp. 2d 1442 (D.N.M. 1998).



less than capable.167 The plaintiff was able to prove that these reasonswere pre-textual by presenting evidence that contradicted the defen-dant’s assertions.168 Gonzalez, of course, is only an anecdote of a suc-cessful case by a plaintiff. The case does demonstrate, however, thatthere is nothing peculiar about the ADA that makes proving a primafacie case more difficult than proving one under Title VII or the ADEA.

ii. Should a plaintiff have a cause of action for losing the litigationadvantage?

In some circumstances, a disabled applicant who might be unableto prove discrimination by using the McDonnell Douglas burden-shifting approach may argue that the employer’s violation of section12112(d)(2) deprived him of the statute’s litigation advantage and thathad he had the litigation advantage, he would have been able to provethat he had been discriminated against. Therefore, the applicant couldargue that he should be entitled to recover for damages for the harmdone to his ADA claim.

The nearest analogs to this type of claim are the common law tortsof negligent and intentional spoliation of evidence. A party that inten-tionally destroys evidence that could have been used in prospectivelitigation can be liable to the other party for intentionally interferingwith that party’s opportunity to win the lawsuit.169 Similarly, a partythat negligently destroys evidence “needed for prospective civil litiga-tion” can be liable to the other party for negligent spoilation of evi-dence.170 Not all states, however, recognize these torts.

There are, however, significant problems to justifying damages un-der section 12112(d)(2), based on either of those common law torts.First, to the extent that these torts are persuasive analogs, there is noreason that section 12112(d)(2), rather than the torts themselves,should be the basis for the recovery. An ADA plaintiff who believes thathis chances of winning his suit were damaged by the employer’s vio-lation of section 12112(d)(2) can simply add causes of action for inten-tional and negligent spoliation of evidence. As it is, allowing an ADAplaintiff to recover additional damages under section 12112(d)(2) es-sentially converts the common law torts to a strict liability regime,when an employer is automatically liable for allegedly damaging theplaintiff’s case, without any showing of intent, negligence, or causation.

Second, as currently interpreted, section 12112(d)(2), as an analogto the spoliation of evidence torts, allows for double recovery. The mea-sure of damages in spoliation of evidence torts is what the plaintiff

167. Id. at 1445.168. Id.169. See, e.g., Smith v. Superior Court, 198 Cal. Rptr. 829, 837 (Cal. Ct. App. 1984).170. See, e.g., Velasco v. Commercial Bldg. Maintenance Co., 215 Cal. Rptr. 504, 506

(Cal. Ct. App. 1985).



would have recovered in the suit, if it had been successful.171 This cor-responds to the particular scenario discussed in this subsection: theADA plaintiff who cannot prove his case but might have been able towith the litigation advantage. Section 12112(d)(2) contains no suchlimitation. John Otero, for example, was able to prove that he hadbeen discriminated against, recovering damages for the discrimina-tion; however, he also recovered $100,000 in punitive damages undersection 12112(d)(2).172 The latter recovery cannot correspond in anymeaningful way to damages for spoliation of evidence because Oterosuffered no harm in his ability to prove his case as a result of losingthe section 12112(d)(2) litigation advantage.

Finally, the most compelling reason not to extend the spoliation ofevidence analogy to section 12112(d)(2) is that, at the time that anemployer asks a disability-related question of an applicant, no litiga-tion is in existence yet. It is one thing to impose a duty on a litigant topreserve evidence relevant to an existing dispute with an adverse party,but it is an altogether different matter to impose such a duty beforeany dispute has arisen.

E. SUMMARY OF THE END-MEANS FIT

A close examination of the various situations in which section12112(d)(2) apparently allows for recovery for being asked disability-related questions demonstrates the serious infirmities with the statute,as interpreted by the Eighth, Ninth, and Tenth Circuits. By allowingnon-disabled plaintiffs, unqualified disabled plaintiffs, and hired dis-abled plaintiffs to bring suit, these courts have divorced section12112(d)(2) from the goals of the ADA. Section 12112(d)(2) thereby failsto satisfy the Central Hudson test.173

5. Other Constitutional Speech RestrictionsBecause it appears that section 12112(d)(2) cannot be justified as

a constitutional restriction on commercial speech, it is likely invalidunless it can be justified under general speech restrictions. Typically,these restrictions apply to regular, non-commercial speech; however, ifsuch restrictions can be validly applied to non-commercial speech,which receives more protection than commercial speech, then they canbe validly applied to commercial speech as well.

171. Smith is not entirely clear on this point, but it seems to be a reasonable infer-ence from the fact that the court allowed the cause of action to proceed simultaneouslywith the underlying action, rather than subsequently, on the ground that there would beless duplication of effort and waste of judicial resources. See Smith, 198 Cal. Rptr. at 837.This suggests that the spoilation of evidence claim would fall away if the plaintiffs wonthe underlying case. Indeed, that would seem to be a necessary result, since the plaintiffwould then have suffered no injury or harm from the destruction of the evidence.

172. Wal-Mart Stores, 11 F. Supp. 2d at 1328.173. Central Hudson, 447 U.S. at 557.



The most common speech restrictions are time, place, or mannerregulations. These are restrictions that “ ‘are justified without referenceto the content of the regulated speech, that . . . are narrowly tailoredto serve a significant government interest, and that . . . leave open am-ple alternative channels for communication of information.’ ”174 A typ-ical such regulation is one that limits the volume of one’s public mes-sage regardless of the content of the message.175 For example, in Wardv. Rock Against Racism, the Supreme Court upheld a city’s “sound am-plification guideline” whereby the city provided “high quality soundequipment” and had hired “an independent, experienced sound tech-nician” to operate the equipment for all concerts at a city-owned “band-shell.”176 The guideline was designed to control noise levels, not artisticcontrol, and hence satisfied the test articulated earlier.

Section 12112(d)(2) has some characteristics of a time, place, ormanner regulation. It serves a significant government interest—elim-inating discrimination against the disabled—and it probably leavesample alternative channels since the employer can ask a disability-related question after making a conditional offer to the applicant.177

However, section 12112(d)(2) is not content-neutral, which disqual-ifies it from being a time, place, or manner restriction. As the Courtstated in Pacific Gas & Electric Co. v. Public Utility Commission, a con-stitutionally “permissible time, place, or manner restriction” may not bebased on either the content or subject matter of speech.178 Quite obvi-ously, the ADA selectively suppresses a single category of speech definedby its content: disability-related questions. It does not matter if the em-ployer asks the question politely, rudely, loudly, or obnoxiously. Whethera question subjects an employer to liability under section 12112(d)(2) isdetermined solely based on the content of the question. Questions thatconcern disabilities are covered by section 12112(d)(2); others are not.

Attempts to extend the time, place, or manner doctrine to arguablycontent-based regulations universally rely on City of Renton v. PlaytimeTheatres, Inc.,179 in which the Supreme Court upheld a suburban or-dinance that banned adult theaters from opening “within 1000 feet ofany residential zone, single or multiple-family dwelling, church, park,

174. See, e.g., Ward v. Rock Against Racism, 491 U.S. 781, 791 (1989).175. See generally Kovacs v. Cooper, 336 U.S. 77, 82–83 (1949) (suggesting in dicta

that the government could regulate the use of sound trucks in residential neighborhoodsif it did so regardless of the content of the message).

176. Ward, 491 U.S. at 784–85.177. It is difficult to find a case analogous to this situation. Somewhat on point is

Madsen v. Women’s Health Clinic, 512 U.S. 753, 772 (1994), in which the Court upheld astate court order that restrained abortion protesters from making excessive noise withinearshot of patients before 7:30 a.m. and noon on Mondays through Saturdays. Presum-ably, the fact that the protesters could carry on at all other times offered them amplealternative channels with which to press their position.

178. 475 U.S. 1, 19 (1986).179. 475 U.S. 41 (1986).



or school.”180 Although the ordinance was facially content-based, theCourt nevertheless applied the time, place, or manner test because thepredominate intent of the ordinance was to combat the “secondary ef-fects” associated with adult theaters—such as crime, decreased prop-erty values, and decline in the quality of nearby neighborhoods.181

However, Renton does not support the argument that the ADA pro-vision is a time, place, or manner restriction aimed at the secondaryeffects of disability-related questions—namely, discrimination againstthe disabled. Reading Renton so broadly is unsound. If the governmentcould address “secondary effects” indirectly through direct regulationof speech, then the government could drastically curtail speech. Forexample, suppose the government had concluded that the secondaryeffect of investigative journalism in the political arena increased cyni-cism among the electorate with a concurrent decline in voter turnout.Can one really believe that the Supreme Court would allow the gov-ernment to regulate such investigative journalism as a means of ad-dressing the secondary effect of low voter turnout?

Indeed, the secondary effects that Renton addresses cannot flowfrom the communicative impact of the speech. In Boos v. Barry,182 theCourt explained that “[r]egulations that focus on the direct impact ofspeech on its audience present a different situation” from that in Ren-ton and that “[l]isteners’ reactions to speech are not the type of ‘sec-ondary effects’ we referred to in Renton.”

That is precisely the case with section 12112(d)(2). The reason thatthe ADA seeks to prevent employers from asking disability-relatedquestions prior to making a conditional offer is that the employer mightlearn something from the applicant’s answer that the employer couldthen use to discriminate against the applicant. In other words, the con-cern is that the asking of the disability-related question may inducethe applicant to communicate information to the employer. However,because the concern involves communicative impact, it cannot involvesecondary effects.

A second justification for speech limitations is that the speech inquestion consists of both speech and conduct elements, and there is a“sufficiently important governmental interest in regulating the non-speech element” to “justify incidental limitations on First Amendmentfreedoms.”183 In practice, the test used to determine the constitution-ality of conduct regulations that have an incidental burden on speechis equivalent to the time, place, or manner test.184 Thus, in United

180. Id. at 43.181. Id. at 49–52.182. 485 U.S. 312, 321 (1988).183. United States v. O’Brien, 391 U.S. 367, 376 (1968).184. See, e.g., Clark v. Community for Creative Non-Violence, 468 U.S. 288, 298 n.8

(1984).



States v. O’Brien, the Court upheld the conviction of a defendant whohad violated a federal statute prohibiting the destruction or mutilationof draft cards. Although the defendant argued that his actions had beena means of protesting the draft and the Vietnam war, the Court heldthat Congress’s interest in regulating the nonspeech/conduct aspects ofthe registration notice and that proof was valid and sufficed to over-come the defendant’s free speech claim.185

Like the time, place, or manner doctrine, the incidental burdenrequires that the regulation be aimed at conduct, not the content ofspeech.186 In that regard, as discussed earlier, section 12112(d)(2) is infact aimed at a particular kind of speech, based on its content: disability-related questions. Moreover, to the extent that the ADA seeks to regu-late conduct in the form of disability-based discrimination, the ADA’sprohibition of discrimination because of disability already does so.Thus, section 12212(d)(2) differs materially from the draft card-burning case, and the incidental burden doctrine does not apply topre-offer disability-related questions.

IV. Harmonizing the ADA and the First AmendmentIf the central thesis of this article is correct—that is, that the re-

covery of damages against an employer who asks a disability-relatedquestion without any showing of discrimination by that employer vio-lates the First Amendment—then a question remains: Does the FirstAmendment prohibit all regulation of disability-related questions? Cer-tainly not. For example, Pittsburgh Press suggests that the SupremeCourt would permit Congress to prohibit advertising such as “Are you100 percent healthy? If so, we want you to apply!”187 Similarly, nothingin the First Amendment prohibits a jury in an ADA case from consid-ering an employer’s disability-related questions as evidence of discrim-inatory intent. In fact, this is the approach that Congress and the EEOChave adopted for age- and religion-based questioning of job applicants.

If there were evidence that an interviewer had asked an applicanta series of questions about the applicant’s background, only to lose in-terest after having asked a single disability-related question—such as“Are you disabled?”—then the jury would obviously be entitled to usethe fact that the question had been asked as proof that the interviewerhad discriminatory motives. In fact, evidence that the interviewerasked such questions of non-disabled applicants might further supporta disabled plaintiff’s case. Of course, non-disabled applicants wouldhave no basis to bring suit themselves.

It does not violate the First Amendment to use speech as evidenceof discriminatory conduct because the defendant is being punished for

185. O’Brien, 391 U.S. at 367.186. See, e.g., Texas v. Johnson, 491 U.S. 397, 406–07 (1989).187. See 413 U.S. 376 (1973).



the conduct, not the speech. In Wisconsin v. Mitchell,188 the SupremeCourt held,

The First Amendment, moreover, does not prohibit the evidentiaryuse of speech to establish the elements of a crime or to prove motiveor intent. Evidence of a defendant’s previous declarations or state-ments is commonly admitted in criminal trial subject to evidentiaryrules dealing with relevancy, reliability, and the like.189

Accordingly, the Court saw no constitutional impediment to the factthat “evidence of the defendant’s prior speech or associations may beused to prove that the defendant intentionally selected his victim onaccount of the victim’s protected status,” which resulted in an enhancedcriminal sentence.190 If a criminal sentence can be enhanced based onspeech, then there seems to be no problem with civil verdicts based onspeech, considering that the U.S. court system accords greater protec-tions to criminal defendants than civil defendants.

Mitchell is not an anomaly. In Street v. New York,191 the Court ex-plained that there was no constitutional problem presented when“words have been introduced to prove some element of [the] offense.”In Price Waterhouse v. Hopkins,192 a plurality of the Court concludedthat, in a gender discrimination case, the fact that a decision makerhad made “stereotyped remarks” about gender “can certainly be evi-dence that gender played a part” in the adverse employment decision.

The context of the disability-related question is, of course, key. Ascourts have noted, the ADA does not require employers to ignore knownor obvious disabilities; rather, the ADA encourages an “interactive pro-cess” involving applicant and employer.193 Thus, these courts under-stand that disability-related questions, in and of themselves, are notthe problem. Rather, an employer who is honestly assessing whether adisabled applicant is qualified for the job must consider whether theperson can perform the essential functions with or without a reasonableaccommodation. This in turn requires that the employer understand,to some extent, the limitations (if any) imposed by the applicant’s dis-ability as well as the possible accommodations that would alleviatethose limitations.

One disabled attorney has suggested that the ADA—specifically,section 12112(d)(2)—actually create barriers for the disabled:

I might be talking to a prospective employer about my professionalexperiences or how I would attract clients. But they seem to look right

188. 508 U.S. 476 (1993).189. Id. at 489.190. Id. at 488.191. 394 U.S. 576, 594 (1969).192. 490 U.S. 228, 251–52 (1989).193. See, e.g., Grenier, 70 F.3d at 676.



through me. No doubt they are thinking about what might happen ifI’m hired. “Will we have to have the library stacks lowered? Will sheneed a specially modified computer or an assistant? . . . Will she sueus if she can’t play on the firm’s softball team?”

An easy solution to this problem would be for the employer toask me such questions. I would not be offended and would welcomethe chance to explain my situation. Yet the [ADA] makes such ques-tions illegal. . . .

By inhibiting free discussion between interviewer and inter-viewee, the [ADA] also makes it difficult for me to determine whetherI want to work for a particular firm or whether a prospective employeris a prejudiced, ignorant jerk. I would find this out if the interviewerwere allowed to ask, “How can you do anything in a wheelchair, muchless represent clients in court?”194

Notice that the employer and the applicant are both confrontedwith incomplete information. Only together do they have enough infor-mation to answer the question of whether a disabled applicant can per-form the essential job functions with a reasonable accommodation. Theemployer knows whether a given accommodation will be feasible (fi-nancially and otherwise) and hence reasonable. This is because theemployer is in a position to know about the impact of a particular ac-commodation on the business. However, the employer will generallynot be in a position to know whether a given applicant needs a partic-ular accommodation. Of course, if the nature of the disability is obvious,such as the need for a wheelchair, the employer may be able to deter-mine whether a particular accommodation is necessary. For such anapplicant, however, the prohibition on disability-related questionsprovides no protection because the applicant cannot hide his or herdisability.

When the disability is hidden, is there any reason why this inter-active process should be deferred to a subsequent, post-offer stage? Ifan employer were acting in good faith, then it would seem desirable tohave the interactive process begin as soon as possible. Otherwise, theemployer and the applicant must expend additional time and resourcesmerely to conduct a post-offer interview to discuss the scope of the dis-ability and the potential accommodations. The employer may sufferfurther inconvenience in that it may be unable to make offers to otherapplicants while it holds the offer open for the disabled applicant.195

Similarly, the applicant, in pursuing the conditional job offer, mayforego other positions for which the applicant would be qualified withor without a reasonable accommodation; after discovering that he is

194. Julie Hofius, ADA Creates Barriers to Jobs for the Handicapped, L.A. DAILY J.,Aug. 31, 2000, at 6.

195. Federal judges, for example, can appreciate the potential problems in havingto keep clerkship offers open for any extended period of time; other desirable applicantsmay accept clerkships with other judges while this judge awaits a decision from theperson to whom an offer has been given.



not qualified for the position for which he has received a conditionaloffer, the applicant may find that the other positions have been filled.

Of course, the employer is not prohibited from asking non-disability-related questions during the pre-offer interview. For ex-ample, the employer can ask the applicant how he or she would per-form the essential functions of the position. However, if the disabilitywere hidden, the employer would have no reason to ask the applicantunless the employer were to ask every applicant such a question. It isabsurd to expect employers to ask every applicant such questionsmerely in anticipation that some applicants may have hidden dis-abilities that potentially impact their ability to perform the essentialfunctions of the job.

Thus, the ultimate issue is whether juries are capable of assessingthe context in which a disability-related question is asked and of de-termining whether the employer acted in good faith or with discrimi-natory intent. As discussed earlier, juries are often called upon to makethat very determination in race, gender, and age discrimination claims,and there is no indication that they are unable to do so. This is truebecause this inquiry essentially requires the jury to assess the credi-bility of the interviewer’s explanation for why he asked a disability-related question. As the Supreme Court has noted, making such cred-ibility determinations is a task that “ ‘belongs to the jury, who arepresumed to be fitted for it by their natural intelligence and their prac-tical knowledge of men and the ways of men.’ ”196 If that is so, then theentire premise underlying section 12112(d)(2) is faulty; there is no needfor employers to be forced to give conditional offers before askingdisability-related questions in order to enable applicants to prove thatthey were discriminated against on the basis of a disability. The ADAand the First Amendment can be harmonized by eliminating section12112(d)(2) and by simply allowing the jury to consider any disability-related question asked as potential evidence of discriminatory intent.

V. ConclusionThe ADA, without question, addresses legitimate societal concerns

on behalf of the disabled. However, in its zeal to follow through on itsnoble intentions, Congress neglected to analyze the full effect of thisanti-discrimination statute.

This is not to say that section 12112(d)(2) is so clearly unconsti-tutional as to be indefensible. Indeed, the burden that it places on theFirst Amendment is temporal rather than absolute. Nevertheless, thepages of United States Reports are filled with examples of seeminglyminimal burdens on speech that were eviscerated by the First Amend-

196. See United States v. Scheffer, 523 U.S. 303, 313 (1998); see also SAUL M. KASSIN& LAWRENCE S. WRIGHTSMAN, THE AMERICAN JURY ON TRIAL 67–70 (1988).



ment. Cohen, for example, could have made his anti-draft point withless colorful language than he used, perhaps something along the linesof “the draft is evil” or even “the draft sucks”; but the Supreme Courtconsidered even that minimal euphemization of Cohen’s speech to beintolerable.197 Although section 12112(d)(2) would be evaluated undera more lenient test than that used in evaluating Cohen’s message, eventhat more lenient test suggests that the provision is unconstitutional.

This is not to say that it would be a good idea, in the absence ofsection 12112(d)(2), for employers to ask disability-related questions ofapplicants during pre-offer interviews. In fact, it generally would notbe a good idea since the answer to such a question could put the em-ployer on notice of a hidden disability, thereby laying the foundationfor an ADA claim; whereas if the employer does not know of a disability,however, it cannot be held liable for violating the ADA. Nevertheless,the First Amendment does not and should not exist to protect employ-ers from asking unwise questions.

The root problem, apparently unconsidered by Congress, is thatsection 12112(d)(2) is simply not necessary to serve the interests ad-vanced by the ADA. The conflict between the First Amendment and theADA could be harmonized simply by eliminating section 12112(d)(2)and allowing juries to consider the asking of disability-related ques-tions as potential evidence of discriminatory motives and possibly asnegligent spoliation of evidence. It may be that these suggestions havethe same practical effect as the current interpretation of section12112(d)(2). Nevertheless, if the same results can be reached withoutdisrupting the First Amendment, there is no reason not to implementthe suggestions.

197. Cohen v. California, 403 U.S. 15, 25–26 (1971) (holding that the First Amend-ment protected a draft protester’s wearing, in a courthouse, a jacket reading “Fuck theDraft”).


143

Accommodating the EmploymentDisabled

Douglas L. Leslie*

I. IntroductionThe Americans with Disabilities Act (ADA) forbids an employer

from discriminating against employees or applicants with disabilitiesby “not making reasonable accommodations” to the disabled person un-less the employer “can demonstrate that the accommodation would im-pose an undue hardship on the operation of the business.”1

A recurring issue under the ADA is what constitutes a “reasonableaccommodation.” The issue has not proved tractable. Judge Posnerwrites,

It is understood in [negligence] law that in deciding what care is rea-sonable the court considers the cost of increased care. (This is explicitin Judge Learned Hand’s famous formula for negligence. UnitedStates v. Carroll Towing Co., 159 F.2d 169, 173 (2d Cir. 1947).) Similarreasoning could be used to flesh out the meaning of the word “rea-sonable” in the term “reasonable accommodations.” It would not fol-low that the costs and benefits of altering a workplace to enable adisabled person to work would always have to be quantified, or eventhat an accommodation would have to be deemed unreasonable if thecost exceeded the benefit however slightly. But, at the very least, thecost could not be disproportionate to the benefit . . . The employeemust show that the accommodation is reasonable in the sense bothof efficacious and of proportional to costs.2

Two thoughtful scholars, arguing that order may emerge from chaos,write,

[T]he ADA calls for a far more individualized process of fitting indi-viduals to jobs than the anti-discrimination and affirmative actionprinciples of Title VII. While it is certainly possible that this case-by-case approach to enforcement could deteriorate into purely ad hocjudicial decision making, precedent counteracts this tendency, bothat the level of formal legal doctrine and by providing the parties with

* Mr. Douglas L. Leslie is the Charles O. Gregory Professor of Law at the Universityof Virginia.

1. Americans with Disabilities Act § 102(b)(5)(A), 42 U.S.C. § 12 112(b)(5)(A) (1990).In this essay, I do not deal with the question of what an “undue hardship” for the employermight mean. In the absence of a defensible meaning of “reasonable accommodation,”qualifying that term with “undue hardship” does not help the analysis. The survey ofcases described infra disclosed no cases in which unreasonable hardship was an issue.

2. Vande Zande v. State of Wis. Dep’t of Admin., 44 F.3d 538, 542–43 (7th Cir. 1995).



templates of reasonable accommodation for settlement and compro-mise. Accommodations imposed, or approved, in prior cases simplifythe process of later negotiations over accommodations for other em-ployers and employees. With the accumulation of decisions, the ade-quacy of any particular accommodation will become both betterknown to the parties and more easily evaluated by a court. 3

Accommodation issues in employment arise in a variety of con-texts. For example, a warehouseman with arthritis may be able to per-form his job only with a piece of equipment, a dolly, that is not ordi-narily provided by the employer. The warehouseman asks the employerto supply a dolly. Second, the warehouseman with arthritis may beable to do all aspects of his job except lift boxes of cigarettes from apalate to storage shelves. The warehouseman asks his employer toreassign that task. This may have only a small impact on other em-ployees. Third, a sight-impaired warehouseman requests to work onthe day shift because his impairment precludes his driving a car towork, and there is no public transportation to the plant at night. Thisrequest requires that a more senior warehouseman be reassigned fromthe preferable day shift to the night shift. Fourth, a sight-impairedwarehouseman who cannot read the labels on many of the boxes in thewarehouse asks that a reader (an assistant who is not sight-impaired)be supplied to him at the employer’s expense.4

II. Disabled Workers in Competitive Labor MarketsIn the idealized competitive labor market, at any point in time

many firms are matched with many workers. When adjusted for differ-ences in location, working conditions, and the like, wages reach equi-librium. Any individual firm has ample workers available to it at theequilibrium wage. Workers have numerous job opportunities at theequilibrium wage. Real labor markets contain substantial transactioncosts, but it is useful to explore the concept of reasonable accommoda-tions in the context of a perfectly competitive market.

Suppose that workers in some groups in a competitive labor marketare perceived by employers to be less valuable to the employer thanaverage workers. I call these workers PLVs—perceived as less valu-

3. Pamela S. Karlan & George Rutherglen, Disabilities, Discrimination, and Rea-sonable Accommodation, 46 DUKE L.J. 1, 21 (1996).

4. It is possible that under section 504 of the Rehabilitation Act and the casesapplying the Rehabilitation Act the use of assistants may be required accommodations.See Nondiscrimination on the Basis of Handicap in Programs or Activities ReceivingFinancial Assistance, 34 C.F.R. § 104.12(b) (Feb. 6, 2001) (“Reasonable accommodationmay include: . . . (2) . . . the provision of readers or interpreters, and other similar ac-tions.”); see also Overton v. Reilly, 977 F.2d 1190, 1195 (7th Cir. 1992) (stating that anassistant to speak on the phone may be a required accommodation for an individualunable to communicate effectively by phone); Arneson v. Sullivan, 946 F.2d 90, 93 (8thCir. 1991) (requiring that a reader must be provided as an accommodation); Nelson v.Thornburgh, 567 F. Supp. 369, aff’d, 732 F.2d 146 (3rd Cir. 1984) (holding that the hiringof readers is a required accommodation for blind employees).


Accommodating the Employment Disabled 145

able. These groups can include, and have historically included, racialminorities, women, and disabled persons. At the equilibrium wage,PLVs will not be hired, whether they are, in fact, less valuable or not.

In the idealized competitive market, PLVs will underbid the equi-librium wage. Some firms will hire them at this lower wage. Over time,if the PLVs are in fact as valuable as other workers, the firms that hirethem will prosper. Other firms will follow suit and compete for theseworkers. This process will eliminate discrimination if discriminationmeans the refusal to hire a worker because of a false perception thatthe worker is less valuable.

Suppose that because of a legal rule, such as the ADA or Title VII,or a strong social norm, managers are not permitted to hire PLVs atless than the equilibrium wage. PLVs will not be able to underbid theequilibrium wage and so will not be hired. Even a manager who doesnot believe these workers to be in fact less valuable will not hire themas long as the manager believes there is a risk that they are less valu-able. There is no reason for the firm to take this risk in the face of anample supply of workers who do not carry the risk. Only if there werean upside possibility that the PLVs were in fact more valuable wouldthey be hired.

It becomes clear why a government which legislates that PLVs bepaid the equilibrium wage must also legislate that firms hire them. Todo otherwise will condemn PLVs to be unemployed.

Disabled persons fall into two categories: those who are incorrectlyperceived as less valuable and those who are in fact less valuable. Dis-abled workers who require an accommodation to be fully productive areless valuable than those who do not—less valuable by the cost of theaccommodation. In a competitive labor market, the disabled person un-derbids the equilibrium wage in order to be hired. The amount of theunderbid is dictated by the cost of the accommodation and any amountnecessary to overcome the firm’s perception that the disabled workeris less productive, notwithstanding accommodation. If the latter per-ception is false, the market will eliminate this component of the un-derbid wage. The result is that the disabled person will absorb the costsof his or her disability.

In summary, if legal rules and/or social norms do not permit dis-abled workers requiring accommodation to be paid less than the equi-librium wage, these workers will not be hired (absent compulsion). Thismakes all the relevant parties worse off.

III. Efficient AccommodationsLegal rules forbid firms from refusing to hire disabled workers and

from hiring them at less than the equilibrium wage. The rules requirefirms to make reasonable accommodations to disabled workers unlessthe accommodation entails an “undue hardship.” A possible meaning



of reasonable accommodation is that firms must only make accommo-dations that carry “de minimus” costs.5 This suggests a transactionscosts analysis. The labor market is not frictionless. Firms fail to noticetrivial changes, such as a small fan for an employee who suffers fromMultiple Sclerosis, that make a disabled worker fully valuable. A judgeuses the statute to correct the flawed market outcome, but the changemust be nearly costless, or else it is hard to explain why managersfailed to notice it.

Alternatively, reasonable accommodations might entail a cost/benefit analysis. If this means comparing the costs to the firm of mak-ing the accommodation to the benefits the firm derives from the now-productive disabled worker, the analysis will produce only de minimusaccommodations, at best. A cost-effective major accommodation is onlyconsistent with a belief that at the equilibrium wage accommodateddisabled workers are more productive than other workers and that em-ployers are ignorant of this fact. Moreover, if the accommodation is deminimus, legal compulsion is often unnecessary. The disabled workerwho needs a dolly to do his job is well advised to buy one out of his ownpocket. The only theory supporting a finding that the cost of a dolly issubstantial to the disabled employee but de minimus to his employeris some version of deep pockets. Where a defendant is a large-scale firm,any accommodation is reasonable on a deep pocket theory.

For those who believe the enactors of Title VII had more than deminimus accommodations in mind when they required reasonable ac-commodations, the task is to find an analytical framework for deter-mining which accommodations are reasonable. One candidate is to com-pare the costs to the firm of an accommodation to the benefit realizedby the accommodated disabled worker. When the benefits to the workerexceed the costs to the firm, they have the flavor of Kaldor-Hicks effi-ciency: changes that benefit some people more than they cost others sothat the gainers can fully compensate the losses and still come outahead. The compensation is not actually paid, thus distinguishingKaldor-Hicks efficiency from Pareto efficiency.6

5. This is the rule when workplace accommodations of religious beliefs are at stake.See Trans World Airlines, Inc. v. Hardison, 432 U.S. 63 (1977).

6. Thomas S. Ulen, Book Review, Law’s Order: What Economics has to do with Lawand Why it Matters, 41 SANTA CLARA L. REV. 643 n.9 (2001) (stating,

Kaldor-Hicks efficiency stands in contrast to Pareto efficiency, which is themore fundamental economic concept of efficiency. An allocation of goods andservices is ‘Pareto efficient’ if it is impossible to reallocate the current holdingsamong the current holders so as to make one or more people better off (in theirown estimation) without making someone else worse off (again in his or herown estimation). That is, under Pareto, efficiency reallocations must be con-sensual—the losers must be compensated by the winners so that there is aclear net gain from any reallocation. An allocation that cannot be consensuallyaltered is said to be ‘Pareto efficient’ or ‘Pareto optimal.’ ‘Kaldor-Hicks effi-ciency’ is an easier standard under which to reallocate goods and services.



Often it is easy to quantify the costs of an accommodation to thefirm. When the firm constructs a ramp to allow a worker in a wheelchairto gain access to a part of the plant, the cost of accommodation is thecost of the ramp. The costs of a reader to help a sight-impaired workerare the reader’s wages and benefits. However, costs to the firm are notas easy to quantify where the interests of other employees are con-cerned. If a disabled worker needs to work the day shift and this re-quires a more senior employee to lose her shift preference, in theorythe cost can be measured by the amount of money necessary to per-suade the senior employee to give up the day shift. Whether the senioremployee’s price can actually be measured is a different story, unlessthe firm in fact makes the offer. As accommodations become more com-plex, calculating the employer’s costs is more difficult. Examples in-clude organizational rearrangements, such as giving the employee per-mission to work from his home.

Calculating the benefit to the worker is difficult, perhaps impos-sible. Take the easiest case: Bill is disabled, but if it were not for hisdisability, he could do the work of a repairman B at a local electronicsfactory. The position pays $30,000 per year. What is the benefit to himof an accommodation that permits him to fill the position?

One needs to know the value to Bill of his next best job. The dif-ference between the value to Bill of the repairman B job and his nextbest job is the benefit to him of the accommodation. Knowing the valueof Bill’s next best job will not be easy, and often there will be no harddata. Moreover, it is incorrect to calculate the difference between re-pairman B and Bill’s next best job merely by using salary figures. Evenassuming that the salary differentials perfectly take into account dif-ferences in working conditions, it is not accurate to assume that salarydifferentials accurately measure the value of a particular job in termsof a worker’s self-esteem.

For instance, take law professors: Some law professors gain con-siderable self-esteem from the position; others gain less or none. Mar-ket salaries may reflect the self-esteem value of a position (by producinglower salaries than if the position did not carry prestige), but there isno occasion actually to convert the self-esteem to dollar values. Profes-sors who gain the self-esteem may stay in the profession; those who donot may stay or go depending on other factors. Comparing the differ-ence in value between Bill of the repairman B position and Bill’s nextbest job requires such a calculation, and it cannot be done with anyconfidence.

Under the Kaldor-Hicks criterion a reallocation is superior if the winnerscould have compensated the losers, but they do not have to do so. In essence,this criterion recommends changes on the basis of a cost-benefit analysis: ifthe benefits of a reallocation exceed the costs, then the reallocation is Kaldor-Hicks efficient.)



Even if repairman B were Bill’s only job prospect, the calculationwould not be easy. At some wage, Bill prefers to stay at home. Thus thecost to the employer of the accommodation will have to be compared tothe value to Bill of the repairman B position, including the value of theself-esteem Bill enjoys by being a member of the workforce, less thewage at which Bill prefers to stay at home.

There is a situation in which an accommodation that an employerordinarily does not make is efficient in a Kaldor-Hicks sense. Assumethat six disabled applicants could perform jobs in the plant if an entryramp were built, and the benefit of the ramp-accommodation to thegroup of six is greater than the cost of constructing it. Absent a legalrule or social norm requiring the ramp to be built by the employer, itmay not be. The value of the ramp to any single employee may be lessthan the cost of construction. The difficulties of collecting contributionstoward ramp construction from the disabled workers are serious. Thereare the familiar hold-out problems, and they are exacerbated by thefact that the precise identity of the disabled persons who will be suc-cessful job applicants will not be known in advance of the building ofthe ramp. In addition, some disabled beneficiaries of the ramp will cometo the firm after the initial beneficiaries leave. The employer will notbuild the ramp absent compulsion so long as it is assumed that thedisabled workers will not be more productive after the ramp is builtthan are workers who need no ramp.

Requiring the employer to build the ramp is Kaldor-Hicks efficientunder these conditions, and measurement costs will not necessarily beinsuperable. What is required is a finding that the cost of the ramp(certainly knowable) is less than the estimated benefit to present andfuture disabled beneficiaries of the ramp. The latter calculation, in the-ory, requires a comparison of the value of this job to each beneficiary’snext best job; but because the net gain is summed over all present andfuture beneficiaries, I may be more confident that even an inexact ap-proximation produces a surplus when the gain to the beneficiaries ismultiplied by their numbers.7

IV. Normative ConclusionsIt is little wonder that courts and commentators alike have no theory

for what constitutes a reasonable accommodation under the ADA. If sucha theory is grounded on a cost-benefit analysis, a calculation will be im-possible when the accommodation of a single employee’s disability is atstake, not because the cost to the employer of the accommodation isunknowable but because the gain to the disabled worker is.

7. This suggests that public accommodations of the disabled requires an analysisdifferent from the analysis of employment accommodations. Collective action problemsare common in public accommodations (could disabled bus riders collectively pay forwheelchair-accessible buses?); they arise much less frequently in employment.



This essay suggests these candidates for justifiable accommoda-tions:

• A court-ordered accommodation is justifiable if the cost to theemployer is de minimis, the gain to the disabled employee ispositive, and the employee cannot secure the accommodation onhis own. This does not include providing a dolly or a reader, butit might include shifting some job tasks from a disabled workerto a fully able worker. The disabled worker may not be able toaccomplish a shift of tasks without the employer’s assistance.

• A court-ordered required accommodation is justifiable when itbenefits many disabled workers, and collective action problemsprevent the disabled workers from paying for the accommoda-tion. This might include a ramp; it does not include a dolly or areader. Neither a dolly nor a reader is a collective good.

A final point deserves mention. If those who are not disabled aregenerally benefited by workplace accommodations of disabled workers,should these benefits count in any cost/benefit calculation? I cannotrefute the claim, nor do I wish to, that many derive psychic benefitsfrom seeing disabled persons perform dignified jobs in the workplace.Moreover, assigning the costs of accommodations over employers is gen-erally not a bad way to spread the costs since it approximates the popu-lation generally. The problem is that these benefits are not quantifiable.Of the 200 million people in the United States over age eighteen, whatannual dollar amount ought to be assigned as the average increase inwell-being experienced by the fully able in observing disabled workersaccommodated in the workplace? These benefits may be real, but themagnitude is purely speculative. Their inclusion in a particular deci-sion of whether to compel an accommodation does not yield predictableor consistent outcomes.

V. Outcomes in the CourtsTo gain a sense of how courts treat the accommodation issue under

the ADA, I read fifty federal courts of appeals opinions and fifty federaldistrict court opinions from 1999. Each case raised ADA issues in anemployment context.8 I made several interesting discoveries. Ofseventy-two ADA appellate cases, fifty were unpublished and twenty-two were published.9 This may be some evidence that the courts of

8. This sort of empirical research runs the risk that cases which produce opinionsdo not accurately reflect the legal landscape. For example, the majority of ADA law suitsmay be settled favorably to plaintiffs, with only the particularly weak claims requiringa court adjudication and opinion. Were that the case, a sampling of opinions would in-dicate a low success rate for plaintiffs, whereas in fact the success rate was high.

9. I read seventy-two in order to get fifty that could be reviewed. The twenty-twothat I rejected were unpublished, so I summarize in form that the facts could not bediscerned.



appeals do not take the issues raised by a typical ADA employmentcase very seriously.

There were few accommodation issues. In only eighteen of the onehundred cases were accommodation issues raised.10 The employer wonon the merits in thirteen of those cases while the plaintiffs won none,and five were sent to a fact finder for disposition.

The employers’ success rate in defending accommodation claimswas matched by the employers’ overall success rate in defending ADAclaims. Of the one hundred cases, the employer won outright inseventy-four. Meanwhile, the employee won outright in three cases andthirteen were sent to a fact finder.

The most common ADA issue was whether the plaintiff was disabledand otherwise qualified to do the job. The courts often treat these twoconceptually distinct questions as the same issue. For example, a plain-tiff discharged for repeated tardiness may allege that a sleep disorderprevents him from regularly arriving to work on time. The court is likelyto rule along the following lines: “We have considerable doubt that thedisorder interferes with a major life activity, but even if it does, the abil-ity to arrive at the workplace on time is an essential element of the job.”

The disabled/otherwise-qualified issue was dispositive in sixty-twoof the one hundred cases. In another thirty cases, the court was willingto assume the plaintiff was disabled and otherwise qualified, and theissue was therefore whether the disability was the cause of the plain-tiff’s discharge.11

My conclusion from the cases is that courts see the ordinary ADAemployment case as a wrongful discharge case. Instead of a dischargedemployee alleging lack of good cause, as she may under a collectivebargaining agreement, or alleging that the discharge violated publicpolicy, as she might in an appropriate at-will employment state, shealleges that the discharge was because of a disability. The statisticsfrom past cases suggest that the ADA plaintiff has a very poor chanceof success.

10. The requested accommodations included

(i) two requests for part-time work;(ii) six requests for job reassignment;(iii) one request for restrictions on lifting and overhead work;(iv) two requests for a helper (such as a sign-language interpreter);(v) one request for a device (such as a large magnifying glass);(vi) five requests were not specifically requested by the employees;(vii) three requests for an extended leave of absence; and(viii) one request for more time to get to work.

The list is longer than the number of cases because in some cases more than one accom-modation was suggested.

11. In four cases, the issue was whether the employer had retaliated against theemployee for raising an ADA claim.



Another purpose of surveying the cases was to determine whatpercentage of the accommodation cases included an accommodation re-quest that would benefit employees in addition to the individual mak-ing the request. Only one of eighteen accommodation cases involved arequest for an accommodation that would benefit a group of workers.In EEOC v. Rockwell International Corp., the EEOC sued to preventan employer from refusing to hire applicants because they failed anerve conduction test.12 The case was not decided on the merits.

In no other case was an accommodation requested that would ben-efit any employee other than the one making the request.13

VI. Summary of the DataDefining reasonable accommodation is an issue in comparably few

ADA cases. In cases where it is an issue, the employer ordinarily pre-vails. Most ADA cases raise issues of causation and whether the plain-tiff is “otherwise qualified.”

Usually, accommodations of trivial cost are not worth a lawsuit byeither side. If the refused accommodations were to produce a collectivegood, they would not be found in the litigated cases.

Dispositions on the merits

Employer 74Plaintiff 3Fact Finder14 19

Types of issues

Disabled or Otherwise Qualified 62Causation 30Retaliation 4Accommodation 18

12. 36 F. Supp. 2d. 1056 (N.D. Ill. 1999).13. A typical case would be one in which a plaintiff, suffering from asthma, requests

a transfer to a different job where the effects of the working conditions on the asthmawill be lessened. The first issue is whether the employee’s asthma impairs a major lifeactivity. This is an individual determination because not all asthma sufferers are equallyafflicted. If the plaintiff prevails on this issue, the question will be whether the transferto a different job is reasonable. This will turn on a host of issues, such as whether thereis a formal seniority system that the plaintiff seeks to avoid, whether there is anotherjob open (or whether another employee must be bumped), and so forth.

It could be argued that the asthma sufferer, who successfully establishes his dis-ability status and gains the job transfer, sets a precedent that will be enjoyed by futureasthma sufferers at this employer; thus, the accommodation benefits a class larger thanthe individual employee. Looking at the cases, I do not treat this precedent-setting ar-gument as carrying force. The cases turn on the facts of the individual claim. (A counter-example may be the asymptomatic HIV-positive worker. If that worker is found to bedisabled, then presumably all asymptomatic HIV-positive workers are also disabled, asnothing distinguishes one asymptomatic individual from another.)

14. By fact finder, I mean that neither side gained a summary judgment.



Dispositions on the merits in accommodation cases

Employer 13Plaintiff 0Fact Finder 5


153

Retail Industry Picketing andHand Billing: Access Rights ofNon-Employee UnionRepresentatives, Striking, andOff-Duty Employees to ShoppingMalls, Parking Fields, Stores, andOther Private Property

Laurie Nicole Robinson andEvan J. Spelfogel*

I. IntroductionCollective bargaining is a cornerstone of national labor policy. In

order to gain bargaining rights, a union must first gain access to em-ployees, and those employees need to be able to communicate theirunion sentiments to others.

Union representatives often attempt to organize retail store em-ployees on an employer’s premises—either inside or near a store en-trance, in the parking lot, or on the sidewalks in and around a store orshopping mall. Unions often seek to enlist the support of on-duty andoff-duty employees in these efforts. Tactics may include distributingunion literature and consumer hand billing. Employees may be askedto cease work and customers to cease doing business with the targetedemployer because either the employer is non-union or it allegedly paysits employees substandard wages and benefits. Sometimes unions pro-test alleged unfair labor practices by an employer or unsafe or danger-ous work conditions.

Although section 7 of the National Labor Relations Act (NLRA)guarantees to employees the right to organize and join unions for theirmutual aid and benefit (or to refrain from such activities),1 employershave certain property rights inherent in their capital investment, aswell as the right to maintain production and discipline. Over the years,

* Evan J. Spelfogel is a partner in the New York office of Epstein Becker & Green,P.C., and a fellow of the College of Labor and Employment Lawyers. Laurie Nicole Rob-inson was an associate in the New York office of Epstein Becker & Green, P.C., when thisarticle was prepared and is now an associate in the New York office of Seyfarth Shaw,where she specializes in labor and employment matters.

1. National Labor Relations Act § 7, 29 U.S.C. § 157 (1998).



the clash between employee and employer rights has been the subjectof numerous administrative and judicial attempts at achieving theproper balance necessary to harmonize the divergent principles.

II. Non-Employees’ RightsA. Babcock & Wilcox

Access rules pertaining to non-employees have traceable origins tothe U.S. Supreme Court’s 1956 decision in NLRB v. Babcock & WilcoxCo.2 In Babcock, the Court addressed whether an employer could denynon-employee union organizers access to its property. Here, the em-ployer had refused to permit non-employee union organizers onto thecompany parking lot to distribute literature to its employees. The Na-tional Labor Relations Board (NLRB) had found that the organizershad no practical alternative to entering company property to hand billemployees because the plant’s physical location made solicitation frompublic property impossible. The employer defended its refusal on thegrounds that its rule against permitting strangers on its private prop-erty had been consistently applied and that the distribution would havelittered its property. The NLRB held that the employer had violatedsection 8(a)(1) of the NLRA because the union’s alternative opportu-nities to reach the employees—personal contact in the community orat home, by telephones, letters or advertised meetings—were “less ef-fective” than communications at the work site.3 Because no employeeswere engaged in the solicitation, it was not the employees’ section 7right to speak that was at issue, but their section 7 right to hear. TheNLRB balanced the employees’ right to hear against the employer’sproperty right to secure its plant from strangers and found against theemployer.

The Supreme Court reversed the NLRB’s decision. The Court laiddown the basic principle that an employer could always prohibit accessto its premises by non-employees, provided “reasonable” alternativechannels of communication were available and the employer’s policy didnot discriminate between protected union and nonunion activities (suchas community fundraising).4 Babcock set out the following standards:

• The “employer may validly post [its] property against non-employee distribution of union literature if reasonable efforts bythe union through other available channels of communicationwill enable it to reach the employees with its message.”5

2. 351 U.S. 105 (1956).3. National Labor Relations Act § 8(a)(1), 29 U.S.C. § 158(a)(1)(1998) (making it

“an unfair labor practice for an employer to interfere with, restrain, or coerce employeesin the exercise of the rights guaranteed” them by section 7 to join unions or act in concertfor mutual aid and protection).

4. Babcock, 351 U.S. at 112.5. Id. at 112.


Retail Industry Picketing and Hand Billing 155

• The employer’s posting of its property must not “discriminateagainst the union by allowing other distribution.”6

• “The right of self-organization [under the NLRA] depends insome measure on the ability of employees to learn the advan-tages of self-organization from others.”7

• These self-organizational rights under the NLRA and the pres-ervation of private property rights are both guaranteed by thefederal government.8

• There must be an accommodation between these two sets ofrights “with as little destruction of one as is consistent with themaintenance of the other,” with the proper balancing betweenthe two sets of rights to be made by the NLRB.9

• “[W]hen the inaccessibility of employees makes ineffective thereasonable attempts by non-employees to communicate with[employees] through the [normal] channels, the [employer’s]right to exclude [non-employees] from [the employer’s] property[must] yield to the extent needed to permit communication ofinformation [to the employees] on the right to organize.”10

After the Babcock & Wilcox decision, unions argued that their rep-resentatives should have access to company premises if solicitation onpublic property near the plant was impractical or if employee homeswere scattered throughout a large metropolitan area. However, theNLRB ruled against a right of access for union organizers in thesecircumstances.11

B. Logan Valley, Tanner, and HudgensIn the ensuing years, the NLRB and the courts have tussled back

and forth in an attempt to balance retail business and shopping centerprivate property rights with employee section 7 rights. In earlier deci-sions, the NLRB allowed access to outside organizers based on consti-tutional freedom of speech. In Logan Valley Plaza, the U.S. Supreme

6. Id.7. Id. at 113.8. Id. at 112.9. Id.

10. Babcock, 351 U.S. at 112.11. See Dexter Thread Mills, Inc., 199 N.L.R.B. 543, 81 L.R.R.M. (BNA) 1293 (1972)

(involving a union attempt to organize retail store employees. The employer’s propertywas accessible only by means of a public highway adjacent to the parking lot, with aspeed limit of 60 m.p.h. A ten-foot wide, tree-filled public easement separated companyproperty from this highway. The union challenged the employer’s refusal to permit or-ganizers to distribute handbills on the company parking lot and argued that efforts toobtain employee names and addresses and to make home visits had been unsuccessful.The NLRB upheld the employer’s right to exclude the organizers because it would havebeen relatively easy and safe for the union organizers to stand on the public easementbetween the lot and the highway and copy the license numbers of cars entering the lot.Hence, union organizers could easily obtain the names and addresses of employees andcommunicate with them at their homes).



Court held that peaceful picketing in a location that was generally opento the public, such as a shopping center, was protected by the FirstAmendment.12 In this case, the union picketed inside a large shoppingcenter. Its target was a tenant of the shopping center: a retail storeemploying a non-union staff. The pickets carried signs and complainedthat the retail store’s employees were not receiving union wages andother union benefits. The Supreme Court of Pennsylvania held thatpicketing inside the shopping center was trespassing and issued aninjunction that required the union to limit picketing to public roadsoutside the shopping center.13 The U.S. Supreme Court vacated theinjunction order.14

In a prior decision in Marsh v. Alabama, the Court had held that atown in Alabama, which was completely owned by a private corporation,had contained all the characteristics and functions of a typical Americantown and, therefore, was quasi-public.15 Following Marsh, the Court inLogan Valley held that shopping center picketing was constitutionallyprotected, notwithstanding its occurrence on private property.16

Four years after Logan Valley, the Supreme Court in Lloyd Corp.v. Tanner held that a group of young people who had entered a shoppingcenter to distribute handbills protesting the ongoing military opera-tions in Vietnam were not protected by the First Amendment.17 TheCourt declined to overturn Logan Valley but distinguished it on thegrounds that the communications in Logan Valley related to a store ina shopping center and that the pickets had no other reasonable oppor-tunity to reach their intended audience.

In Hudgens v. NLRB, the Supreme Court went full circle and over-ruled Logan Valley.18 The NLRB in Hudgens tried to have it bothways—depriving an owner of his property rights on both constitutionaland section 7 grounds. The case involved union picketing at a storeinside a shopping center. The pickets left when threatened with arrestand the union filed a section 8(a)(1) unfair labor practice charge. TheSupreme Court held that there was no constitutional right for a unionto picket on private property and expressly overruled Logan Valley onthe constitutional issue. However, it did not resolve the section 7 issue.

On the section 7 point, the NLRB continued to rule in favor ofgranting union access. In Giant Food Markets, Inc., for example, theNLRB permitted area standards picketing and hand billing at the en-

12. Amalgamated Food Employees Union Local 590 v. Logan Valley Plaza, Inc., 391U.S. 308 (1968), abrogated by Hudgens v. NLRB, 424 U.S. 507 (1976).

13. Logan Valley Plaza, Inc. v. Amalgamated Food Employees Local 590, 227 A.2d874 (Pa. 1967).

14. 391 U.S. 308.15. 326 U.S. 501, 508 (1946).16. Logan Valley Plaza, Inc., 391 U.S. at 319–20.17. 407 U.S. 551 (1972).18. 424 U.S. 507.



trance to a grocery store that shared a building with K-mart.19 Giant’sformer workforce was unionized, but the store was closed and the em-ployees were terminated. When Giant reopened with a nonunion work-force, the union picketed and hand billed the store on private shoppingcenter property, asking the public to boycott the store because its em-ployees received substandard wages and benefits. The property ownerdemanded that the pickets vacate the property, and when they refused,the owner obtained a state court injunction prohibiting trespassoryarea standards activity. The union thereafter filed a section 8(a)(1)charge.

The NLRB found that the balance weighed in favor of granting theunion access for the following reasons: (1) the area standards activitywas protected under section 7; (2) the property in question was sharedby at least one other business; and (3) the union’s principal intendedaudience was potential customers. Accordingly, the board held that re-quiring the picketing and hand billing to be conducted on public prop-erty at the parking lot entrances, some 250 feet from the store entrance,“would too greatly dilute the union’s message for it to be meaningful.”20

The Sixth Circuit refused to enforce and vacated the NLRB’s decision.21

C. Jean CountryAfter the Hudgens and Giant Food decisions, a number of cases

came before the NLRB in which it attempted to balance private prop-erty rights with union access rights, generally finding for the unions.On appeal and review, however, the courts were not sympathetic to theboard. In Jean Country, the NLRB tried to clarify its balancing test inlight of these court rejections and the principles of Babcock & Wilcoxand Hudgens.22

Jean Country involved a retail clothing store that was owned andoperated by a tenant in a shopping mall. The shopping mall includedtwo large department stores and over one hundred smaller specialtystores generally clustered together and grouped in aisles in the middleof the mall. Union representatives carried signs in the mall, informingthe public that store employees were not represented by the union andasked customers not to patronize Jean Country. The union’s goal wasto persuade customers to shop at other stores in the mall, whose em-

19. Giant Food Mkts, Inc., 241 N.L.R.B. 727, 100 L.R.R.M. (BNA) 1598 (1979), va-cated, 633 F.2d 18 (6th Cir. 1980).

20. 241 N.L.R.B. at 729. An interesting sidelight of the Giant Food decision was thatthe state court initially granted, then vacated, and then reinstated its injunction. Afterthe NLRB decision in favor of the union, the state court injunction was again vacated onpreemption grounds.

21. 633 F.2d 18 (6th Cir. 1980).22. 291 N.L.R.B. 11, 129 L.R.R.M. (BNA) 1201 (1988), abrogated by Lechmere, Inc.

v. NLRB, 502 U.S. 527 (1992). The test announced in Jean Country replaced the NLRB’searlier test in Fairmont Hotel Co., for non-employee union access. 282 N.L.R.B. 139, 123L.R.R.M. (BNA) 1257 (1986), overruled in part by Jean Country, 291 N.L.R.B. 11.



ployees were represented by the union. The mall owner and Jean Coun-try requested the police to remove the pickets from the premises.

In its Jean Country ruling, the NLRB changed its standard foraccess cases. Based on its interpretation of Supreme Court precedent,23

the board declared that in all access cases, the degree to which section7 rights were impaired through denial of access should be balancedagainst the degree to which private property rights would be impairedif access had been granted. In addition, the availability of reasonableand “effective” alternative means of communication was to be consid-ered “especially significant” in this balancing process.24

Applying this test, the NLRB found that (1) the picketing was fororganizational purposes and to discourage customers from shopping atJean Country and (2) these purposes were on the weaker end ofthe spectrum of section 7 rights.25 Notwithstanding, the board foundthe picketing to be within the protection of section 7. In so finding, theboard examined the possibility of the union’s reaching customers in anon-trespassory manner but dismissed this as a viable alternative. Itwas unreasonable, said the NLRB, to require the union to undertake amass media campaign, particularly because the union would therebyincur great costs and its message would be removed from the “situs.”26

Moreover, the board opined, the union message could not be adequatelyconveyed from the public entrances of the mall. The alternatives wouldnot only dilute the union message, but would also not allow the unioneffectively to reach “impulse shopper[s].”27 The only way for the unionto “effectively” identify and communicate with potential customerswould be to picket inside the mall closer to the store. Moreover, theboard concluded that private property rights would not be meaningfullyimpaired. 28

Until the U.S. Supreme Court decision in Lechmere, discussedlater, the NLRB had consistently applied the Jean Country analysis togrant union access. In most of these cases, the board had determinedthat the relative ineffectiveness and impracticability of alternativemeans of communication outweighed the private property interests. In1992, in Lechmere, Inc. v. NLRB, the Supreme Court overturned JeanCountry and criticized the NLRB for failing to adhere to the principlesof Babcock & Wilcox and Hudgens.29

D. LechmereIn Lechmere, the Supreme Court addressed the issue of access by

non-employee union organizers to an employer’s private property. Lech-

23. See Babcock & Wilcox, 351 U.S. 105; Hudgens, 424 U.S. 507.24. Jean Country, 291 N.L.R.B. at 14.25. See id. at 18.26. Id. at 2027. Id. at 18.28. Id. at 19.29. 502 U.S. 527 (1992).



mere arose out of an attempt by Local 919 of the United Food and Com-mercial Workers Union to organize Lechmere employees at a retailstore located in a shopping plaza in Newington, Connecticut. Lechmerealso owned part of the plaza’s parking lot, a section of which was des-ignated as the employees’ parking lot. Union representatives enteredthe parking lot and placed handbills on the windshields of cars parkedin the employees’ section.

Lechmere removed the handbills and denied the union organizersaccess to the lot on several occasions. The union representatives thenrelocated themselves to a public strip of land adjacent to the parkinglot and continued their organizing efforts by distributing handbills,picketing, and recording the license plate numbers of cars parked inthe employee area of the lot.

The union filed an unfair labor practice charge with the NLRB,alleging that Lechmere had violated the NLRA by barring the non-employee organizers from the property. An administrative law judgefound for the union. The board affirmed, relying on the balancing testset forth in Jean Country. The U.S. Court of Appeals for the First Cir-cuit enforced the NLRB’s order.30

On appeal, however, the U.S. Supreme Court reversed and heldthat the non-employee union organizers could be barred entirely fromprivate shopping center premises unless they could show no reasonablealternative means of communicating their message.31 The Court con-cluded, based on Babcock & Wilcox, that Lechmere did not commit anunfair labor practice by barring non-employee union organizers fromthe property for the following reasons:

• An employer could not be compelled to allow non-employee or-ganizers on its property;

• As stated in Babcock & Wilcox, section 7 “does not protect non-employee union organizers except in the rare case where ‘theinaccessibility of employees makes ineffective the reasonable at-tempts by non-employees to communicate with them throughthe usual channels’ ”;32 and

• The facts did not justify the Babcock & Wilcox inaccessibilityexception.

The Supreme Court expressly rejected the NLRB Jean Countryapproach, saying that the board had misconstrued and misapplied Bab-cock & Wilcox.33 Henceforth, the Supreme Court said that where there

30. 914 F.2d 313 (1st Cir. 1990).31. Lechmere, Inc., 502 U.S. at 541.32. Id. at 537 (quoting Babcock & Wilcox, 351 U.S. at 112.)33. Id. at 538. Justice White, in dissent, argued that the NLRB correctly made an

“accommodation” of the competing section 7 interest and the private property interestunder the Babcock & Wilcox and Hudgens rulings. Moreover, the dissent argued thatthere are cases in which access to private property must be granted under section 7 andthat this access should not be limited solely to instances when reasonable alternativeaccess is infeasible. Rather, Justice White asserted that under previous cases, the Court



were any alternative means of communication with employees, regard-less of how effective those means might be, the union was not entitledto access private shopping mall or store property for organizational orrecognition purposes. The Court further stated that in large metropol-itan areas, newspapers, radio, and television almost always providedreasonable alternative access; the availability of public sidewalks anda public way less than 500 feet from the target store was itself a rea-sonable alternative access. Furthermore, the Court held that alterna-tive access may have been reasonable even if it was more expensive orless effective for the union.34

III. Employees’ RightsSo far we have discussed non-employees’ rights of access. Different

rules apply to employees’ access to private store property to assist inunion objectives. Moreover, there is an entirely separate body of lawthat has developed, and it involves the rights of employees to engagein union related solicitation and distribution of union materials in theworkplace.

For example, in Seattle-First National Bank, the NLRB applied abalancing approach and ruled that section 7 rights of employees onstrike outweighed an owner’s property rights.35 In this case, a restau-rant’s striking employees picketed and hand billed in the foyer of therestaurant until they were ordered to leave the building. The boardreasoned that the union’s message could not have been effectively com-municated unless the pickets had access to the employer’s property.Restaurant customers, the board said, became identifiable only as theyentered the restaurant. Therefore, access to the restaurant entranceand premises was essential for employees to deliver the message to theintended audience.

A. Solicitation and DistributionGenerally, cases involving solicitation and distribution by employ-

ees are fairly straightforward. In recognition of the fact that employershave an interest in maintaining production and discipline inside theworkplace, the NLRB allows restrictions on workplace solicitation byan employer’s own employees during working time. Moreover, becauseof the special difficulties with litter that distribution often creates, anemployer may restrict the distribution of literature in working areas ofa facility both on and off the employees’ working time. These rules are

viewed reasonable alternative means as “an important factor in finding the least destruc-tive accommodation between § 7 and property rights.” Id. at 545. Finally, Justice Whiteargued that the Court failed to give proper deference to the board’s interpretation ofsection 7.

34. Id. at 539.35. 243 N.L.R.B. 898, 101 L.R.R.M. (BNA) 1537 (1979).



applied to test the legality of an employer’s restrictions in the absenceof a showing of special circumstances. However, a rule valid on its facemay be rendered illegal by disparate application. The adoption by em-ployers of rules limiting solicitation and distribution first received Su-preme Court attention in Republic Aviation Corp. v. NLRB.36 In thatcase, an employee had been discharged for violating the following em-ployer rule, which existed well before the commencement of any unionactivity at the plant: “[S]oliciting of any type cannot be permitted in thefactory or offices.”37

The Supreme Court held that an employer could not prohibit em-ployee distribution of union organizational literature on company prop-erty in non-working areas or union solicitation during non-workingtime, absent a showing that such a ban was necessary to maintain plantdiscipline or production. The rationale was, essentially, that whileworking time was for work, non-working time was the employee’s touse without unreasonable restraint, even though the employee was oncompany property and “on the clock.”

In Our Way, Inc., the NLRB subsequently clarified that workingtime meant periods of actual work and excluded coffee breaks, meals,restroom breaks, wash-ups, and other down time, even though “on theclock.”38 The board held that an employer restriction using the termworking time was presumptively valid—absent evidence of discrimi-nation—while a restriction using the term working hours was pre-sumptively invalid.

Under the Supreme Court’s special circumstances exception in Re-public Aviation, the employer carries a heavy burden of proof. Specialcircumstances, however, may be found on selling floors of a retail de-partment store where close contact with the store’s customers andcrowded inventory might justify a more restrictive rule or where thereis a highly inflammable environment. Following Republic Aviation, em-ployers in retail stores have been permitted by the NLRB to ban unionsolicitation in all store selling areas during both employees’ workingand nonworking time (a ban that absent special circumstances wouldnormally be invalid).39

B. Off-Duty Employees’ RightsThe determination of the rights of an off-duty employee depends

on whether the off-duty employee is on the interior or exterior of theemployer’s property. The general rule is that an employer’s no-access

36. 324 U.S. 793 (1945).37. Id. at 795.38. 268 N.L.R.B. 394, 115 L.R.R.M. (BNA) 1009 (1983).39. See Famous-Barr Co., 59 N.L.R.B. 976, 15 L.R.R.M. (BNA) 173 (1944), enf’d sub

nom. NLRB v. May Dep’t Stores Co., 154 F.2d 533 (8th Cir. 1946); May Dep’t Stores Co.,136 N.L.R.B. 797, 49 L.R.R.M. (BNA) 1862 (1962), set aside by May Dep’t Stores Co. v.NLRB, 316 F.2d 797 (6th Cir. 1963).



rule that denies off-duty employees entry to the exterior—parking lots,gates, and other outside nonworking areas—is invalid, except wherejustified by special business reasons.40

An employer’s no-access rule may be valid so long as it “(1) limitsaccess solely with respect to the interior of the plant and other workingareas; (2) is clearly disseminated to all employees; and (3) applies tooff-duty employees seeking access to the plant for any purpose and notjust to those employees engaging in union activity.”41

Thus, the NLRB holds that off-duty employees, unlike on-duty em-ployees, are not permitted to engage in union organizing activities in-side the workplace, even in non-work areas such as an employee loungeor the company cafeteria.

IV. The Impact of Lechmere on Access CasesOne of the access issues remaining after Lechmere is whether its

holding applies to employees as well as non-employees. In a series ofNLRB decisions and the decisions of the NLRB’s general counsel afterLechmere, the board has held that the underlying rationale and prin-ciples enunciated by the Supreme Court in Lechmere and Babcock &Wilcox apply to every union purpose and to striking employees as wellas non-employee union organizers.

For example, in Leslie Homes, Inc., the NLRB considered for thefirst time how Lechmere affected an employer’s right to exclude fromits property non-employee union representatives engaged in area stan-dards handbilling.42 Finding for the employer, the board ruled thatLechmere applied to area standards picketing and hand billing becausethe interests of non-employee union protesters should not have receivedmore protection than derivative section 7 interests of non-employeeunion organizers. In Loehmann’s Plaza, the NLRB applied Lechmereto a consumer boycott by non-employees.43 In Stepherson’s Big Star,employees stood near the doors of a freestanding grocery store throughwhich customers and employees entered and peacefully attempted todistribute handbills. The NLRB’s general counsel, in an advisory opin-ion, concluded that this case was not the appropriate vehicle in whichto advance the arguments that “despite the Supreme Court’s Lechmeredecision, a distinction should be drawn between the access rights ofstriking employees versus those of non-employees . . . [and] that off-duty or striking employees should have greater access rights than non-

40. Tri-County Medical Center, Inc., 222 N.L.R.B. 1089, 91 L.R.R.M. (BNA) 1323(1976).

41. Id. at 1089 (emphasis added); see also NLRB v. Pizza Crust Co. of Pa., Inc., 862F.2d 49 (3d Cir. 1988) (employer’s rule against off-duty employee distribution of unionliterature in plant parking lot is an unfair labor practice).

42. 316 N.L.R.B. 123, 148 L.R.R.M. (BNA) 1105 (1995).43. 316 N.L.R.B. 109, 148 L.R.R.M. (BNA) 1116 (1995).



employees to appeal to the public.”44 In Weingarten Realty Investors,the NLRB’s general counsel ruled broadly that the rationale of Lech-mere covered access to all private shopping center property by strikingemployees as well as non-employees.45 The union and the employees,the general counsel said, had reasonable alternative means of convey-ing their message from the public way at the perimeter of the shoppingcenter 500 feet from the target AppleTree store and by radio advertise-ments. Thus, the employer and the property owner had the right to barthe strikers from the property completely.

Subsequently, the NLRB extended Lechmere to apply to non-employee union consumer boycott activities in Oakland Mall, Ltd., andSears, Roebuck & Co.46 Although this case involved application of Lech-mere to a secondary employer’s right to bar non-employee union rep-resentatives from engaging in secondary consumer boycotting andhand billing on the employer’s private property, its teaching concerningJean Country and Scott Hudgens is instructive. The board acknowl-edged that in Jean Country it had stated, “Generally it will be the ex-ceptional case where the use of newspapers, radio, and television willbe feasible alternatives to direct contact.”47 The board in Oakland Mallthen stated,

In light of Lechmere, we find it necessary to reconsider the commentin Jean Country quoted above. Newspaper, radio, and television arecertainly part of “the ordinary flow of information that characterizesour society.” . . . [T]he General Counsel must show that the use of themass media (such as newspapers, radio, and television) would not bea reasonable alternative means for the Union to communicate itsmessage.48

The board in Oakland Mall concluded, “The General Counsel ha[d]failed to carry his heavy burden of proving ‘unique obstacles’ to theUnion’s attempt to communicate its consumer boycott message toSears’s customers.”49

Further, in Galleria Joint Venture, the NLRB vacated its earlierdecision and order after reconsideration in light of Lechmere. 50 Al-though this case also involved non-employee access, the board charac-terized the Jean Country standard as the “now rejected” Jean Country

44. Case 26-CA-14841, 1992 WL 83509, at *1–2 (N.L.R.B.G.C. Feb. 28, 1992). Al-though the picketing employees were removed from the storefronts, they were allowedto remain in the adjacent private parking fields by agreement with the employer and theproperty owner.

45. Case 16-CA-15665, 1993 WL 142608, at *1 (N.L.R.B.G.C. Mar. 31, 1993).46. 316 N.L.R.B. 1160, 149 L.R.R.M. (BNA) 1017 (1995), review denied, 74 F.3d 292

(D.C. Cir. 1996).47. Jean County, 291 N.L.R.B. at 13.48. 316 N.L.R.B. at 1163.49. Id. at 1164.50. 317 N.L.R.B. 1147, 149 L.R.R.M. (BNA) 1320 (1995).



standard.51 Citing its several month’s old decision in Oakland Mall, theboard held that picketing and hand billing on the public property side-walk outside the shopping mall as well as mass-media communicationwere reasonable alternatives to trespassing.

On the other hand, the Supreme Court’s failure to define in Lech-mere what constitutes “disparate” or “discriminatory” application of anotherwise valid limitation has allowed the NLRB and some courts torequire union-related access if an employer grants access to its propertyto various charitable organizations (e.g., Girl Scouts, Salvation Army,United Way, or Red Cross). This point is illustrated in Victory Markets,Inc.52

In Victory, non-employee union representatives engaged in handbilling on Victory’s property to protest allegedly nonunion and substan-dard wages paid to employees by contractors remodeling one of Vic-tory’s stores. Concord, the manager of the mall in which the Victorystore was located, asked the police to arrest the hand-billers for tres-passing if they did not leave. Nonprofit and charitable organizations,however, had been given access to the property for fundraising andpublic awareness programs. The NLRB found, “Concord repeatedly per-mitted the use of its property for a wide range of charitable activity,and even some commercial activity, unrelated to the operation of themall itself.”53 Thus, the board held that barring union hand billing wasdiscriminatory and unlawful.

The U.S. Courts of Appeals for the Fourth, Six, and Ninth Circuitshave disagreed with the NLRB’s premise that permitting charitablesolicitation while excluding non-employee union activities requires afinding of discrimination. For instance, in Cleveland Real Estate Part-ners v. NLRB, the court defined discrimination very narrowly.54 In thiscase, the union began a do-not-patronize handbill campaign againstMarc’s, a retail store located in a strip mall managed by Cleveland.After its requests to leave went unheeded, Cleveland contacted the po-lice to remove the hand-billers. The ensuing unfair labor practice pro-ceeding resulted in the board’s adoption of an administrative lawjudge’s finding of discrimination.

The court, reversing the NLRB’s decision, found that the strip mallmanager had not engaged in an unfair labor practice by forbidding theunion’s informational handbilling of mall customers on mall premises,even though it allowed solicitation of mall customers by several chari-table organizations. The court stated its belief that the board had mis-interpreted Babcock & Wilcox:

51. 317 N.L.R.B. at 1149.52. 322 N.L.R.B. 17, 153 L.R.R.M. (BNA) 1177 (1996).53. Id. at 24.54. 95 F.3d 457 (6th Cir. 1996), disagreed with by Meijer, Inc. v. NLRB, 130 F.3d

1209 (6th Cir. 1997).



To discriminate in the enforcement of a no-solicitation policy cannotmean that an employer commits an unfair labor practice if it allowsthe Girl Scouts to sell cookies, but is shielded from the effect of theAct if it prohibits them from doing so. . . . the term “discrimination”as used in Babcock means favoring one union over another, or allow-ing employer-related [anti-union] information while barring similarunion-related information.55

The court held, “No relevant labor policies are advanced by re-quiring employers to prohibit charitable solicitations in order to pre-serve the right to exclude non-employee distribution of union literaturewhen access to the target audience is otherwise available.”56

In NLRB v. PayLess Drug Stores Northwest, Inc., non-employeeunion representatives picketed in front of the PayLess store to publicizeits nonunion status and to urge the public not to patronize the store.57

PayLess, along with Wandermere (the owner of the strip shopping mallin which PayLess was located), had the pickets removed by the police.The NLRB found that the ejection of the union from the property con-stituted discrimination because of prior access that had been grantedto certain other groups for use of the mall unrelated to the business ofthe mall.

The Ninth Circuit rejected the position that PayLess and Wan-dermere had engaged in disparate treatment of the union and deniedenforcement of the board’s order. It held, “A business should be free toallow local charitable and community organizations to use its premises,whether for purely altruistic reasons or as a means of cultivating goodwill, without thereby being compelled to allow the use of those samepremises by an organization that seeks to harm that business.”58

Similarly, in Riesbeck Food Markets, Inc. v. NLRB, the Fourth Cir-cuit upheld Riesbeck’s prohibition of non-employee union pickets andhand-billers from distributing do-not-patronize literature on Riesbeck’sproperty, even though Riesbeck “permitted all kinds of civic and char-itable solicitation for a total of almost [two] months a year.”59 TheNLRB had found that Riesbeck’s solicitation policy was “inherently dis-criminatory” against union solicitation, noting that the screening pro-cess for allowing group activities was problematic because it involveda practice by which Riesbeck reviewed and evaluated each messagesought to be distributed.60

The Fourth Circuit refused to enforce the board’s order. Discrimi-nation claims require that an employer treat similar conduct differ-ently. Here, the court found, there was a legally significant difference

55. Id. at 465 (citation omitted).56. Id.57. 57 F.3d 1077, 1995 U.S. App. LEXIS 13443, at *3 (9th Cir. May 25, 1995).58. Id. (citation omitted).59. 91 F.3d 132, 1996 U.S. App. LEXIS 17693, at *4 (4th Cir. July 19, 1996).60. Id. at *5.



between charitable solicitations and a union’s do-not-patronize solici-tation.61 The court was not especially concerned with union animus;rather, it emphasized, “[A]n employer must have some degree of controlover the messages it conveys to its customers on its private property.”62

Furthermore, the court distinguished the union’s message from thecharitable solicitations by the fact that the former directly underminedRiesbeck’s purposes (the sale of goods and services), while the latterencouraged business activity.

In sum, the NLRB and the courts currently disagree whether anemployer may exclude non-employee union representatives from itsproperty where it allows access by charitable and civic groups. Thecourts permit denial of access as long as the union has a reasonablealternative means of access to employees. While the NLRB is bound tofollow court decisions within a circuit, it is free to ignore them in casesarising in other circuits that have not ruled on the issue.

V. ConclusionOver the years, the NLRB and courts have grappled with balancing

section 7 rights of employees and private property rights of employers.Lechmere and its progeny teach that non-employee union representa-tives may be barred under trespassing laws from shopping centers,malls, and parking fields regardless of their purpose. Various otherboard and court cases have upheld the right of employers to adopt care-fully worded rules to limit, but not entirely bar, union-related solici-tation and distribution by employees during their working time and inworking areas. Whether and to what extent property owners or storesmay bar off-duty or striking employees from their private property isnot entirely clear and requires careful attention. Changing factual pat-terns, new strategies, and turnover on the five-member NLRB haveresulted in and may still continue to result in modifications of positionsand unsettled law.

61. Id. at *2.62. Id. at *13.


167

Organizing Contingency Workers:Community of Interest v. Consent

Nancy Schiffer*

I. IntroductionWhen the National Labor Relations Board (NLRB) issued its de-

cision in M.B. Sturgis, Inc.,1 the ruling was both hailed and condemned.The Labor Policy Association criticized the NLRB for “[i]gnoring[twenty-seven] years of precedent,”2 and its general counsel predictedthe board’s ruling would “create chaos.”3 Management attorneys com-plained of the “elimination of this [consent] weapon from employers’arsenals,” explaining that pre-Sturgis, employers could “use the ‘con-sent’ requirement offensively or defensively and, at times, do so tothwart a union’s organizing efforts.”4 In contrast, AFL-CIO PresidentJohn J. Sweeney praised the ruling as “an important step in addressingthe rights of contingent workforce employees, who have too often beenrelegated to second-class status and rights—if any” and predicted thatthe decision would “boost the ability of millions of workers to have avoice on the job.”5

So which is it? Does it eliminate twenty-seven years of precedent?Is it designed to help unions organize? Will it create chaos? Will it ex-tend to temporary workers a voice at work, which was previously de-nied to them?

Before such questions can be answered, the term contingent workermust be defined. The term encompasses a wide variety of different em-ployment schemes, including agency temporary workers, direct-hiretemps, on-call workers, day laborers, contract company workers, inde-pendent contractors, self-employed workers, leased workers, and part-time workers. Such workers are an increasingly significant segment of

* The author is associate general counsel for the AFL-CIO in Washington, DC. Thisarticle was presented in Kauai, Hawaii, at the 2001 Midwinter Meeting of the Labor andEmployment Section’s Committee on Development of the Law Under the National LaborRelations Act (February 2001).

1. 331 N.L.R.B. No. 173, 165 L.R.R.M. (BNA) 1017, 2000 WL 1274024, at *1 (Aug.25, 2000).

2. NLRB Rewrites Rules Governing Union Representation of Temps, athttp://www.NLRBWatch.com/news/jeffboat.htm (last visited Feb. 13, 2001).

3. Susan J. McGolrick, Contingent Workers: Will NLRB’s Recent Sturgis Ruling Helpor Hurt Organizing, Bargaining?, Daily Lab. Rep. (BNA) No. 173, at AA-2 (Sept. 6, 2000).

4. Kenneth R. Dolin & Scott V. Rozmus, N.L.R.B. Decision in “Sturgis,” NAT’L L.J., Nov. 27, 2000.

5. McGolrick, supra note 3, at AA-1.



the worker population. When all of these categories are considered, thecontingent workforce “makes up almost [thirty] percent of the totalworkforce.” 6 Although this does not represent a recent increase, longer-term trends show that in certain categories, the numbers have grown.Specifically, the temporary help supply industry “has grown signifi-cantly.”7 About ten percent of the job growth in the 1990s was in tempagencies. Manpower, Inc., boasts that it is America’s largest employer.“[M]any employers got hooked on temp agencies,” resulting in “morethan 3.3 million workers . . . on temp-firm placements, mostly in cler-ical or light-manufacturing jobs.”8

As the sheer number of these different types of employment sys-tems suggests, the term contingent worker covers a lot of ground. Thenonstandard working arrangements it embraces are wildly divergentand are not all created equally. Studies have found that answers tocommonly asked questions about contingent workers differ accordingto what part of the population responds.

Do contingent workers choose a non-traditional work arrangementbecause it affords them flexibility or training or an entree into the workforce? Independent contractors, self-employed individuals, and part-time workers are typically relatively satisfied with their voluntarilychosen lifestyle. In contrast, most temporary agency and on-call work-ers prefer standard employment to their current arrangements. Simi-larly, there is a pay penalty for nonstandard work, which persists forpart-time workers and temps but does not hold for contract workers,independent contractors, and the self-employed. Career advancementthrough nonstandard jobs works for men but is much less likely to workfor women. Overall, the best-paid type of non-standard work, often out-earning similarly situated traditional workers, disproportionately con-sists of older white males, while the poorest-quality nonstandard jobsare disproportionately filled by workers who are African-American,Hispanic, young, and female.9

Findings that verify substandard incomes and benefits for contin-gent workers were reported in June 2000 by the U.S. General Account-ing Office’s health, education, and human services division in a sixty-page report titled Contingent Workers: Incomes and Benefits LagBehind Those of Rest of Workforce.10 According to the report, “on aver-age, these workers have lower annual family incomes than standard

6. GAO/HEHS-00–76, CONTINGENT WORKERS: INCOME AND BENEFITS LAG BEHINDTHOSE OF REST OF WORKFORCE 14 (June 2000).

7. Id. at 16.8. David Wessel, Temp Workers Have Lasting Effect, WALL ST. J., Feb. 1, 2001, at A1.9. ARNE L. KALLEBERG ET AL., NONSTANDARD WORK, SUBSTANDARD JOBS: FLEXIBLE

WORK ARRANGEMENTS IN THE U. S. (Economic Policy Institute/Women’s Research & Edu-cation Institute 1997).

10. GAO/HEHS-00–76, supra note 6.


Community of Interest v. Consent 169

full-time workers” and “are less likely than standard full-time workersto have employer-provided health insurance and pension benefits.”11

For many contingent workers, non-standard employment arrange-ments have created barriers to their exercise of legal rights enjoyed bytheir regular co-workers. According to the June 2000 General Account-ing Office report, “contingent workers, such as temporary, on-call, andpart-time workers, may not be covered by some of the laws designed toprotect workers.”12 Even when contingent workers are technically cov-ered by such laws, many are denied statutory benefits and protectionsbecause they cannot fulfill specified conditions or meet eligibility re-quirements or because they are misclassified by their employers.13

Specifically relevant to this discussion is the exclusion of tempo-rary workers from the rights and protections of the National LaborRelations Act (NLRA).14 This exclusion was partially undone by thedecision of the NLRB in its August 25, 2000, ruling in Sturgis.15 In itsdecision, the board recognized that its prior policy “fragment[ed] groupsof employees who share common interests and working conditions intosmaller groups with diminished bargaining power” and made it “moredifficult for employees to obtain union representation, or result[ed] infragmented units if they [were] successfully organized.”16 According tothe board, its previous policy “ha[d] the potential for denying numerousaffected employees the same Section 7 rights to self-organization ac-corded other employees under the Act.”17

In Sturgis, the NLRB acknowledged that its prior policy requiringemployer consent before temporary agency employees could organizeeffectively denied NLRA rights to these workers. This admission by theboard partially answers the question of whether the decision assistsunion organizing. To the extent that it allows employees to organizewithout the consent of their employer—a right that other NLRA-covered employees have always had—the decision certainly removesan impediment to union organizing.

Does that mean that unions did not organize contingent workerspre-Sturgis? Here are two spectacular organizing successes from boththe public and private sector: Last year 5,000 home health care workersin California were organized in a campaign that included legal, politi-cal, legislative, and organizing strategies. The legislative effort in-cluded the creation of a central, governmental employing entity for

11. Id. at 18–20.12. Id. at 30.13. Id. at 27, 31, 33.14. 29 U.S.C. §§ 151–169 (1998).15. Sturgis, 2000 WL 1274024, at *1.16. Id. at *18.17. Id.



these mostly women of color who worked in their clients’ homes, as-sisting with personal needs. In Louisiana, garbage truck hoppers, whojump off and collect garbage bags but do not drive the trucks, wantedunion representation. The NLRB ruled, pre-Sturgis, that the tempo-rary agencies who employed these day laborers were not joint employ-ers with Waste Management, the garbage collection company.18 Thus,the union won election after election with the temp agencies separately.Then, through a series of strategically timed job actions and efforts atpublic awareness (apparently, mounting garbage in southern Louisianain the summer grabs the public’s attention) and media focus, the agen-cies reached a contract. These examples merely serve to quell the notionthat contingent workers could never be organized absent a board fix.

II. The Sturgis DecisionAny discussion of Sturgis really has to start with Greenhoot, Inc.,19

because Sturgis was merely the vehicle of undoing. In Greenhoot, aunion petitioned for a unit of building maintenance employees em-ployed by Greenhoot, a management company, at fourteen building lo-cations in the District of Columbia. The union named Greenhoot as theemployer. The NLRB held that the separate building owners at eachbuilding location were joint employers with Greenhoot. The board thentreated the petition as seeking a multiemployer unit of Greenhoot andthe building owners, who were not named in the petition. The NLRBconcluded that, absent consent by the employers in which they have“manifested a desire to be bound in future collective bargaining bygroup rather than individual action,” the unit was inappropriate.20

However, separate units at each location would be appropriate, accord-ing to the board.

The Greenhoot requirement of consent was significantly expandedin Lee Hospital.21 There, certified registered nurse anesthetists soughtrepresentation separately from other hospital professionals, in part,because they were jointly employed by the hospital and AAI (Anesthe-siology Associates, Inc.). The NLRB held that the petitioned-for nurseanesthetists did not constitute a separate appropriate unit and werenot able to be combined with a unit of professionals employed solely bythe hospital, absent consent.22

In Sturgis, the NLRB significantly limited Greenhoot and over-ruled Lee Hospital as wrongly decided. The board held that there was“no statutory requirement of employer consent to a unit combining

18. See Temlaco, Inc., Corporate Personnel & Temps, Inc., and Waste Management,Inc., 15-RC-7901.

19. 205 N.L.R.B. 250, 83 L.R.R.M. (BNA) 1656 (1973).20. 250 N.L.R.B. at 251.21. 300 N.L.R.B. 947, 136 L.R.R.M. (BNA) 1348 (1990).22. 300 N.L.R.B. at 948 (citing Greenhoot, 205 N.L.R.B. 250).



solely and jointly employed employees of a single user employer” be-cause no multiemployer bargaining was implicated.23 According to theboard,

After carefully reviewing our precedent and the policy questionsraised, we find that the units at issue—all the employees performingwork on behalf of the user employer (e.g., M.B. Sturgis and Jeff-boat)—do not constitute multiemployer units requiring consent. . . .Separating “regular” employees—i.e., the solely employed—from the“temporaries” who may . . . share the same classifications, skills, du-ties, and supervision, creates an artificial division that is not requiredby the statute. We therefore overrule Lee Hospital and find no stat-utory requirement of employer consent to a unit combining solely andjointly employed employees of a single user employer.24

Moreover, in units with a single supplier employer and various useremployers, no multiemployer unit is created when the union namesonly the single supplier employer in its petition for a supplier-wide unit.According to the board, such a unit “is not a multiemployer unit becausethe petition is seeking to represent the employees vis a vis a singleemployer.”25 However, the board continued to insist that a multiem-ployer unit was created in Greenhoot-type units of a single supplieremployer and various user employers when the union “[sought] to rep-resent a unit that includes employees of all of the users” and soughtbargaining with all of the user employers.26

III. The Rationale of Sturgis Supports OverrulingGreenhoot in TotoWhile the result reached by the NLRB in Sturgis was long overdue,

it did not go far enough. Laudably and correctly, the board set forth itsrationale for overruling Lee Hospital and modifying Greenhoot. All of thereasons that led the Sturgis board to decide that Lee Hospital shouldhave been overruled are equally supportive of overruling all of Green-hoot. Simply put, the board’s characterization of the Greenhoot unit of asingle supplier and multiple user employers as a multiemployer unitrequiring consent is wrong. It violates the plain text of section 9(b), iscontrary to the legislative history, departs from NLRB precedent, anddoes not further any legitimate statutory policy. An examination of thesefactors not only supports the board’s decision to overrule Lee Hospital,but also provides the basis for overruling all of Greenhoot.

A. Section 9(b)As an initial matter, section 9(b) of the NLRA provides that units

for purposes of collective bargaining “shall be the employer unit, craft

23. Sturgis, 2000 WL 1274024, at *14.24. Id. at *12–14.25. Id. at *19.26. Id. at *13.



unit, plant unit, or subdivision thereof.”27 An employer-wide unit isdenominated by the act as generally appropriate whether the employerconsents or not. A unit is decidedly an employer unit when it is formedaround an employer who is the employer of all the unit employees.

In Sturgis, the NLRB acknowledged this plain interpretation of theNLRA and applied section 9(b) to employer-wide units of single useremployers, concluding that an employer unit could constitute a “unitof all of the user’s employees, both those solely employed by the userand those jointly employed by the user and the supplier.”28 Such a unitdoes not create a multiemployer unit, which requires employer consentbecause, according to the board, the scope of the bargaining unit “isdelineated by the work being performed for a particular employer.”29

The board held that units of all the employees performing work onbehalf of a single user employer “do not constitute multiemployer unitsrequiring consent”30 because there is “no statutory requirement of em-ployer consent to a unit combining solely and jointly employed employ-ees of a single user employer.”31 Yet this very same application of sec-tion 9(b) also supports a unit of all the employees who perform workon behalf of a single supplier employer (i.e., the Greenhoot unit). As witha single user employer, the scope of a single supplier employer’s work-force “is delineated by the work being performed for a particular em-ployer,”32 albeit here, the single supplier—rather than user—employer.

B. Legislative HistoryIn 1947, Congress considered several amendments to the definition

of employer that related, in part, to the board’s multiemployer deci-sions. Senator Taft introduced Senate Bill 1126, which modified section2(2) to limit the NLRB’s authority with regard to multiemployer unitsby adding the following proviso: “That for the purposes of section 9(b)hereof, the term ‘employer’ shall not include a group of employers ex-cept where such employers have voluntarily associated themselves to-gether for the purposes of collective bargaining.”33 A Senate Reportdescribed the amendment as clearly defining the board’s authority to“deem an employer association to be an employer, provided the individ-ual employers in such an association have voluntarily delegated theirauthority to bargain collectively with their employees to such an or-ganization.”34 The report acknowledged that “the Board itself has

27. 29 U.S.C. § 159(b) (1994).28. Sturgis, 2000 WL 1274024, at *13.29. Id.30. Id. at *12.31. Id. at *1432. Id. at *13.33. 1 LEGISLATIVE HISTORY OF THE LABOR MANAGEMENT RELATIONS ACT, 1947, at 102

(1948).34. Id. at 424 (quoting SEN. REP. NO. 80–105, at 18 (1947)).



reached such a construction” and that “the amendment merely ap-proves of those Board interpretations.”35

The proposed amendment was characterized in a Senate MinorityReport as “enact[ing] into law present Board practice.”36 That practicewas described as combining “within a single unit the employees of morethan one employer” in two situations: “those involving two or more com-panies operated as a single business enterprise with the direct controlof labor relations vested in a single source” and “those involving em-ployers engaged in the same industry who have formed trade or em-ployer associations to which they have delegated the right to bargaincollectively for all members.”37

House Bill 3020 was introduced by Representative Hartley. It mod-ified section 2(2) by substituting “any person acting as an agent of anemployer, directly or indirectly” for “any person acting in the interestof an employer, directly or indirectly” in the definition of employer.38

The bill was adopted in conference and the Senate bill’s proviso to sec-tion 2(2) was dropped because “it merely restate[d] the existing practiceof the Board.”39 In NLRB v. Truck Drivers Local Union No. 449, theSupreme Court reiterated that the 1947 amendments supported the“compelling conclusion . . . that Congress intended ‘that the Boardshould continue its established administrative practice of certifyingmultiemployer units.’ ” 40

C. Consistent NLRB Case LawBoth before and after the 1947 amendments, the NLRB consis-

tently included jointly employed employees in broader units with em-ployees of only one of the joint employers despite employer objectionsand without requiring employer consent. As the board noted in Sturgis,there is a rich history of combining user and supplier employees intoone bargaining unit without any requirement of consent and withoutever viewing them as multiemployer bargaining units.41

35. Id.36. Id. at 497 (quoting SEN. REP. NO. 80–105, pt. 2, at 35).37. Id.38. 29 U.S.C. § 152(2) (1994); see also 1 LEGISLATIVE HISTORY OF THE LABOR MAN-

AGEMENT RELATIONS ACT, 1947, at 535 (quoting H.R. CONF. REP. NO. 80–510, at 31 (1947)).39. 1 LEGISLATIVE HISTORY OF THE LABOR MANAGEMENT RELATIONS ACT, 1947, at

536 (quoting H.R. CONF. REP. NO. 80–510, at 32).40. 353 U.S. 87, 96 (1957) (quoting Truck Drivers Local Union v. NLRB, 231 F.2d

110, 121 (1956) (Waterman, J., dissenting)).41. See Walgreen Louisiana Co., Inc., 209 N.L.R.B. 213, 85 L.R.R.M. (BNA) 1309

(1974) (including licensee employees in a broader store unit despite the employer’s ob-jection); United Mercantile, Inc., 171 N.L.R.B. 830, 68 L.R.R.M. (BNA) 1173 (1968), (li-censees operating the fine jewelry and shoe departments of a department store are jointemployers and a combined unit of their jointly and solely employed employees is appro-priate given the close community of interest and lack of any history of collective bargain-ing); Red-More Corp., 164 N.L.R.B. 638, 65 L.R.R.M. (BNA) 1155 (1967), enforced, 418F.2d 890 (9th Cir. 1969); Thriftown, Inc., 161 N.L.R.B. 603, 63 L.R.R.M. (BNA) 1298 (1966)



The courts have routinely enforced board orders that include em-ployees of multiple licensees in the same bargaining unit with employ-ees of a user employer. In Gallenkamp Stores Co. v. NLRB42 and S.S.Kresge Co. v. NLRB,43 the courts enforced NLRB decisions approvingjoint employer relationships between a user employer and its licenseesand certifying storewide bargaining units based on community-of-interest criteria. The user employers in each of these cases protestedthat the board’s decision to compel “unwilling employers” to bargain asjoint employers would disrupt the collective bargaining process becauseeach licensee would have independent ideas about appropriate laborpolicy. Both courts rejected this argument.44

Even post-Greenhoot, such combined units of jointly and solely em-ployed employees have been approved. The joint employer/community-of-interest analysis was applied to a manufacturing operation of userand supplier employees in NLRB v. Western Temporary Services, Inc.45

There, the court enforced an NLRB order that a single user employerand a temporary help service agency that supplied its part-time work-ers were joint employers and that employees of both were properly in-cluded in a single bargaining unit, based on a community-of-interestanalysis.

In Archdiocese of Philadelphia,46 the board found that the Arch-diocese and each of 273 parish elementary schools were joint employersof the lay teachers. Without any discussion of Greenhoot, the boardfound a single Archdiocese-wide unit appropriate where each of theschools was arguably a user employer and the Archdiocese was a singlesupplier employer. Similarly, in Seligman & Associates, Inc.,47 a singlecombined unit of employees of a sole supplier employer and multipleuser employers was found appropriate. There, Seligman managed

(finding a joint-employer relationship between a department store and its licensed shoedepartment); Jewel Tea Co., 162 N.L.R.B. 508, 64 L.R.R.M. (BNA) 1054 (1966); Stack &Co., 97 N.L.R.B. 1492, 29 L.R.R.M. (BNA) 1263 (1952); Taylor Oak Ridge Corp., 74N.L.R.B. 930, 20 L.R.R.M. (BNA) 1219 (1947) (including concessionaire’s employees inbroader unit with department store’s employees despite store’s objection); Louis PizitzDry Goods, Co., 71 N.L.R.B. 579, 584, 19 L.R.R.M. (BNA) 1037 (1946) (including “dem-onstrators” and employees of concessionaires who operated key and watch departmentsdue to “strong community of interest with other employees” and over the employer’sobjection); Hale Bros. Stores, Inc., 62 N.L.R.B. 367, 371, 16 L.R.R.M. (BNA) 236 (1945)(including employees of the millinery and lending library leased departments in a sin-gle store-wide unit based on a joint employer relationship and community of interestanalysis).

42. 402 F.2d 525 (9th Cir. 1968), enforcing K-Mart, 162 N.L.R.B. 498, 64 L.R.R.M.(BNA) 1045 (1966).

43. 416 F.2d 1225 (6th Cir. 1969), enforced, 169 N.L.R.B. 442, 67 L.R.R.M. (BNA)1200 (1968).

44. Gallenkamp, 402 F.2d at 531; S. S. Kresge, 416 F.2d at 1231.45. 821 F.2d 1258 (7th Cir. 1987).46. 227 N.L.R.B. 1178, 94 L.R.R.M. (BNA) 1719 (1977).47. 240 N.L.R.B. 110, 100 L.R.R.M. (BNA) 1351 (1979), enforced, 639 F.2d 307 (6th

Cir. 1981).



twenty-one apartment house complexes, all but two of which wereowned by other employers. The board affirmed an administrative lawjudge’s finding that an appropriate unit included all Seligman employ-ees at the twenty-one complexes even though Seligman had been foundto be a joint employer with each owner of its employees at each complex.All employees in the unit were employed by one common employer—Seligman—but the nineteen separate complex owners, all joint em-ployers with Seligman, did not share any common employees. The SixthCircuit enforced the decision, agreeing “with the Board that the multi-complex unit would not be rendered inappropriate even if the complexowners are separate joint employers.”48

These cases provide solid support for combined units of employeesof supplier and user employers—regardless of whether there are mul-tiple supplier employers or multiple user employers. Such units havebeen approved by the NLRB and the courts, pre-Sturgis, since the1940s, in joint employer relationships where community-of-intereststandards are met, without any requirement for consent even afterGreenhoot was decided.

D. Statutory PurposeAs the board acknowledged in Sturgis, the rule of Greenhoot does

not further the central statutory purposes of stabilizing bargaining re-lationships and promoting employee free-choice. Rather, it serves todeny temporary workers their section 7 rights to organize. Greenhootviolates the community-of-interest standard, which has been a bedrockfor determining appropriate groupings of employees into bargainingunits. The community-of-interest standard is intended to further thecollective bargaining process by ensuring that the employees groupedtogether have enough in common to permit collective action and to for-mulate common demands.49 Artificially and arbitrarily fragmentingunits of employees who share a community of interest, which is thepractical result of Greenhoot’s application, disturbs the bargaining pro-cess and promotes industrial strife. Increasingly, regular workers workside by side, on a continuing basis, with leased and temporary agencyemployees. Requiring numerous splintered bargaining units for suchemployees, who share a community of interest, is contrary to the stat-utory purposes of the NLRA.

This deleterious impact is particularly apparent in the health careindustry. There, Greenhoot has created exactly the proliferation of bar-gaining units that the board’s health care bargaining unit rules soughtto avoid. Thus, absent consent and pre-Sturgis, a group of registerednurses could be divided into two or three or ten separate bargainingunits, depending on the number of supplier employers involved, based

48. 639 F.2d at 309.49. NLRB v. Action Automotive, Inc., 469 U.S. 490 (1985).



solely on the identity of their supplying agency and not at all on theircommunity of interest on the job. Bargaining will be fragmented anddifficult, yet disputes will envelop the entire workforce. This dangerousconsequence is triggered by Greenhoot’s application in both multi-user/single supplier and multi-supplier/single user working arrange-ments.

E. Consistent with SturgisThe NLRB’s decision in Sturgis is based on the interpretation that

a section 9(b) employer unit is “delineated by work being performed fora particular employer,” that its result is “consistent with well-settledprecedent that both precedes and postdates Greenhoot,” and that theGreenhoot doctrine denied contingent workers their rights under theNLRA.50 These same principles compel a total rejection of Greenhoot.

First, in the case of a single supplier employer with multiple useremployers, the employer unit is delineated by the work being performedfor the single supplier employer. Nothing in Greenhoot or prior case lawdistinguishes between a single user employer and a single supplier em-ployer. In both instances, all the employees in the potential bargainingunit share a common employer; they are all employees of a single sup-plier employer. Second, NLRB precedent that was cited earlier supportssuch combined units. Finally, the same statutory purposes served bySturgis are thwarted when employees of a single supplier employermust obtain their employer’s consent to unionize when both their sup-plier and user employers are named in their petition.

As with the units considered in Sturgis, all of the employees of asingle supplier employer providing employees to various user employ-ees have one common employer. Section 9(b), which defines appropriateunits, is intended to protect employees and not employers. One of thepotentially appropriate units it describes is an employer unit. A unit ofall the employees of a single supplier constitutes an employer unit be-cause all the employees are employed by one employer. The fact thatsome or all of the employees may be jointly employed by another em-ployer does not render the unit something other than an employer unit.This interpretation of section 9(b) is consistent with Sturgis. For pur-poses of section 9(b), it makes no difference whether the common singleemployer is the user employer or the supplier employer.

F. Greenhoot Does Not Present a Multiemployer UnitFrom the NLRA’s earliest days, the board has rejected the argu-

ment that a unit of solely and jointly employed employees creates amultiemployer unit. Instead, the NLRB has treated units consisting ofemployees of an employer (who employed all the unit employees) andjoint employers (who employed only some of the employees) as a single

50. Sturgis, 2000 WL 1274024, at *13.



unit so long as community-of-interest factors otherwise support theunit’s appropriateness, regardless of employer consent.

Indeed, the multiemployer bargaining model simply does not applyto these employment arrangements. Multiemployer bargaining unitsoccur where “individual employers have, on their own initiative, com-bined themselves into employer associations, and these associationshave, pursuant to the powers delegated to them by their members,acted with respect to the employees of those members so as to bringthemselves within the statutory definition of employer.”51 With multi-employer bargaining, totally unrelated employers of (typically) a par-ticular industry agree to bargain through a mutually selected agent forsubstantially similar contracts. They agree to delegate their bargainingauthority in favor of one voice at the bargaining table, with a goal ofreaching a single set of contract terms. Their employees share no com-munity of interest except that their employers have elected to bargain,not just together, but essentially as one. It is an arrangement employerscan voluntarily undertake without regard for the wishes of their em-ployees and with no consideration for whether their employees haveany common interests.52

At the bargaining table, the agent for the employers bargains forall employers regarding all the terms and conditions of all the employ-ees, and every employer has an identical or virtually identical contract.Consent must be a requirement because the employer is granting au-thority to an agent to act on its behalf and because it is agreeing to bebound by a single outcome that it cannot entirely control once consentis given.

Here, joint employers are brought to the bargaining table to ad-vance their own bargaining interests. They are joined by the fact thatthey each employ employees in the bargaining unit jointly with anotheremployer, albeit not all may employ all bargaining unit employees.They bargain only as to the employees with whom they have an em-ployment relationship and just to the extent of their control over theterms and conditions of those employees. A single (or substantiallysimilar) contract may not be the outcome.

This model is not multiemployer bargaining. Consent is not re-quired because the employer is not granting authority to an agent toact on its behalf. No employer is agreeing to be bound by the outcomeof a group effort. Each employer does not even necessarily bargain overall the terms and conditions of employment of all the employees. Therequisite attributes for multiemployer bargaining and the justificationfor the consent requirement are totally lacking.

51. Waterfront Employers Ass’n of the Pacific Coast, 71 N.L.R.B. 80, 110–11, 18L.R.R.M. (BNA) 1465 (1946).

52. Kroger Co., 148 N.L.R.B. 569, 57 L.R.R.M. (BNA) 1021 (1964).



All of these factors support overruling the remaining vestiges ofGreenhoot and allowing temporary employees their place at the bar-gaining table with the employers who control the terms and conditionsof their employment.

IV. Post-Sturgis Cases and Related IssuesA. Joint Employer Status

In Sturgis, the NLRB indicated that, for a combined unit of userand supplier employees, a threshold issue is the employers’ joint em-ployer status:

[T]wo or more employers are joint employers [when] the entities mustshare or co-determine matters governing essential terms and condi-tions of . . . the employment relationship, such as hiring, firing, dis-cipline, supervision, and direction.53

Subsequently in Professional Facilities Management, Inc.,54 the boarddetermined that the joint employer issue could be avoided if the peti-tioning union named only a single employer. The board held that apetitioning union could “seek to bargain with and name in its petitiononly the single user employer.”55 In such circumstances, the board “willnot require the naming of all potential joint employers” and will notrequire litigation of “the existence of a joint employer relationship.”56

If a union seeks a combined unit of user and supplier employees, it mayname only the common employer in the petition and avoid litigation ofthe joint employer issue.

B. Community of InterestIn order for a combined unit of user and supplier employees to be

appropriate, the employees must share a community of interest. Stur-gis did not change this standard, which examines the following factors:

(1) similarity of working conditions, (2) job classifications, (3) skillsand functions, (4) similarity of products, (5) interchangeability of em-ployees, (6) geographic proximity, (7) functional integration of thebusiness, (8) centralization of management control, (9) collective bar-gaining history, and [in accretion cases] (10) the size and number ofemployees at the facility to be acquired as compared with the existingoperation.57

The community-of-interest standard was discussed by the board inrelation to Sturgis in two subsequently issued cases. In J.E. HigginsLumber Co.,58 the board remanded the case for review in accordance

53. Sturgis, 2000 WL 1274024, at *7 (citations omitted).54. 332 N.L.R.B. No. 40, 165 L.R.R.M. (BNA) 1397, 2000 WL 1449837, at *1 (2000).55. Professional Facilities, 2000 WL 1449837, at *2.56. Id.57. HOW TO TAKE A CASE BEFORE THE NLRB 114 (Brent Garren et al., eds., BNA

2000).58. 332 N.L.R.B. No. 109, 166 L.R.R.M. (BNA) 1188, 2000 WL 1663426, at *1 (Oct.

31, 2000).



with Sturgis. There, the regional director had granted a UC petitionfiled by the employer to exclude supplied employees from a warehouseunit, relying on Greenhoot, even though they performed bargaining unitwork for the user employer on a daily basis. Concurring with the re-mand, Member Peter Hurtgen expressed his opinion that he would“generally not force” supplier employees into units with user employeesand that, even in unit determination proceedings in non-accretioncases, since supplier and user employees have different employers anddifferent “emoluments of employment,” he “would have serious con-cerns” about joining supplier and user employees into a single votingunit.59 It is noteworthy that Member Hurtgen, who did not participatein the Sturgis decision, expressly agreed with its holding and reason-ing, notwithstanding these concerns.

In Lodgian, Inc., a union petitioned for a unit of only the useremployees. 60 The employer objected that the unit must include thejointly employed employees as well. The board denied the request forreview, allowing the unit of user-only employees to stand, but empha-sized that it was “not passing on the issue of whether a unit that en-compasses both the solely employed employees and jointly employedemployees also would be appropriate under a community-of-interestanalysis” because the union was seeking only the solely employed em-ployees and was “seeking to bargain only with the Employer, and notthe supplier employers.”61 The NLRB also explicitly refrained fromreaching the issue of whether the jointly employed employees couldconstitute a separate appropriate unit.

C. Seasonal and Casual TemporariesHistorically, the NLRB has used the term temporary to identify

seasonal and casual employees who may not be eligible to participatein an NLRB-conducted election. Sturgis did not change the standardfor such eligibility. The general rule is that less-than-full-time employ-ees are eligible to vote if they have a reasonable expectation of contin-ued employment and work sufficient hours to have a substantial andcontinuing interest in the working conditions of regular employees. Noteligible are short-term employees whose employment is for a finite pe-riod and/or those hired to complete a specific project who, at the timeof the NLRB election, have no “reasonable expectation of continuedfuture employment.”62 Various standards, such as hours worked perday or week or days worked per calendar period, have been applied in

59. Higgins, 2000 WL 1663426, at *3 (Member Hurtgen concurring).60. 332 N.L.R.B. No. 128, 165 L.R.R.M. (BNA) 1380, 2000 WL 1740949, at *1.61. Lodgian, 2000 WL 1740949, at *1.62. Caribbean Communications Corp., 309 N.L.R.B. 712, 142 L.R.R.M. (BNA) 1130

(1992); New World Communications, 328 N.L.R.B. No. 10, 161 L.R.R.M. (BNA) 1049 (Apr.7, 1999).



different industries to determine whether an employee is regular andeligible to vote, or casual and ineligible.63 These rules still apply.

D. BargainingIn an accretion situation, the terms and conditions of the existing

collective bargaining agreement are applied to the incoming employeeson the basis that they should have been included as bargaining unitemployees from the beginning. The contract is extended to them as itwould be to any newly hired bargaining unit employees. In Tree of Life,Inc.,64 the board considered a case which involved a complaint that theemployer violated section 8(a)(5) by refusing to extend the terms of anexisting collective bargaining agreement to newly hired temporaryagency workers. Although such employees had been hired in the pastduring brief periods of high demand for the employer’s products, theemployer brought agency employees in as regular warehouse workerswhen it was unable to successfully hire on its own. The union requestedinformation about the new workers and demanded that they be coveredunder the existing contract. An administrative law judge (ALJ) foundthat the user and supplier employers were joint employees but dis-missed the complaint because “the requisite consent” had not beenshown.65 The board remanded for further consideration in light of Stur-gis. In a supplemental decision, the ALJ granted the relief sought. Thecase is now on appeal before the board.

When temporary agency workers are added to an existing unitthrough a self-determination election or voluntary recognition agree-ment, the employer must bargain in good faith with the union “as tothe appropriate contractual terms to be applied to this new addition tothe previous unit.”66 The scope of the bargaining obligation was de-scribed by the NLRB in Sturgis. There, the board made clear that “inthese units each employer is obligated to bargain only over the em-ployees with whom it has an employment relationship and only to theextent it controls or affects their terms and conditions of employ-ment.”67 “[T]he joint employers must bargain over the terms and con-ditions of employment of their employees, and the sole employers are

63. Davison-Paxon Co., 185 N.L.R.B. 21, 74 L.R.R.M. (BNA) 1730 (1970); St. Luke’sEpiscopal Hosp., 222 N.L.R.B. 674, 91 L.R.R.M. (BNA) 1359 (1976).

64. 332 N.L.R.B. No. 24, 165, L.R.R.M. (BNA) 1191, 2000 WL 1375048, at *1 (Sept.20, 2000).

65. 2000 WL 1375048, at *4.66. Federal-Mogul Corp., 209 N.L.R.B. 343, 344, 85 L.R.R.M. (BNA) 1353 (1974);

H. K. Porter Co. v. NLRB, 397 U.S. 99 (1970).67. Sturgis, 2000 WL 1274024, at *15 (citing Management Training Corp., 317

N.L.R.B. 1355, 149 L.R.R.M. (BNA) 1313 (1995). In Management Training Corp., theboard ruled that it would assert jurisdiction over and entertain representation petitionsas to employers with close ties to an exempt government entity where “there are sufficientemployment matters over which unions and employers can bargain” even if they couldnot bargain over all terms and conditions of employment. 317 N.L.R.B. at 1355.



obligated to bargain over the terms and conditions of employment oftheir employees.”68

This view was further clarified in Professional Facilities Manage-ment, Inc.69 There, the board concluded, “[T]he absence of one of thealleged joint employers at the bargaining table does not destroy the abil-ity of the named employer . . . to engage in effective bargaining . . . tothe extent it controls their terms and conditions of employment.”70

V. ConclusionThe long-awaited decision in Sturgis addressed some of the con-

cerns faced by temporary agency workers, but many issues remain forfuture resolution. For example, how will the decision be applied torevolving-door temporary agency workers? What will be the primarysecondary-implications? Will accretion standards be changed or modi-fied? How will the bargaining obligations sort out? Sturgis was an im-portant first step in giving a voice at work to contingent workers. Formany such workers, their section 7 rights are no longer subject to theiremployer’s approval and consent; rather, they have finally been ac-corded the statutory protections to which they are entitled.

68. Sturgis, 2000 WL 1274024, at *15.69. 2000 WL 1449837, at *1.70. Id. at *2.


183

When Is a MultiemployerBargaining Unit a “MultiemployerBargaining Unit”?

Robert W. Tollen*

I. IntroductionIn M.B. Sturgis, Inc.,1 the National Labor Relations Board (NLRB)

considered the representational rights of “an important segment of the‘contingent work force.’ ”2 Specifically, the NLRB considered whetheremployees who were supplied by a supplier employer to a user employerand were found to be jointly employed by both could be combined in abargaining unit with the user’s regular employees.

Opponents argued that the combination would be a multiemployerbargaining unit, which the NLRB could not decide was appropriate,absent consent of the employer participants. Two cases supported theopponents’ position: Greenhoot, Inc.,3 and Lee Hospital.4

The NLRB took oral argument on December 2, 1996; Sturgis wasone of the few cases in which the board had done so. The decision wasnot issued until almost four years later. By then, only one member ofthe NLRB that had heard the oral argument, Member Fox, was still onthe board. A majority ruled that a unit of (1) employees jointly em-ployed by a supplier employer and a user employer and (2) employeessolely employed by the user employer was not a multiemployer bar-gaining unit, overruling Lee Hospital. Greenhoot was distinguished,clarified, and reaffirmed.

The dispute has been viewed as reflecting a typical alignment ofmanagement and labor. The Chamber of Commerce, Business Lead-ership Council, Labor Policy Association, National Association of Tem-porary and Staffing Services, Associated Builders and Contractors, andother employer organizations aligned themselves as amicus curiaeagainst the AFL-CIO and the general counsel. Chairman Truesdale andMembers Fox and Liebman formed the majority, with Member Brame

* Robert W. Tollen is a labor partner in the San Francisco, California, office of Sey-farth Shaw. He is a 1964 graduate of the University of Pennsylvania Law School, a mem-ber of the ABA Section of Labor and Employment Law, and a contributing editor to thebook The Developing Labor Law. This article was presented in Kauau, Hawaii, under theNational Labor Relations Act (February 2001).

1. 331 N.L.R.B. No. 173, 165 L.R.R.M. (BNA) 1017, 2000 WL 1274024, at *1 (2000).2. Sturgis, 2000 WL 1274024, at *1.3. 205 N.L.R.B. 250, 83 L.R.R.M. (BNA) 1656 (1973).4. 300 N.L.R.B. 947, 136 L.R.R.M. (BNA) 1348 (1990).



vigorously dissenting. There were, however, anomalies. Former Chair-man Stephens was the first NLRB member to call for reconsiderationof Greenhoot. In Brookdale Hospital Medical Center,5 he noted that inthe preceding decade, health care employers had increasingly utilizedcontract labor to perform work that had formerly been done by theirpermanent work forces. He concluded, in light of those changes, that itmight be appropriate to reexamine the continuing validity of Green-hoot. Member Truesdale followed Stephens’s call in Hexacomb Corp.6

In addition, the parties were not aligned as one might have beenexpected. M.B. Sturgis argued to the regional director and to the NLRBthat Greenhoot should be overruled and that its temporary employeesshould be included in a bargaining unit with its regular employees.Member Hurtgen, who had recanted himself in Sturgis and who hadbeen expected to agree with Member Brame, later expressed his agree-ment with the majority.7

This article agrees with the particular result reached by the ma-jority, although not with its reasoning. Under the majority’s reasoning,a multiemployer bargaining unit requiring a showing of consent is pres-ent when one supplier employer services multiple unrelated user-employers. A multiemployer bargaining unit requiring a showing ofconsent is not present when one supplier employer services one useremployer. This article agrees with both conclusions. The majority’s ra-tionale, however, might lead to the conclusion that a multiemployerbargaining unit requiring a showing of consent is not present whenmultiple suppliers service one user. This article disagrees and con-cludes that configuration is also a multiemployer bargaining unit re-quiring a showing of consent.

In other words, the majority concluded—and this article agrees—that the mere combination of a supplier employer with a user employerdoes not create a multiemployer bargaining unit requiring a showingof consent. The majority would find a multiemployer bargaining unitrequiring a showing of consent solely where there were multiple users,regardless of the number of suppliers. This article finds a multiem-ployer bargaining unit where there are multiple users or multiple sup-pliers. Both the majority and this article find no multiemployer bar-gaining unit requiring a showing of consent when there is merely onesupplier and one user, which are the facts presented in the cases con-solidated in the Sturgis decision.

5. 313 N.L.R.B. 592, 593 n.4, 145 L.R.R.M. (BNA) 1017 (1993).6. 313 N.L.R.B. 983, n.2, 145 L.R.R.M. (BNA) 1338 (1994).7. See J. E. Higgins Lumber Co., 332 N.L.R.B. No. 109, 166 L.R.R.M. (BNA) 1188,

2000 WL 1663426, at *1 (2000).


Multiemployer Bargaining Units 185

II. Section 9(b) Prohibits Multiemployer BargainingUnits, Absent ConsentMultiemployer bargaining long antedated the National Labor Re-

lations Act (NLRA).8 Multiemployer bargaining was used both in in-dustries like the garment industry, which were characterized by nu-merous employers of small work forces, and in industries likelong-shoring and building construction, which were characterized byworkers who changed employers from day-to-day or week-to-week.9

When the NLRA was passed in 1935, section 9(b) directed the NLRB,as it does today, to decide in each case whether the unit appropriate forcollective bargaining was “the employer unit, craft unit, plant unit, orsubdivision thereof.”10 Soon after passage of the NLRA, it was arguedthat the NLRB had no jurisdiction to go beyond the individual companyin deciding on an appropriate unit. In Shipowners Association of thePacific Coast,11 the board ruled that it could. The board reasoned thatsection 9(b) authorized it to decide that an employer unit was an ap-propriate unit, that section 2(2) defined employer as including a “personacting in the interest of an employer, directly or indirectly,” and thatsection 2(1) defined person as including associations.12 Therefore, theNLRB reasoned, an employer unit encompassed another person or per-sons acting in the interest of the employer.13 A concomitant of this rea-soning was that the other person must be authorized, either formallyor informally, to act for or in the interest of an individual employer.When consent was present, the board held that it could decide that amultiemployer bargaining unit was appropriate. When consent was ab-sent, the board held that it could not:14

Any uniformity in wages, hours, and working conditions that existsin the industry . . . has not therefore been achieved through any agentacting for or in the interest of all the Companies under any delegationof authority. Thus each of the Companies has retained to itself andhas exercised direct control over the essential employer functions.Consequently, . . . within the limitations of the Act, we are unable tofix a single unit embracing the employees of all the Companies.15

8. National Labor Relations Act, 29 U.S.C. §§ 151–169 (1998).9. NLRB v. Truck Drivers Local Union No. 449, 353 U.S. 89, 94, 95 n.23 (1957).

10. 29 U.S.C. at § 159(b).11. 7 N.L.R.B. 1002, 2 L.R.R.M. (BNA) 377 (1938).12. Id. at 1024–25.13. Followed in Waterfront Employers Ass’n of the Pacific Coast, 71 N.L.R.B. 80, 110,

18 L.R.R.M. (BNA) 1465 (1946).14. See, e.g, F.E. Booth & Co., 10 N.L.R.B. 1491, 3 L.R.R.M. (BNA) 552 (1939).15. Id. at 1496–97. See also Metro-Goldwyn-Mayer Studios, 7 N.L.R.B. 662, 2

L.R.R.M. (BNA) 322 (1938) (evidence insufficient to justify finding multiemployer bar-gaining unit is appropriate); M&J Tracy, Inc., 12 N.L.R.B. 936 (1939); Bulk Sales Dep’t,Gulf Refining Co., 21 N.L.R.B. 1033, 6 L.R.R.M. (BNA) 152 (1940); Rayonier Inc., 52N.L.R.B. 1269, 1275, 13 L.R.R.M. (BNA) 91 (1943) (association’s lack of power to bindmembers not relevant where members “demonstrated their desire to be bound by grouprather than individual action.”); George F. Carleton & Co., 54 N.L.R.B. 222, 13 L.R.R.M.(BNA) 189 (1943); Dolese & Shepard Co., 56 N.L.R.B. 532, 14 L.R.R.M. (BNA) 178 (1944);



During the course of the Taft-Hartley debates, many proposals tolimit multiemployer bargaining were introduced. A House bill wouldhave banned most multiemployer bargaining. A Senate bill would havebanned only involuntary multiemployer bargaining.16 Neither bill’slanguage was adopted. In rejecting the Senate version, the conferencecommittee commented,

The treatment in the Senate amendment of the term employer forpurposes of section 9(b) is omitted from the conference agreement,since it merely restates the existing practice of the Board in fixing ofbargaining units containing employees of more than one employer,and it is not thought that the Board will or ought to change its prac-tice in this respect.17

In NLRB v. Truck Drivers Local Union No. 449,18 the Supreme Courtconcluded that Congress intended the board to “continue its establishedadministrative practice of certifying multiemployer units, and intendedto leave to the Board’s specialized judgment the inevitable questionsconcerning multiemployer bargaining bound to arise in the future.”

Two changes in the statute were enacted as part of the Taft-Hartleyamendments and arguably are relevant to the NLRB’s authority to de-cide whether a multiemployer bargaining unit is appropriate. In Ship-owners Association of the Pacific Coast, the board relied on the languageof section 2(2), defining employer as including “any person acting in theinterest of an employer,” to support its conclusion that it could decidewhether a consensual multiemployer bargaining unit was appropri-ate.19 That language was changed to read, as at present, “any personacting as an agent of an employer.” According to Patrick Hardin in TheDeveloping Labor Law,20 the NLRB “implicitly read this amendment”in Associated Shoe Industries21 “as detracting nothing from its author-ity to conduct elections in multiemployer units.”

The Taft-Hartley amendments also added section 8(b)(4)(A); it pro-hibits a union from engaging in coercive activity for an object of “forcingor requiring any employer . . . to join . . . any employer organization.”This section has been cited as evidence of congressional intent that

Advance Tanning Co., 60 N.L.R.B. 923, 16 L.R.R.M. (BNA) 22 (1945); Associated ShoeIndus., 81 N.L.R.B. 224, 23 L.R.R.M. (BNA) 1320 (1949); Pacific Metals Co., 91 N.L.R.B.696, 26 L.R.R.M. (BNA) 1558 (1950); York Transfer & Storage Co., 107 N.L.R.B. 139, 33L.R.R.M. (BNA) 1078 (1953); Bennett Stone Co., 139 N.L.R.B. 1422, 1424, 51 L.R.R.M.(BNA) 1518 (1962); NLRB v. Beckham, Inc., 564 F.2d 192 (5th Cir. 1977).

16. Mobile Mech. Contractors Ass’n, Inc. v. Carlough, 664 F.2d 481, 485 (5th Cir.1981), comparing H.R. 3020, 80th Cong., 1st Sess. §§ 2(16), 9(f)(1), 12(a)(3) (1947), withS. 1126, 80th Cong., 1st Sess. §§ 2(2), 9 (1947).

17. H. CONF. REP. NO. 510 on H.R. 3020, 2 Leg. Hist. 535–536 (LMRA 1947).18. 353 U.S. at 96.19. 7 N.L.R.B. at 1024–25.20. PATRICK HARDIN, THE DEVELOPING LABOR LAW 510 (3d ed. 1992)21. 81 N.L.R.B. 224, 23 L.R.R.M. (BNA) 1320 (1949).



multiemployer bargaining must be voluntary. Nothing in the languageof the section, however, purports to limit the NLRB’s authority to findthat a multiemployer bargaining unit is appropriate nor does this sec-tion assist in identifying what is or is not a multiemployer bargainingunit.

Regardless of the impact of section 8(b)(4)(A), today there is anunchallenged consensus that the NLRB lacks authority to decide thata multiemployer bargaining unit is appropriate, absent the individualemployers’ consents. Member Brame so argued in his dissent in Stur-gis, 22 and the majority agreed. In overruling Lee Hospital and in clar-ifying Greenhoot, the majority wrote,

Unlike true multiemployer bargaining, . . . all the employees in factshare the same employer, i.e., the user employer. . . . We thereforeoverrule Lee Hospital and find no statutory requirement of employ-ment consent to a unit combining solely and jointly employed em-ployees of a single user employer.23

If the petitioner names only the supplier employer in its petition,there is no statutory impediment to a supplier-wide unit under theAct.24

Further, not one of the many parties or amici before the NLRB arguedthat the board could find a multiemployer bargaining unit appropriate,absent consent of all the employers. The issue in Sturgis was thereforenot whether the board could decide a multiemployer bargaining unitwas appropriate, absent consent (it cannot), but whether the units inquestion were multiemployer bargaining units.

III. Precedents: The Department Store CasesPrior to Greenhoot and Lee Hospital, the Board had frequently

found bargaining units appropriate, which the Sturgis majoritythought were like the units at issue in Sturgis.25 Those cases could havebeen distinguished. Former-Member Raudabaugh demonstrated to theNLRB that they all involved one business sector, retail stores, in whichthe store licensed the operation and management of individual depart-ments to third parties (for example, the jewelry department in a de-

22. 2000 WL 1274024, at *21 (Member Brame, dissenting).23. Id. at *14.24. Id. at *19.25. See, e.g., Louis Pitzitz Dry Goods Co., 71 N.L.R.B. 579, 19 L.R.R.M. (BNA) 1037

(1946); Taylor’s Oak Ridge Corp., 74 N.L.R.B. 930, 20 L.R.R.M. (BNA) 1219 (1947); Den-ver Dry Goods Co., 74 N.L.R.B. 1167, 1176, 20 L.R.R.M. (BNA) 1247 (1947); J.M. HighCo., 78 N.L.R.B. 876, 878, 22 L.R.R.M. (BNA) 1288 (1948); Block and Kuhl Dep’t Store,83 N.L.R.B. 418, 419, 24 L.R.R.M. (BNA) 1101 (1949); Stack & Co., 97 N.L.R.B. 1492, 29L.R.R.M. (BNA) 1263 (1952); Frostco Super Save Stores, Inc., 138 N.L.R.B. 125, 50L.R.R.M. (BNA) 1558 (1962); Thriftown, Inc., 161 N.L.R.B. 603, 63 L.R.R.M. (BNA) 1298(1966); Jewel Tea Co., 162 N.L.R.B. 508, 64 L.R.R.M. (BNA) 1054 (1966); Walgreen Loui-siana Co., 209 N.L.R.B. 213, 85 L.R.R.M. (BNA) 1309 (1974); Sun-Maid Growers of Cali-fornia, 239 N.L.R.B. 346, 352–353, 99 L.R.R.M. (BNA) 1668 (1978), enforced 618 F.2d 56,59 (9th Cir. 1980).



partment store or the meat department in a supermarket).26 In each ofthose cases, the store was designed and presented to the public as oneintegrated enterprise, a situation explicitly relied on by the NLRB inholding that it was appropriate to combine employees jointly employedby a store and by a department operator with employees solely em-ployed by the store:

A meaningful interpretation of the provisions of the [retailer’s] li-censes and a consideration of their purpose and effect must, in ouropinion, take full cognizance of the entrepreneurial context in whichthese licenses are utilized. That context is a commercial venture inwhich separate corporate entities combine their resources and createthe appearance of a single integrated enterprise under the same roofin order to obtain the mutual business advantages to be derived fromthis type of operation. 27

Thus, those stores gave the appearance of a common or joint venture.Further, there was no contention made in any of the cases that com-bining different employers violated the board’s authority under section9(b). Therefore, there was no consideration of that issue. The lack ofsuch contention might show that no one thought the units were mul-tiemployer, within the meaning of section 9(b), but it also means thatthe cases were not stare decisis. When confronted with the contentionthat combining jointly employed employees in one bargaining unit withsolely employed employees violated the statutory bar on multiemployerbargaining units, absent consent, more was needed to resolve the issuethan a recitation of possibly factual similar cases that nevertheless didnot address the issue.

IV. Precedents: Greenhoot and Lee HospitalSturgis was essentially a case of first impression. Although its is-

sues had ostensibly been considered in Greenhoot and Lee Hospital,they had never been plumbed before Sturgis. In Greenhoot, a unionappeared to have petitioned for a unit of employees employed by Green-hoot, Inc., a property management company, at fourteen separatelyowned office buildings. The fourteen separate owners did not appear tohave been named in the petition. They were served with notices of thehearing. Six appeared in the persons of two representatives.28 Therewas no indication of the positions they took, if any. Greenhoot con-tended that the separate building owners were the sole employers. Inthe alternative, Greenhoot contended it was a joint employer with eachof the separate building owners, and “accordingly, a multiple location

26. Post-Hearing Brief of Intervenor, Interim Personnel, Inc. for the National LaborRelations Board at 6–7 (NLRB Jan. 14, 1997) (Nos. 9-UC-406, 14-RC-11572,33-RC-4042).

27. United Mercantile, Inc., 171 N.L.R.B. 830, 832, 68 L.R.R.M. (BNA) 1173 (1968).28. Greenhoot, 205 N.L.R.B. at 250 n.1.



unit [was] not appropriate.”29 The decision did not say whether Green-hoot’s contention was (1) that the board was barred by section 9(b) fromrecognizing a multiemployer bargaining unit without consent or (2)that employees at each separate location lacked a community of inter-est with employees at other locations.

The regional director found that Greenhoot was not an employer.30

The NLRB reversed that finding.31 It found that Greenhoot was anemployer and that it had entered into a joint employment relationshipat each of the fourteen locations with the owner of each location. Con-tinuing, the board held,

In this circumstance, there is no legal basis for establishing a mul-tiemployer unit absent a showing [of consent]. . . . As there is no con-sensual basis here for finding a multiemployer unit, we find that sepa-rate units at each location sought by the Petitioner . . . to beappropriate herein.32

The NLRB cited precedent in support of the conclusion that it couldnot establish a multiemployer bargaining unit absent consent but citedno precedent or explanation for its conclusion that a unit consisting ofa supplier employer and user employers would constitute a multiem-ployer bargaining unit.

In Lee Hospital, the union petitioned for a unit of the hospital’sregistered nurse anesthetists.33 Under bargaining rules unique to hos-pitals, the NLRB held that the anesthesia department lacked sufficientdisparity from the hospital’s other professional staffs to be a separateunit. The board then considered another way the anesthesia depart-ment might be a separate unit. The hospital had contracted with anoutside company to operate the anesthesia department. The depart-ment would be a separate unit, the board concluded, if the hospital andthe outside company were joint employers. The jointly employed em-ployees of the department, the board concluded, could not be combinedin a bargaining unit with the hospital’s other solely employed profes-sional staffs: “[T]he Board does not include employees in the same unitif they do not have the same employer, absent employer consent.”34

Ultimately, the NLRB concluded that the outside company was not anemployer. Therefore, the hospital was the anesthetists’ sole employer,and there was no impediment to placing them in a bargaining unit withthe hospital’s other professional staffs. As for the board’s conclusionthat, if the employees in the anesthesia department had been jointly

29. Id. at 250 (emphasis added).30. Id. at 251.31. Id.32. Id.33. 300 N.L.R.B. at 947.34. Id. at 948 (citing Greenhoot, 205 N.L.R.B. 250).



Table 1.

SINGLE

EMPLOYER

BARGAINING

UNIT

JOINT EMPLOYER

BARGAINING

UNIT

MIXED

SUPPLIER/USER

BARGAINING

UNIT

UNDISPUTED

MULTIEMPLOYER

BARGAINING

UNIT

Number ofEmployers

One Multiple Multiple Multiple

SharedControl OverEmployees

Not applicable All employees Someemployees andnot otheremployees

None

Commonalityof Employersto Employees

One employercommon to allemployees

Multipleemployerscommon to allemployees

One employercommon to allemployees andone employernot common toall employees

No employercommon to allemployees

employed, then they could not have been placed in a unit with solelyemployed employees of the hospital, the board gave no explanationother than its citation to Greenhoot.

V. Consent Is the Controlling FactorIs a unit consisting of employees jointly employed by two employers

and of employees solely employed by one of them (henceforth referredto as a mixed supplier/user bargaining unit35) a multiemployer bar-gaining unit within the meaning of section 9(b)? If it is, then the NLRBmay not decide such a unit is appropriate, absent consent of all theemployers.

Another possible relationship between or among multiple employ-ers is that of joint employment. Joint employers “exert significant con-trol over the same employees.”36 A unit of joint employers is not referredto as a multiemployer bargaining unit, although it literally is. NLRBlaw does not require a showing of consent before the board may decidesuch a unit is appropriate.

Is a mixed supplier/user bargaining unit like a joint employer bar-gaining unit, a multiemployer bargaining unit, or neither? In the tablebelow, the attributes of four types of bargaining units are compared.

An obvious truth about a mixed supplier/user bargaining unit isthat it involves more than one employer. In this regard, it is like amultiemployer bargaining unit that requires a showing of consent. Ajoint employer bargaining unit, however, also involves more than one

35. Meaning the unit mixes employees; some are jointly employed, and some aresolely employed.

36. Lutheran Welfare Services v. NLRB, 607 F.2d 777, 778 (7th Cir. 1979); NLRB v.Western Temp. Servs., 821 F.2d 1258, 1266 (7th Cir. 1987).



employer. It is not, on that basis alone, described as a multiemployerbargaining unit. Further, suppose one supplier employer supplies allof a user employer’s employees (a supplier/user unit but not mixed withother employees). No one would contend that it is a multiemployer bar-gaining unit; it would be described, at most, as a joint employer unit.Plainly, the mere fact of combining two employers in one bargainingunit has not resulted in labeling the unit a multiemployer bargainingunit, even though there are multiemployers.

A distinguishing feature of a multiemployer bargaining unit re-quiring a showing of consent is that each member controls its own em-ployees and does not share control over them with other employers.“Thus, each of the Companies has retained to itself and has exercisedcontrol over its essential employer functions.”37 Compare joint employ-ers: They “exert significant control over the same employees.”38 In thisregard, a mixed supplier/user unit is like a joint employer unit: Thesupplier and the user share control over the joint employees. The sup-plier and the user, on the other hand, do not share control over em-ployees employed solely by the user. The situation of those employees,however, is distinguishable from a bargaining unit that is described asmultiemployer on another ground: They share an employer in commonwith all employees in the unit. No employee in a unit described as amultiemployer shares an employer in common with all employees.

Which of these fluctuating factors is significant? It is certainly truethat the unit called a mixed supplier/user unit is unlike any unit de-scribed as multiemployer that was reviewed in the board’s case lawprior to Taft-Hartley. If it can be said that Taft-Hartley froze in time asnapshot of a multiemployer bargaining unit, then a mixed sup-plier/user unit is not one. Where, however, is the rational basis for iden-tifying one unit as multiemployer, within the meaning of section 9(b),and another not? It lies in yet another ultimately more obvious factor.

Harking back to the NLRB’s pre-Taft-Hartley standards, theNLRB could combine two or more employers in a single bargaining unitwhen they consented to act in each other’s interests and not otherwise.The facts that permit two separate employers to be treated as jointemployers demonstrate a voluntary alliance. Consent to the alliance isimplicit. A joint employer relationship exists where multiple employershave “chosen to handle jointly . . . important aspects of their employer-employee relationship.”39 In a mixed suppler/user unit, the supplierand the user are joint employers. Joint employers implicitly consent toact in each other’s interests. The consent of others must be demon-strated. Absent the implicit consent of a joint employment relationship

37. F.E. Booth & Co., 10 N.L.R.B. at 1497.38. Lutheran Welfare Servs., 607 F.2d at 778 (emphasis added).39. NLRB v. Browning-Ferris Indus., Inc., 691 F.2d 1117, 1122 (3d Cir. 1982) (em-

phasis added) (quoting NLRB v. Checker Cab Co., 367 F.2d 692, 698 (6th Cir. 1966)).



or, otherwise, a demonstrated consent, two employers may not, as amatter of law, be joined together in one bargaining unit.

In other words, a joint employer bargaining unit is a multiemployerbargaining unit. The consent of the joint employers to come together inone bargaining unit is implicit in the nature of a joint employmentrelationship. Thus, there is no exception to the statutory mandate thatmultiple employers may not be combined in one bargaining unit with-out their consent.

VI. The Sturgis DecisionThe Sturgis decision consolidated two cases. In Sturgis itself, a

union petitioned for a unit consisting of all production employees atSturgis’s hose assembly plant.40 The plant employed about thirty-fiveregular employees. It also used ten to fifteen temporary employees sup-plied by a temporary employment agency. Sturgis contended that thetemporary employees should have been included in the bargainingunit. The union objected. The regional director found the temporaryemployees were jointly employed by Sturgis and the agency and that,under Lee Hospital, they could not have been combined in a unit withSturgis’s solely employed employees.41 Sturgis petitioned for review.

In Jeffboat Division, American Commercial Marine Service Co., theunion already represented a unit of 600 production and maintenanceemployees who were engaged in shipbuilding.42 A collective bargainingagreement was in place. A temporary personnel agency supplied thirtywelders and steam-fitters. The union petitioned to clarify the bargain-ing unit to include the welders and steam-fitters. The regional directorfound that the welders and steam-fitters were jointly employed by Jeff-boat and the agency.43 On that basis, the regional director dismissedthe petition under authority of Greenhoot and Lee Hospital.44 The unionpetitioned for review.

In briefing before the NLRB, Sturgis, the union at Jeffboat, thegeneral counsel, and the AFL-CIO urged the board to reverse Greenhootor Greenhoot and Lee Hospital. All parties and amici in oppositionurged the board to reaffirm both. No party or amicus curiae suggestedthat the two cases were distinguishable or that the board should affirmone and reverse the other. Yet, that is what the NLRB did, reaffirming(and clarifying) Greenhoot, while overruling Lee Hospital.

The Sturgis board held that the combination of multiple user em-ployers (the building owners) in Greenhoot produced a multiemployerbargaining unit, while the presence merely of one user employer in Lee

40. Sturgis, 2000 WL 1274024, at *4.41. Id. at *2.42. Id. at *5.43. Id. at *3.44. Id.



Hospital negated a multiemployer bargaining unit.45 The distinguish-ing and controlling fact for the board was the number of employers atthe user level:

The scope of a bargaining unit is delineated by the work being per-formed for a particular employer. In a unit combining the user em-ployer’s solely employed employees with those jointly employed by itand a supplier employer [as in Lee Hospital, Sturgis and JeffboatDivision], all of the work is being performed for the user employer.46

By contrast, in Greenhoot, the work was being performed for fourteenunrelated users. Because Greenhoot involved more than one employerat the user level, the board reaffirmed that it presented a multiem-ployer bargaining unit.47

The board offered no citation and no explanation beyond the pre-ceding two sentences for its ultimately defining rationale. The propo-sition that work performed uniquely for a particular employer can beidentified and isolated, and is the distinguishing factor between a mul-tiemployer bargaining unit and other bargaining units, is novel, un-explained, and suspect. For example, the work performed by the em-ployees of one or more of a contractor’s subcontractors is performed forthe contractor, but the work does not delineate the scope of a bargainingunit.

By the preceding holding, the NLRB disposed of Lee Hospital, Stur-gis, and Jeffboat Division. Expounding further on Greenhoot, the boardwrote that Greenhoot “did not, however, pass on whether consent wouldhave been required had the union sought to be certified only . . . forpurposes of collective bargaining with Greenhoot alone.”48 In that cir-cumstance, the board held, consent would not have been required (i.e.,the unit would not have been a multiemployer bargaining unit):

If a petitioner seeks to bargain only with the supplier employer, apetitioned-for unit of all the employees of a single supplier is not amultiemployer unit because the petition is seeking to represent theemployees vis a vis a single employer . . . . [W]e wish to make clearthat Greenhoot’s requirement of employer consent to the creation ofa multiemployer bargaining unit has no application when the bar-gaining relationship sought is only with the supplier employer . . . .

[A] petition that . . . seeks a unit of all the employees of a supplieremployer and names only the supplier employer, . . . does not involvea multiemployer unit.49

Section 9(b), however, makes no reference to the identity of the partywith whom the union seeks a bargaining relationship. It merely

45. Id. at *13.46. Sturgis, 2000 WL 1274024, at *13.47. Id. at *1, *13.48. Sturgis, 2000 WL 1274024, at *19. In fact, every indication in the Greenhoot

opinion is that the union did name Greenhoot alone. See supra discussion in Part V.49. Sturgis, 2000 WL 1274024, at *19.



directs the board to decide whether the unit appropriate for bargainingshall be the employer unit, craft unit, plant unit, or subdivision thereof.The NLRB’s regulations and its form petition require the petitioner toname the employer,50 but the requirement is not part of the statutoryscheme. Section 8(a)(5) prohibits an employer from refusing “to bargainwith the representative of his employees.”51

Once the board certifies a union as the representative of employees,any employer of those employees is obligated to bargain with the union.If the board had certified the union in Greenhoot as the representativeof the Greenhoot employees at each of the office buildings, the buildingowners, as joint employers, would have been obligated to bargain withthe union, without regard to whether the union had named them in itspetition. The only issue would have been whether the building ownershad received notices of the representation proceedings. That issuewould have been relevant solely for due process purposes.52 Section11008.1(c) of the Casehandling Manual now requires that notificationbe given in representation proceedings to “any other employer whichmight be a joint employer,” including “a contractor, an employment ser-vice, or a supplier of leased or temporary employees,” or “the operatorof a leased department.”53

Was the NLRB correct to distinguish Greenhoot from Lee Hospital,Sturgis, and Jeffboat Division and to find that the Greenhoot unit wasa multiemployer bargaining unit? The unit at issue in Greenhoot wasdifferent from the units at issue in the other cases. The issue posed bythe board in Sturgis was “whether and under what circumstances em-ployees who are jointly employed by a ‘user’ employer and a ‘supplier’employer can be included for representational purposes in a bargainingunit with employees who are solely employed by the user employer.”54

Sturgis’s holding is, “A unit composed of employees who are jointlyemployed by a user employer and a supplier employer, and employeeswho are solely employed by the user employer, is permissible under thestatute without the consent of the employers.”55

Greenhoot did not involve a unit of (1) employees who were jointlyemployed by a user employer and a supplier employer and (2) employ-ees who were solely employed by a user employer. Greenhoot involved(1) employees who were jointly employed by a supplier employer and auser employer and (2) other employees who were jointly employed bythe same supplier employer and different user employers.

50. 29 CFR § 102.61(1) (West 2001) (petition for certification shall contain the nameof the employer); Petition, item 2.

51. 29 U.S.C. § 158(a)(5).52. S.S. Kresge Co., 416 F.2d 1225 (6th Cir. 1969); Central Transport, Inc., 306

N.L.R.B. 166, 139 L.R.R.M. (BNA) 1404 (1992).53. Sturgis, 2000 WL 1274024, at *20.54. Id. at *1.55. Id. at *12.



The Sturgis board did not need to pass on the validity of Greenhootto decide the cases before it. Nevertheless, its ultimate disposition ofGreenhoot makes sense. A Greenhoot-type unit is different from a unitdescribed as multiemployer in two respects: In a Greenhoot unit, first,every employer shares control over its employees with another em-ployer, and second, there is an employer common to all employees. Theopposite is true, in both respects, in a unit described as multiemployer.Nevertheless, a Greenhoot type unit is like a multiemployer bargainingunit in a more important respect. It brings together, in one bargainingunit, multiple employers (the users) who have not consented, eitherimplicitly or explicitly, to come together. This element distinguishesGreenhoot from Lee Hospital, Sturgis, and Jeffboat Division and war-rants a different result.

The final unit for consideration is present in none of the cases dis-cussed so far. It is a unit that consists of the employees of one useremployer and several supplier employers. Under the majority’s ratio-nale in Sturgis, this unit cannot be considered a multiemployer bar-gaining unit because the user level is not multiple. That basis for dis-tinguishing multiemployer bargaining unit bears no relationship tosection 9(b). This unit should be barred under section 9(b) because itbrings together multiple employers, the suppliers, who have not con-sented to come together.

VII. Conclusion: Consent Is the Controlling FactorAll variations of units and their variable factors may be summa-

rized in the following table, but the one factor that is legally significantis consent. Under section 9(b), multiple employers may not be combinedin the same bargaining unit absent consent, whether implicit or dem-onstrated. That is so without regard to whether the multiple employersare suppliers or users.

VIII. Implications of SturgisA. Community of Interest

Plainly, Sturgis is not the end of the road for supplier/user units,which are now held not to be multiemployer bargaining units. Beforethe jointly employed employees or a supplier and a user may be com-bined in one unit with the solely employed employees of the user, theproposed unit must survive a gauntlet of community-of-interest tests.56

Sturgis merely removes an artificial, albeit convenient, barrier toreaching the community-of-interest test:

. . . [A]pplication of our community-of-interest test may not alwaysresult in jointly employed employees being included in units with

56. Overnite Transp. Co., 322 N.L.R.B. 723, 723–24, 154 L.R.R.M. (BNA) 1019(1996).


196 17 THE LABOR LAWYER 183 (2001)T

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solely employed employees. We do not prejudge the outcome of thisanalysis in the cases before us. Having decided above that the statutedoes not require consent of both employers for the establishment ofsuch units, we simply find that their appropriateness will be decidedbased on their particular circumstances, using the Board’s traditionalanalysis.57

Since a contingent or temporary work force is at the heart of thesecases, the most obvious limitation on including them in a bargainingunit is the principle that temporary or casual employees are not eligibleto vote in representation elections.58 In order to include an employeewithin the unit, it must be shown that “the employee performs unitwork with sufficient regularity to demonstrate a community of interestwith remaining employees in the bargaining unit.”59

In the construction industry, the rules are more relaxed. A workeris eligible to vote in the construction industry (1) if the worker has beenemployed for at least thirty days within the twelve months precedingthe eligibility date, or (2) if the worker has been employment for someamount of time within the preceding twelve months and for at leastforty-five days within the preceding twenty-four months.60 Suppose aconstruction worker is employed on a regular basis by a supplier em-ployer, but on a temporary basis by a user employer. Which set of eli-gibility rules should govern? If the construction industry rules govern,presumably, the NLRB will apply them solely to employment for theuser employer.

In J.E. Higgins Lumber Company, Member Hurtgen noted hisagreement with the majority decision in Sturgis but noted also that hewould have “serious concerns” about finding a community of interest“in many supplier/user situations” because “the two groups are likelyto have different economic emoluments. . . . [I]n many supplier/usersituations, the economic emoluments of employment for the jointly em-ployed group are set by the supplier, while the emoluments for the usergroup are set only by the user.” 61 The supplier and user employers arelikely to have divergent interests too. Depending on the severity of in-

57. Sturgis, 2000 WL 1274024, at *15 (citations omitted).58. Owens-Corning Fiberglass Corp., 140 N.L.R.B. 1323, 52 L.R.R.M. (BNA) 1246

(1963); E. F. Drew & Co., Inc., 133 N.L.R.B. 155, 48 L.R.R.M. (BNA) 1615 (1961) (em-ployees hired through U.S. Employment Service on temporary basis excluded); Sealite,Inc., 125 N.L.R.B. 619, 45 L.R.R.M. (BNA) 1153 (1959) (laborers and truck drivers hiredfor particular construction jobs lasting several days to several months excluded); Conti-nental Winding Co., 305 N.L.R.B. 122, 124, 138 L.R.R.M. (BNA) 1397 (1991) (Kelly Ser-vices and user found to be joint employers, but their employees excluded for lack ofshowing continuity and regularity of employment).

59. Pat’s Blue Ribbons and Trophies, 286 N.L.R.B. 918, 127 L.R.R.M. (BNA) 1034(1987).

60. Daniel Constr. Co., 167 N.L.R.B. 1078, 66 L.R.R.M. (BNA) 1220 (1967); Steiny& Co., 308 N.L.R.B. 1323, 141 L.R.R.M. (BNA) 1217 (1992).

61. J. E. Higgins, 2000 WL 1663426, at *3.



terest differences, a future case may find that this factor underminesa community of interest between the two groups of employees.

B. AccretionIn the accretion context (Jeffboat Division), additional limitations

apply. First, “[t]he Board has followed a restrictive policy in findingaccretion because it forecloses the employees’ basic right to select theirbargaining representative.”62 The NLRB adds employees to a bargain-ing unit without their consent “only when the additional employeeshave little or no separate group identity . . . and when the additionalemployees share an overwhelming community of interest with the pre-existing unit to which they are accreted.” 63

Second, imposing an existing labor contract on an employer in theaccretion context is wholly different from requiring an employer to par-ticipate in negotiating a contract in a newly certified bargaining unit.Dissenting Member Brame and some of the amicus curiae argued thatthis result would violate the principle expressed by the U.S. SupremeCourt in H.K. Porter Co. v. NLRB,64 which states that the board lacksauthority to compel an employer to accept any particular contractualprovision.65 This issue has yet to be tested.

If the board does accrete, issues of retroactivity may be raised.Should the joint employers have been compensating joint employees inaccordance with the terms of the collective bargaining all along?

C. Limitation on the Duty to BargainAn important limitation on the obligations of an employer in a

mixed supplier/user bargaining unit is found in the Sturgis majority’sinsistence that “in these units, each employer is obligated to bargainonly over the employees with whom it has an employment relationshipand only to the extent it controls or affects their terms and conditionsof employment. . . . [A] user employer . . . and its supplier . . . need onlynegotiate with the union over their jointly employed employees to theextent that they each control their conditions of labor.”66 Thus, the sup-plier employer is not obligated to bargain regarding the employees whoare solely employed by the user employer. More significantly, with re-gard to the joint employees, the supplier and the user are each obligatedto bargain solely with regard to those terms and conditions that eachcontrols or affects. For example, in a typical situation, a supplier em-ployer will set the wages and benefits of its employees. On the job, the

62. Towne Ford Sales, 270 N.L.R.B. 311, 116 L.R.R.M. (BNA) 1066 (1984).63. Compact Video Servs., Inc., 284 N.L.R.B. 117, 119–20, 125 L.R.R.M. (BNA) 1167

(1987) (quoting Safeway Stores, 256 N.L.R.B. 918, 918, 107 L.R.R.M. (BNA) 1338 (1981));See also Member Hurtgen’s precautionary concurrence in J. E. Higgins, 2000 WL1663426, at *3.

64. 397 U.S. 99 (1970).65. See also NLRB v. Burns Int’l Sec. Servs., 406 U.S. 277 (1972).66. Sturgis, 2000 WL 1274024, at *15.



user employer will set the hours of work and direct the work. In thatsituation, according to the majority, the user will not be required tobargain with the union regarding wages or benefits, and the supplierwill not be required to bargain regarding hours or onsite working con-ditions. The majority was “confident that bargaining in these units isfeasible. Since employers will be obligated to bargain only over thoseterms and conditions over which they have control, we believe . . . thatemployers and unions will be able to formulate appropriate and work-able solutions to logistical issues that may arise.”67

D. Secondary ActivityThe implications of Sturgis for secondary activity are problematic.

Regardless of Sturgis, joint employers will not be neutral with regardto disputes relating to their jointly employed employees.68 With regardto disputes relating to the user’s solely employed employees, a supplierwill be neutral if its employees (the jointly employed employees) arenot performing struck work (i.e., work normally done by the user’ssolely employed employees).69 In fact, the supplier might often be per-forming precisely that work, but its loss of neutrality will have nothingto do with Sturgis.

Dissenting Member Brame felt the “model adopted by the majority. . . could unnecessarily complicate the identification of the primary em-ployer in disputes by creating the mistaken impression that a supplieremployer such as a temporary agency is a primary employer in contro-versies between the user employer and its solely employed employ-ees.”70 In that event, Member Brame felt that a dispute could spill overto involve other user employers of the supplier, but he thought it wouldonly be a “mistaken impression” that the supplier employer was a pri-mary employer.71 In fact, he stated, “Action by a union against theagency in these circumstances would be purely secondary because theagency, rather than being able to settle the dispute through its ownaction, could only bring about a resolution by exerting pressure on theuser employer.”72

Employers have the assurance of the AFL-CIO that it agreed withMember Brame. In its post-argument brief to the board, the AFL-CIOwrote,

It is also settled that the joint employers’ duty to bargain is limitedin scope to the joint employees. [Citations omitted.] Thus, a joint em-ployer has no duty toward employees in a bargaining unit who arenot its own. It follows that if a dispute arises within the unit which

67. Id. at *16.68. Local 363, IBT, 214 N.L.R.B. 868, 88 L.R.R.M. (BNA) 1102 (1974).69. Cf. Local 761, IUE v. NLRB, 366 U.S. 667 (1961).70. Sturgis, 2000 WL 1274024, at * 40 (emphasis added).71. Id.72. Id.



relates only to the non-joint employees, only the employer of thoseemployees will be treated as the primary. For example, taking thefacts of Jeffboat, if a bargaining dispute arises which concerns onlythe employees of Jeffboat, and not the joint employees, [the temporaryagency] would be treated as a neutral person with respect to thatdispute, and entitled to protections from coercive conduct that anyneutral is entitled to under section 8(b)(4). However, if the disputewas unit wide—encompassing both the joint employees and the otheremployees in the unit—then [the temporary agency] would not be aneutral and would be subject to the range of pressures that any pri-mary employer may experience.73

As noted earlier, the temporary agency’s exposure to primary status inthe latter example would be based on its status as a joint employer, noton any status newly created by Sturgis.

E. Increased Board LitigationThe Sturgis decision means increased time and litigation for the

NLRB and for the parties that come before it. Difficult issues of com-munity of interest and accretion will be litigated in representation pro-ceedings, and issues of the parties’ respective duties to bargain and ofsecondary activity will be litigated in unfair labor practice proceedings.Especially in the representation area, quick stipulations are unlikely.

73. Post-Argument Brief of the AFL-CIO for the National Labor Relations Board at18–19, Jeffboat Division (9-UC-406), M.B. Sturgis, Inc. (14-RC-11572), Value Recycle,Inc. (33-RC-4042).


201

Epilepsy Foundation of NortheastOhio and the Recognition ofWeingarten Rights in the Non-Organized Workplace: AManifestly Correct Decision and aSeed for Further Progress

Sam HeldmanHilary E. BallFrederick T. Kuykendall III*

In the first half of the last century, legal realism grew to be thedominant strain in American jurisprudence. In a very rough nutshell,this realism was the recognition that judges, in deciding cases, weredoing more than applying neutral logic and deduction to derive thecorrect answer from precedent; realists understood that somethingmore than logic, something including even an awareness of reality andsocial policy, went into the art of judging. As the century went on, thisunderstanding became so dominant that it was common in the aca-demic legal community to say, “We are all realists now.”

Later, an even more emphatic and often accusatory description ofjudging was put forth by some of those who practiced what becameknown as Critical Legal Studies. Some of those Crits (as they calledthemselves) argued that law and judging were raw acts of politics,which were often designed to serve one class at the expense of another.This doctrine was—as one might have expected in light of the timeperiod and historical context—put forth by those on the left, who wereclaiming that the class that dominated legal decision making was therich, who used their power at the expense of workers. This view, ofcourse, was most often rejected by those at the centers of power in legalacademia and the establishment, who tended to hold a more idealized—or at least more overtly respectful—view of legal decision makers.

* The authors are all of counsel with Gardner, Middlebrooks, Gibbons, & Kittrell,P.C., in the District of Columbia and Alabama. In addition to other aspects of their prac-tice, they represent unions and employees in labor and employment matters. An earlierversion of this article was presented in Kauai, Hawaii, at the 2001 Midwinter Meetingof the Labor and Employment Section’s Committee on the Development of the Law underthe National Labor Relations Act (February 2001).



However, upon reading much of the management-side response tothe decision of the National Labor Relations Board (NLRB) in EpilepsyFoundation of Northeast Ohio,1 it is tempting to say not just that weare all realists, but that we are all Crits now. That management-sideresponse, as disseminated through the new quasi-populist medium ofpamphleteering (i.e., the World Wide Web), has the continual refrainthat Epilepsy Foundation was an act of raw politics and that politicalpower must be mobilized against it. The online newsletter of the firmWalter & Haverfield LLP, for instance, asserts that the decision was“seemingly based on political party lines” and that the decision (unlessreversed on appeal) “will likely stand until a Republican president iselected.”2 The law firm Duvin, Cahn & Hutton even more bluntly as-serts that it knows what was on NLRB members’ minds, calling Epi-lepsy Foundation an “abrupt and politically motivated reversal of awell-settled legal doctrine.”3 A Delaware business publication, the NewCastle Business Ledger, says, “Since the National Labor RelationsBoard is headed by five members appointed by the president for five-year terms, its rulings often twist and turn with the political winds ofchange. [Epilepsy Foundation] is a classic example of that phenome-non.”4 A management advocacy group calling itself LPA (the public pol-icy association of senior human resource executives) highlights Epi-lepsy Foundation in an article titled Recent Reversals of EstablishedPrecedents Highlight Politicization of the Board, declaring that muchof the board’s decision making is pure politics and going so far as toadvocate eliminating the NLRB’s jurisdiction over unfair labor practiceissues. 5 The funny thing, of course, is that (unlike the first Crits) thischorus proceeds from the view that the basic problem in contemporaryAmerican labor law is that the unfortunate bosses are suffering might-ily from arbitrary power wielded by a “dictatorship of the proletar-iat”6—a view that no one but a management lawyer or anti-union con-sultant could say with a straight face.

It is our belief, however, that this chorus of management-side neo-Crits has appropriated only some of the rhetoric of critical legal the-

1. 331 N.L.R.B. No. 92, 164 L.R.R.M. (BNA) 1233, 2000 WL 967066, at *1 (2000).2. Randall G. Ammons, New NLRB Decision Makes It Harder to Talk to Employees,

at http://www.walterhav.com/news_item2.asp (visited Apr. 4, 2001).3. Duvin, Cahn & Hutton, Weingarten Rights: NLRB Rules That Nonunion Employ-

ees Have the Right to Insist on Presence of Coworkers at Investigatory Meetings, athttp://www.duvinlaw.com/publications/newsletter/clientalert/weingarten.htm (visited Apr.4, 2001) (emphasis added).

4. Robert F. Stewart, Jr., Union-Like Decision for Non-Union Employees, athttp://www.ncbl.com/archive/09–00labor.html (visited Apr. 4, 2001).

5. Recent Reversals of Established Precedents Highlight Politicization of the Board,at http://www.nlrbwatch.com/news/Recent_Reversals.htm (visited Apr. 4, 2001).

6. Because this is a law journal, we must note that the phrase “dictatorship ofthe proletariat” appears at least as far back as 1875, in Karl Marx’s “Critique of theGotha Programme.” See http://www.marxists.org/archive/marx/works/1870/gotha/ch04.htm(visited Apr. 4, 2001).


Weingarten Rights in the Non-Organized Workplace 203

ory—that is, a willingness to deride as political any decision with whichthey disagree. They are critical in that they criticize, but critical think-ing means more than disagreeing—it also entails the use of close, rig-orous, and careful logical analysis. In this sense, the new managementCrits utterly fail to engage in actual critical thinking. They have ele-vated rhetoric over substance.7 Their criticisms of Epilepsy Foundationare, if evaluated seriously, quite weak. We will show in this article thatEpilepsy Foundation makes perfect sense as a matter of law and publicpolicy.

I. Legal Background and the Limited Nature of the RightRecognized in Epilepsy Foundation

The basic legal background of Epilepsy Foundation is familiar tomost labor lawyers. Section 7 of the National Labor Relations Act(NLRA) states, “Employees shall have the right to self-organization, toform, join, or assist labor organizations, to bargain collectively throughrepresentatives of their own choosing, and to engage in other concertedactivities for the purpose of collective bargaining or other mutual aidor protection.”8 Section 8(a)(1) makes it an unfair labor practice for anemployer “to interfere with, restrain, or coerce employees in the exer-cise of the rights guaranteed in section 7.”9

Thus, although we are most familiar with section 7 as a source ofrights related to union activity—organizing, representation elections,and the negotiation and administration of collective bargaining agree-ments—it is clear from the language of section 7 that the statute alsorecognizes rights that are applicable outside of the context of unionactivity.10 The right to engage in concerted activities for the purpose ofmutual aid or protection, under the statute, is a right in every work-place (at least so long as the employer is subject to the NLRA, as mostsignificant private employers are). There have been, over the years,many cases recognizing and enforcing section 7 rights in non-organizedworkplaces. As a recent example, see Odyssey Capital Group III, L.P.11

Numerous other examples of cases finding activity protected under sec-

7. It is noteworthy that this criticism of NLRB decision making is not the onlyrecent instance in which Crit-like sound-bites have come from legal commentators on theright, ascribing raw political motivation to decisions with which the commentators dis-agree. Another particularly stark example was the response of many Republican legalcommentators to the decisions of the Florida Supreme Court in the litigation over the2000 presidential election.

8. 29 U.S.C. § 157 (1998).9. 29 U.S.C. § 158(a)(1) (1998).

10. See 29 U.S.C. § 157 (“the right . . . to engage in other concerted activities for thepurpose of . . . other mutual aid or protection”).

11. 2000 WL 1728274, at *1 (2000) (Administrative Law Judge decision holding em-ployees’ action was protected under section 8(a)(1) where—in a non-organized work-place—employees collectively refused to work around asbestos under unsafe conditions).



tion 8(a)(1) in non-organized workplaces are listed in the NLRB’s de-cision in Materials Research Corp.12 The Supreme Court, too, agreesthat employees in non-organized workplaces do enjoy the section 7 rightto engage in concerted activity for mutual aid or protection.13

Most labor lawyers are also quite familiar with Weingarten rights,under the Supreme Court’s decision in NLRB v. Weingarten, Inc.14 InWeingarten, the Supreme Court upheld the NLRB’s ruling that, undersections 7 and 8(a)(1), it is an unfair labor practice for an employer todeny “an employee’s request that [a] union representative be presentat an investigatory interview which the employee reasonably believedmight result in disciplinary action.”15 The right to the presence of sucha representative was, according to both the NLRB and the SupremeCourt, to be found in the above-quoted broad language of section 7; itwas an instance of “concerted activities for the purpose of . . . mutualaid or protection” (the NLRB concluded, and the Supreme Court agreed,that the conclusion was a reasonable and permissible one).16

As the Weingarten right arises from a portion of section 7 that islikewise applicable to non-organized workplaces, the question thereforenaturally arose whether an employee in a non-organized workplace en-joyed a similar section 7 right to be accompanied when called to aninvestigatory meeting that the employee reasonably believed might re-sult in disciplinary action. In 1982, in Materials Research Corp., theboard held that employees in non-organized workplaces enjoyed sucha right.17 In 1985, in Sears, Roebuck & Co., the board overruled Mate-rials Research, holding that employees in non-organized workplaceshave no right analogous to Weingarten; the board went so far as to saythat the NLRA itself actually prohibits the board from recognizing sucha right in non-organized workplaces.18 In 1988, in E.I. DuPont deNemours, the NLRB—while continuing not to recognize Weingarten oranalogous rights in the non-organized workplace—retreated from theextreme position staked out in Sears: The board acknowledged that itcould recognize such rights but chose not to.19

In Epilepsy Foundation, the NLRB returned to the issue at theurging of the general counsel and once again considered whether “Wein-

12. 262 N.L.R.B. 1010, nn. 15–16, 110 L.R.R.M. (BNA) 1401 (1982).13. See, e.g., NLRB v. Washington Aluminum Co., 370 U.S. 9 (1962).14. 420 U.S. 251 (1975).15. Id. at 252.16. Id. at 252–53 (citing Weingarten, Inc., 202 N.L.R.B. 446, 82 L.R.R.M. (BNA)

1559 (1973) (noting that the right was derived from this portion of section 7)); Id. at260 (upholding the NLRB’s decision as a reasonable interpretation of this portion ofsection 7).

17. 262 N.L.R.B. 1010, 110 L.R.R.M. (BNA) 1401 (1982).18. 274 N.L.R.B. 230, 118 L.R.R.M. (BNA) 1329 (1985).19. 289 N.L.R.B. 627, 128 L.R.R.M. (BNA) 1233 (1988).



garten should be extended to employees in non-unionized workplaces,to afford them the right to have a co-worker present at an investigatoryinterview which the employee reasonably believes might result in dis-ciplinary action.”20 The board—after substantial discussion of Wein-garten, Materials Research, Sears, DuPont, and the issues of statutoryconstruction and labor policy involved in the question—decided, “[T]herule enunciated in Weingarten applies to employees not represented bya union as well as to those that are.”21 The NLRB thus “overrule[d] theBoard’s decision in DuPont and return[ed] to the standard set forth inMaterials Research Corp.”22 The board concluded that DuPont, and therejection of Weingarten rights for employees in non-organized work-places, was “inconsistent with the rationale articulated in the SupremeCourt’s Weingarten decision, and with the purposes of the Act.”23

Thus the present law under Epilepsy Foundation is that an em-ployee in a non-organized workplace, when called by the employer foran investigatory interview that the employee reasonably believes mightresult in disciplinary action, has the right to have a co-worker present.It is important (because, among other reasons, it allows a realistic ap-praisal of whether the decision is really so disastrous for managementas some critics have publicly claimed) to note that the right recognizedin Epilepsy Foundation—like the Weingarten right in organized work-places—is a rather limited right. (This is based on the assumption that,which we think is probably a fair one, the NLRB is unlikely to extendthe Epilepsy Foundation right for non-organized workers beyond theparameters of the Weingarten right.)

The right is limited, as the Supreme Court noted in Weingartenitself, by the following points: (1) the right exists only when invoked bythe employee, and notably, the employer under current law has no ob-ligation to notify the employee of her right to make such a request;(2) the right exists (so far) only as to interviews that the employeereasonably believes may result in discipline; (3) the employee does nothave a statutory right that the employer must bargain with the em-ployee or her accompanying co-worker;24 and (4) as with the Weingartenright, the employer may—once the employee requests the presence ofa co-worker—refuse to go forward with the investigatory interview andmay proceed to discipline the employee without ever hearing her sideof the story.25 The employer can even pressure the employee with the

20. 2000 WL 967066, at *1 (noting that the general counsel urged the NLRB torevisit the issue).

21. Id. at *6.22. Id.23. Id. at *2.24. Weingarten, 420 U.S. at 257–60.25. Id. at 258–59.



threat that it will do just that—that is, the employer can tell the em-ployee that it will hear her out only if she relinquishes her statutoryright.26

It is sometimes naively believed that the Weingarten right—andnow maybe the Epilepsy Foundation right—is analogous to that aspectof Miranda v. Arizona27 and related constitutional cases which recog-nize that an accused has the right to counsel in police interrogations.(After all, who could object to a rule that gives an accused loyal em-ployee the same right as an accused criminal?) A critical understandingof Weingarten and Epilepsy Foundation and an appraisal of the prac-tical effects of those decisions on American work-life require the un-derstanding that, in fact, Weingarten and Epilepsy Foundation arevastly weaker than this aspect of Miranda and related cases. Amongother things, the essence of Miranda is that an accused criminal mustbe given notice of, among other rights, her right to request a represen-tative in the interview; yet the employee has no such right to notice.Equally importantly, an accused criminal who invokes her right tocounsel under Miranda and related cases cannot lawfully be cajoled orpressured into recanting that invocation of the right (through, for in-stance, a declaration that she will get a chance to tell her story only ifshe withdraws her request for counsel), yet the employee is subject toprecisely that type of badgering, designed to induce her to abandon herstatutory right to be accompanied in the interview.

With this understanding of the background and the limited scopeof Epilepsy Foundation, it soon becomes clear that the chorus ofmanagement-side criticism of the decision is wildly overblown.

II. The NLRB’s Decision in Epilepsy Foundation Is a Permis-sible Interpretation of the NLRA and Should Be Enforcedby the CourtsThough some management-side advocates argue that U.S. courts

of appeals (or the Supreme Court) will (or should) deny enforcement ofthe board’s decision in Epilepsy Foundation, we believe that well settledprecedent requires federal courts to uphold the board’s decision.28

The most specific guidance in this regard is the fact that existingfederal court precedent already holds that the rule to which the boardreturned in Epilepsy Foundation is a reasonable and permissible in-terpretation of the NLRA. The Third Circuit so held in Slaughter v.NLRB, finding that the NLRB in Sears had wrongly asserted that the

26. Id.27. 384 U.S. 436 (1966).28. The Epilepsy Foundation has filed a petition for review of the decision in the

U.S. Court of Appeals for the D.C. Circuit, Docket Number 00–1332. The petition ispending as of this writing.



act forbade extension of Weingarten to non-organized employees.29 Thesame court also so held in E.I. DuPont de Nemours & Co. v. NLRB,upholding the Materials Research rule extending Weingarten rights tonon-organized employees.30 Though the Ninth Circuit denied enforce-ment of a Materials Research-era NLRB decision applying Weingartenin a non-organized workplace,31 that decision was (as had been ex-plained by the Third Circuit in its DuPont decision) based on peculiarfacts. Thus, the more persuasive and generally applicable existing ju-dicial precedent is the Third Circuit’s Slaughter/DuPont, which sup-ports the current Epilepsy Foundation rule.

More general precedent regarding judicial review of NLRB deci-sions also supports enforcement of Epilepsy Foundation. The generalprinciple, of course, is that Congress has entrusted the NLRB with theprimary responsibility of interpreting the NLRA in light of reality andpolicy. The courts are to enforce the board’s decisions so long as thosedecisions are rational and consistent with the language of the NLRA.32

The board’s decision in Epilepsy Foundation easily passes muster un-der this very deferential standard of review.

First, the decision is not foreclosed by the language of the NLRA.To the contrary, the language of section 7—which protects employees’rights, whether or not their workplaces are organized, to “engage in . . .concerted activities for the purpose of . . . mutual aid or protection”—is easily broad enough to encompass the activity at stake in this con-text. At stake here is, in essence, a declaration by employees (at leasttwo and perhaps more) that they will look out for each other when theemployer threatens possible discipline and that for their mutual pro-tection they will stick together, refusing to allow the employer to isolatethem from each other in the crucial area of discipline. This is the quin-tessence of concerted activity for mutual protection. At the very least,the NLRB violated no linguistic rule and no congressional command byinterpreting section 7 in this way.

29. 794 F.2d 120 (3d Cir. 1986).30. 724 F.2d 1061 (3d Cir. 1983); see also Epilepsy Found., 2000 WL 967066, at *26

n.75 (Member Brame, dissenting) (detailing the long procedural history of Slaughter andDuPont).

31. E.I. DuPont de Nemours & Co. v. NLRB, 707 F.2d 1076 (9th Cir. 1983).32. See, e.g., ABF Freight Sys., Inc. v. NLRB, 510 U.S. 317, 324 (1994) (holding that

NLRB decisions “merit the greatest deference” because Congress has entrusted theNLRB with the “authority to make specific policy determinations,” and NLRB decisionsare therefore to be enforced unless they are “arbitrary, capricious, or manifestly contraryto the statute.” Id. at 324 (quoting Chevron, U.S.A., Inc. v. Natural Resources DefenseCouncil, Inc., 467 U.S. 837, 844 (1984))); Allentown Mack Sales & Serv., Inc. v. NLRB,522 U.S. 359, 364 (1998) (holding that “[c]ourts must defer to the requirements imposedby the Board if they are ‘rational and consistent with the Act,’ . . . and if the Board’s‘explication is not inadequate, irrational or arbitrary’”).



Turning for a moment from the general rule to the specific facts atissue in Epilepsy Foundation, 33 it surely cannot be denied that theconduct at issue there falls neatly within the plain language of sections7 and 8(a)(1). The case involved two employees, Hasan and Borgs, whoembarked on a path of concerted activity for mutual aid and protection.First, they wrote a memo to their supervisor stating that his supervi-sion was no longer required (although this memo was no doubt some-what presumptuous from an employer’s point of view, there can surelybe no debate that this was concerted activity for mutual aid). Then,after learning that the employer had reacted negatively to the memo,they wrote another memo to a higher supervisor, elaborating on thereasons for their assertion and including various incidents where theirsupervisor had acted inappropriately—again, classic concerted pro-tected activity. The case came to a head, with regard to Borgs’s dis-charge, when the two supervisors then directed Borgs to meet withthem. To make a long story short, Borgs asked if Hasan (his cohort)could come to the meeting as well because he was intimidated by theprospect of meeting alone with the two supervisors. The supervisorsrefused Borgs’s request. Borgs still resisted going to the meeting with-out Hasan’s accompaniment. Borgs was discharged the next day for“gross insubordination” (i.e., refusing to go to the meeting alone asdirected).34

When Borgs declared that he preferred to meet the supervisorswith his colleague Hasan by his side, that plainly amounted to “con-certed activities for the purpose of . . . mutual aid or protection” withinthe meaning of section 7. Borgs and Hasan were in this together, actingjointly because they obviously knew (as all employees learn sooner orlater) that joint action is more powerful than the act of one individualin isolation. When Borgs sought to have Hasan accompany him in themeeting, it was clearly an act by which Borgs sought to match the em-ployer’s double-team (two supervisors) with equal strength. He did thisnot only for his own protection, but also for Hasan’s because, after all,they were in it together and would (so long as they stuck together) sinkor swim together. The employer, for its part, undoubtedly recognizedthat its own position, strength, and intimidating power vis-a-vis theemployees would be enhanced if it could isolate them from each other.That is why the employer took action that, under the plain language ofsection 8(a)(1), interfered with and restrained the employees’ at-tempted exercise of section 7 rights. The employer told Borgs that heand Hasan could not stick together in this meeting.

Surely any person reasonably versed in the English language willagree that these facts come within the language of sections 7 and

33. Epilepsy Found., 2000 WL 967066, at *1.34. Id. at *2.



8(a)(1). Borgs and Hasan tried to stick together (“concerted activities”)to present their joint position to the employer in order to improve theirwork lives and reduce the possibility that they would be disciplined(“for the purpose of mutual aid or protection”), and the employer flatlydemanded the right to isolate them from each other at the most criticalmoment (“interfere with, restrain, or coerce”).

Moreover, the board’s decision in Epilepsy Foundation is certainlynot arbitrary or capricious in the extreme sense, which is necessarybefore a court can overturn an NLRB decision on such an issue of laborlaw and policy. While management advocates freely assert that theboard’s ruling in Epilepsy Foundation was not well considered, theircomplaint in this regard does not go beyond the sort of attack that onecan always make against a judicial or administrative decision. One canalways say (and is sometimes even correct in saying) that the logicemployed by the judge or other decision maker was not airtight or thatthe decision would have negative consequences which the judge or de-cision maker failed to refute or that sort of thing. Those, by and large,are the type of criticisms that management advocates are hurling atEpilepsy Foundation, but judicial deference to the board means that agreat deal more than that sort of criticism is required before the courtscan overturn a decision of the board.

The main argument made by those who would have the courts denyenforcement of Epilepsy Foundation is that the decision is contrary tothe thrust of section 9 of the NLRA, which requires an employer tobargain only with a certified or recognized majority representative.35

This contention was, for instance, a large part of Member Brame’s dis-sent.36 This argument should not prevail because—unless, for rhetor-ical effect, one vastly overstates the parameters of the right recognizedin Epilepsy Foundation—that right does not conflict at all with theprinciple of exclusive representation in section 9.

In order to manufacture a conflict between section 9 (or even thespirit of section 9) and Epilepsy Foundation, it is necessary for a criticto portray Epilepsy Foundation as requiring a non-organized employerto bargain—or, at the very least, to deal—with a representative otherthan one that is properly certified or recognized under section 9. Thecritic’s claim is that Epilepsy Foundation requires the employer in aninvestigatory interview to treat the accompanying co-worker as the rep-resentative of the target (i.e., the employer is required to engage in adialogue with the representative, listening to the points that the rep-resentative seeks to make and (perhaps) even going so far as to nego-tiate or debate with that representative). If that were what EpilepsyFoundation required, then there would be a colorable argument that

35. 29 U.S.C. § 159 (1988).36. Epilepsy Found., 2000 WL 967066, at *22 (Member Brame, dissenting).



the decision was contrary to the concept of representation as embodiedin section 9.

That sort of dealing or bargaining with a representative is not whatEpilepsy Foundation requires. First, even if the employer does go for-ward with the investigatory meeting in the presence of the accompa-nying co-worker, it is clear that no bargaining is required. This is thelaw even in the organized setting under Weingarten,37and the same istrue under Epilepsy Foundation.38 Thus, there is no conflict with sec-tion 9, which sets up a system of exclusive representation only as tobargaining.39 The Third Circuit in Slaughter v. NLRB recognized thata rule such as that adopted in Epilepsy Foundation would not conflictwith section 9 for this very reason.40 Moreover, the argument that Ep-ilepsy Foundation conflicts with section 9 misses the point for anotherreason as well: Epilepsy Foundation (like Weingarten) leaves the em-ployer entirely free to decide not to have the investigatory meeting atall and to proceed to a decision on discipline without any interactionwhatsoever with the co-worker who would have accompanied the targetto an investigatory interview.41 Thus, Epilepsy Foundation does noteven come close to a conflict with section 9 because it does not requirethe employer to have any contact with anyone who might possibly beconsidered a representative outside the scope of section 9. To say thatEpilepsy Foundation conflicts with section 9, then, is ultimately no dif-ferent from saying that an employer does, or should, have the right toforbid employees in a non-organized workplace from sticking togetheron matters of mutual concern or the right to be free from collectiveaction by employees. The plain language of section 7, and years ofNLRB and court decisions, show that the non-organized employer hasno such right.42

Indeed, even just to call the accompanying co-worker a represen-tative is to misstate the nature of the right under Epilepsy Foundation.The accompanying co-worker is not a representative in the sense thata union business agent or even a steward is. The accompanying co-worker is instead one with a shared concern for mutual aid and pro-tection and with an equal part in the collective activity. Her presenceis, in many cases, desired as part of a pact made among co-workers towatch each other’s back in case of trouble, to stand beside each otherwhen conflict with the employer is imminent, or to pay attention towhat happens to each other because of the recognition that the fates ofall employees are intertwined. The role of the accompanying co-worker

37. Weingarten, 420 U.S. at 259–60.38. Epilepsy Found., 2000 WL 967066, at *5.39. See 29 U.S.C. § 159.40. Slaughter, 794 F.2d at 127–28.41. Epilepsy Found., 2000 WL 967066, at *4; Weingarten, 420 U.S. at 259.42. See, e.g., Wash. Aluminum Co., 370 U.S. at 9.



under such a pact of collective action is, at least in part, to share knowl-edge and information (e.g., about relevant laws and employer practices)with the target and to observe what occurs in the investigatory meeting(and thereby, among other things, both to deter employer overreachingand to be a potential witness should a hearing of any sort become nec-essary). This sort of concerted activity among co-workers is even moreobviously protected by section 7 than is the Weingarten right to a unionrepresentative in a similar meeting. Even more so than the union rep-resentative, the co-worker in Epilepsy Foundation falls within the clearcore of the section 7 phrase “concerted activities for the purpose of . . .mutual aid or protection.”43 For these reasons, the board’s decision inEpilepsy Foundation is certainly due to be enforced by the courts.44

III. The Board’s Decision Is Not Merely a Permissible Inter-pretation of the NLRA; It Is a Manifestly CorrectInterpretationThe NLRB’s decision in Epilepsy Foundation is not—as discussed

earlier—just a permissible and reasonable interpretation of the NLRA.It is, beyond that, a wise and good decision. In the dissents in EpilepsyFoundation and the chorus of Internet criticisms from the managementside, several complaints about the decision are repeated time andagain. They are all, however, quite overstated and ultimately veryflimsy.

43. It remains to be seen, in future cases, whether employees in non-organized work-places have the right to bring a real representative (i.e., someone other than a co-worker)to an investigatory meeting, where the retention of such a representative is itself theresult of concerted activity among employees. The recognition of that right would be trulyanalogous to Weingarten. As it stands, for the reasons mentioned in the text above, Ep-ilepsy Foundation is in fact an easier case than Weingarten, as the request for an accom-panying co-worker under Epilepsy Foundation does not involve a representative as suchbut instead is, in itself, direct concerted action.

44. We note that we are not making a prediction with a confidence level of 100%that the rule in Epilepsy Foundation will be upheld by the courts in all instances (par-ticularly in those future cases where the facts are somewhat less perfect, as an instanceof concerted activity for mutual aid and protection, than they were in Epilepsy Founda-tion itself). We are realists—or perhaps even Crits—enough to know that there is apossibility that some court(s) will deny enforcement of such a board decision by (for in-stance) analogizing it to Lechmere, Inc. v. NLRB, 502 U.S. 527 (1992). The thrust of theSupreme Court’s decision in Lechmere was that the Court had already, in prior cases,announced the correct interpretation of the act on the subject at hand (there, it was non-employee access to employer property), and the NLRB had no authority to adopt a dif-ferent approach once the Court indicated what the correct rule was. As just noted, somewill try to analogize Epilepsy Foundation to Lechmere, claiming that the Supreme Court’sdecision in Weingarten marked the “correct” and final word on the topic of investigatorymeetings. The analogy would be fundamentally flawed, because Weingarten clearly didnot (and could not have, because the issue was not presented) hold that employees innon-organized settings have no right of the sort recognized in Epilepsy Foundation.Therefore, the board did not in any sense violate Weingarten by recognizing the existenceof analogous rights in the non-organized workplace. Lechmere is therefore not a properanalogy (even if one assumes that Lechmere was correctly decided).



Perhaps the most often repeated criticism of Epilepsy Foundation—even from those management advocates who do not cynically chalk thedecision up to raw politics—is that it overruled precedent.45 This com-plaint is not a logical part of a coherent management/Republican/rightjurisprudence these days; conservative judges have certainly not shrunkfrom overturning precedent in recent years (consider, among many otherexamples, Seminole Tribe of Florida v. Florida46). As discussed earlier,the precedent that Epilepsy Foundation reversed was itself an overrulingof prior precedent.47 In other words, precedent is not sacrosanct to man-agement advocates or to employee advocates; each of us has worked atone time or another to have some adverse precedent overturned. Fur-thermore, the U.S. Supreme Court has explicitly recognized that theboard—like all rational decision makers—can rationally change its col-lective mind from time to time.48 From the point of view of the EpilepsyFoundation itself as an employer and litigant, there was perhaps thesting of liability (relatively modest) when its conduct had been lawfulunder then-existing law; for the rest of us, the fact that Epilepsy Foun-dation overturned precedent is essentially irrelevant on a real-world,forward-looking basis. It is no real criticism to say that Epilepsy Foun-dation overturned precedent that itself had overturned precedent.

The next common criticism of Epilepsy Foundation from manage-ment advocates is that it is a trap for the unwary: few non-organizedemployers know about the right, they therefore violate it out of igno-rance of the law, and there is something unfair about this.49 (This wasalso a concern expressed in Member Hurtgen’s dissent.50) We, however,agree with Thomas Jefferson: “Ignorance of the law is no excuse in anycountry.”51 The argument of ignorance could just as easily be made asto every NLRB decision about section 7 rights in the non-organizedworkplace, but as we repeatedly point out in this article, the existenceand enforceability of such rights are well settled. We also cannot helpbut highlight the irony in this assertion that employer ignorance ofEpilepsy Foundation creates some level of unfairness to employers, for

45. See supra note 3.46. 517 U.S. 44 (1996).47. As discussed above, the NLRB in Epilepsy Foundation returned to the rule of

Materials Research, which had been temporarily overruled in Sears and DuPont.48. See, e.g., NLRB v. Curtin Matheson Scientific, Inc., 494 U.S. 775, 787 (1990) (“a

Board rule is entitled to deference even if it represents a departure from the Board’s priorpolicy”).

49. See, e.g., Moffatt Thomas Barrett, Rock & Fields, CHTD, The NLRB’s EpilepsyFoundation Decision Sets a Trap for Unwary Non-union Employers, at http://www.moffatt.com/jddnews.html (visited Apr. 4, 2001).

50. Epilepsy Found., 2000 WL 967066, at *14.51. Thomas Jefferson, Letter to Andre Limozin, 22 Dec. 1787. Jefferson continued

with a level of cynicism which is perhaps appropriate in labor law: “Ignorance of the lawis no excuse in any country. If it were, the laws would lose their effect, because it canalways be pretended.”



from our point of view, the real unfairness is that Epilepsy Foundationdoes not require employers to notify employees of their right to be ac-companied in an investigatory interview. We therefore have the oddspectacle of management advocates who say in one breath that em-ployer unawareness of Epilepsy Foundation is unfair to employerswhile, in the other breath, advising employers to take advantage ofemployees’ unawareness of the decision.

Another common criticism of Epilepsy Foundation among manage-ment advocates is that it interferes with legitimate interests of em-ployers in investigatory meetings. Though it is natural and to someextent appropriate that those advocates feel more deeply about the in-terests of employers than of employees, we believe nonetheless that theasserted employer interests at stake are not actually affected to anysubstantial degree by Epilepsy Foundation.

Some management advocates claim that an employee’s right to beaccompanied by a co-worker to an investigatory meeting will interferewith the employer’s ability to obtain the truth in such a meeting.52 Thatclaim is wrong as a matter of practical reality. This culture has cometo understand that isolating vulnerable witnesses from all sources ofsupport, in intimidating situations where they have much to lose, isnot (as a factual matter) the method best designed to discover the truth.In the employment setting, such a method of investigation will in manyinstances not succeed in obtaining the fullest true picture of the situ-ation. An employee who is scared, isolated, and feeling no sense of con-trol whatsoever over an investigatory meeting often has less ability topresent her own accurate explanation of the facts at issue (either indescribing the facts which mitigate her perceived misconduct, in ex-plaining that similar conduct has been tolerated in other employees, orany of the many other facts that might bear on the situation) than shewould have if she were supported by a co-worker. There is no real rea-son to believe that more truth will emerge in a one-sided meeting thanin a meeting with a more level balance of power.

Another concern often asserted by management advocates is theputative interest of the employer in protecting the confidentiality of thematters at issue in the investigatory interview.53 Denial of the right tobe accompanied by a co-worker to an investigatory interview does notsubstantially protect this putative interest of the employer (even inthose rare cases where it may be an interest that anyone but the

52. See, e.g., Susan L. McGreevy, NLRB Expands Rights of Non-Union Employees,at http://www.contractormag.com/articles/1200/clawtemp.asp (visited Apr. 3, 2001)(claiming “[o]bviously, an ‘adviser’ can influence his co-worker and make it more difficultto get to the facts”).

53. See, e.g., Roxane N. Sokolove & Jonathan L. Sulds, The Presence of CoworkersDuring Investigatory Interviews, at www.akingump.com/labor/publications/pdfs/presence_of_coworkers.pdf (visited Apr. 4, 2001).



employer would consider worthy of the law’s protection; more often, inour experience, this putative interest is not even one which the lawshould protect, but is instead based on mere secretiveness for its ownsake). Even without the Epilepsy Foundation right, an employee whois subjected to an investigatory interview undoubtedly has the right totell other employees about what was said to her by the employer andwhat she said to the employer in such a meeting. That type of discussionamong co-employees, about matters in which they share an importantinterest (i.e., the employer’s disciplinary practices), surely falls withinthe scope of the section 7 phrase “concerted activities for the purposeof . . . mutual aid or protection.”54 So even without Epilepsy Founda-tion, an employer cannot lawfully require that an employee keep con-fidential that which occurred in an investigatory meeting at which shewas the target. Thus, it is not a compelling argument against EpilepsyFoundation to say that the decision undermines the confidentiality ofwhat occurs in such a meeting.

One final putative employer interest that is supposedly under-mined by Epilepsy Foundation is worth noting precisely because it soclearly illustrates the vastly divergent views of employer and employeeadvocates on this topic. This is the assertion by the Walter & Haverfieldfirm that “[u]nfortunately, the worst part about this decision is that itputs you, as an employer, on the defensive and breaks down any trustthat might have been built [between employer and investigated em-ployee] prior to that call to your office.”55 This is a strange usage of theword trust. If the employer is reluctant to have its conduct in the meet-ing observed by another employee and if (as this same firm advocates)the employer is careful not to tell the employee what it knows aboutthe existence of the Epilepsy Foundation right,56 it seems to us thatthis describes a relationship in which there is no real trust whatsoever,in either direction. If an employer feels that it does not trust an em-ployee who would dare engage in concerted protected activity, then thatsays much about management’s attitudes towards the NLRA. The pres-ence of such management anti-act attitudes, however, is not a legiti-mate reason to narrow the interpretation of section 7.

For all these reasons, the protest that Epilepsy Foundation sub-stantially undermines the legitimate interests of employers is vastly

54. See Westside Community Health Ctr., 327 NLRB No. 125, 1999 WL 94097, at*1, *11 (1999) (employees have the right under section 7 to discuss their discipline witheach other, and the employer cannot forbid such discussion); cf. Niles Co., 328 NLRB No.58, 1999 WL 318899, at *1, *8 (1999) (employees have the right under section 7 to discusstheir respective salaries, and the employer cannot forbid such discussion).

55. Randall G. Ammons, New NLRB Decision Makes It Harder to Talk to Employees,at http://www.walterhav.com/news_item2.asp (visited Apr. 4, 2001).

56. Id. (stating “You don’t need to let [the employee] know that she has the ‘Right’to bring someone else along (after all, it’s easier to talk about these issues one-on-one)but if she asks . . . say yes.”)



overstated. Likewise unconvincing are the protests of management ad-vocates that the right recognized in Epilepsy Foundation is of no realbenefit to employees (and that it may even be to employees’ detriment).Management advocates have tended to identify two asserted reasonswhy (in their view) Epilepsy Foundation is of no real benefit to em-ployees; neither of those reasons, when subjected to critical thinking,is strong enough to sway anyone who is not already convinced.

One of the common assertions in this regard is that the grantingof Epilepsy Foundation rights will actually harm employees because,when an employee invokes that right, the employer will likely decideto forego the investigatory meeting altogether and will proceed to dis-cipline the employee without ever hearing her side of the story.57 Thisputative concern, however, suffers from at least two serious flaws:(1) it postulates the most unreasonable sort of employer (i.e., the em-ployer who elevates its own interest in dominance and control, over thedesire to obtain factual information, to such a degree that it is willingto forego any chance of obtaining useful information in order to avoidencountering concerted activity among its employees) and oddly urgesthat the law should cater to the behavior of that employer; and (2) itembraces a curious paternalism, urging the view that people ought nothave rights if the invocation of those rights might cause a negativereaction in others, rather than letting the employee in each instancedecide (as a mature and competent adult) whether her interests wouldbe better served by invoking the Epilepsy Foundation right.

The other common putative concern in this regard is that a co-worker who accompanies the target to the investigatory meeting willlikely not be as helpful as the union representative who accompaniesthe target in an organized setting under Weingarten.58 Here again, webelieve that this putative concern suffers from at least two seriousflaws: (1) as a matter of fact, broad generalizations as to the allegeduselessness of a co-worker are grossly exaggerated because, in fact,there will in many cases be significant benefit not only to the target ofthe investigatory meeting, but to other employees as well;59 and

57. See Epilepsy Found., 2000 WL 967066, at *6 (noting that this concern had beenraised by some advocates against the extension of Weingarten to non-organized work-places, but rejecting this concern).

58. This concern was stated (for instance) in Member Brame’s dissent. 2000 WL967066, at *29 (“a coworker-representative does not bring the same level of assistance toan investigatory interview as does a union representative”).

59. These benefits will in many cases include, but are not limited to, (1) deterringemployer overreaching in the investigatory meeting; (2) providing a potential corrobo-rating witness, not aligned with management, in the event that testimony as to whatwas said in the meeting ever becomes necessary; (3) providing emotional support to en-able the target employee to give her own full account of the facts at issue; (4) assistingthe target employee with at least some knowledge about relevant laws and employerpractices; and (5) gathering, for use by other employees in future disciplinary matters, aworking collective knowledge of the employer’s disciplinary practices.



(2) again the odd paternalism discussed earlier is at work in this pu-tative concern, for any employee is capable of deciding for herselfwhether the benefits from being accompanied by a co-worker are suf-ficient to justify the countervailing risk of incurring the employer’sdispleasure.60

In our view, if one engages in actual critical reflection on theseasserted reasons for denying the Epilepsy Foundation right, one willarrive at a conclusion that ought to be a rule of thumb for every advo-cate: Always take it with a grain of salt when an opponent claims thather opposition to one’s position is really for one’s good.

One particularly curious aspect of the management-side responseto Epilepsy Foundation is that many critics of the decision expresslyconcede that an employee’s request to management that a co-workerbe present at such an investigatory meeting is protected by the NLRA.(Among those who made this concession was Member Brame in dis-sent.61 Member Hurtgen, the only other dissenter, also conceded thepoint but only for the sake of argument rather than as a definitivestatement.62) By this concession, they agree that an employee cannotbe terminated simply because she made that request. They admit thatsuch a termination would violate section 8(a)(1), but, they continue,this does not mean that the employer must grant the request. In their

A hypothetical example may help. Consider an employee investigated for tardiness,and correctly believing that she may be about to incur discipline for it. If her occasionaltardiness is necessitated by the care of a chronically sick child, each of the benefits abovecould easily accrue from the presence of a co-worker in the meeting. The co-worker could,by her presence, deter the employer from browbeating the target into a bare confessionof guilt and a promise to reform. She could be a witness in any proceeding under theFamily and Medical Leave Act or similar proceeding. She could help the target put herown defense on the table through explanation of the reasons for the occasional tardiness.She could help the target work through an understanding of whether the Family andMedical Leave Act might apply to the situation. By participating and hearing the em-ployer’s response, the co-worker could add to the employees’ collective databank of infor-mation about the employer’s leave practices.

60. This contention—that a lay co-worker would be less helpful in an investigatorymeeting than a union representative—also misses the mark because (among other rea-sons) as noted above, Epilepsy Foundation is a much easier case than Weingarten.

In the non-organized setting such as Epilepsy Foundation, the very act of being ac-companied by a co-worker to an investigatory meeting is (as explained above) in and ofitself “concerted activit[y] for the purpose of . . . mutual aid or protection.” In the orga-nized setting at issue in Weingarten, by contrast, it requires a few more words to explainwhy being accompanied by a union representative (who may or may not be a co-worker)is “concerted activit[y] for the purpose of . . . mutual aid or protection.” The SupremeCourt’s decision in Weingarten supplies that explanation, in laying out some of the rea-sons why the presence of a union representative in such a meeting is useful to the bar-gaining unit as a whole. But again, no such explanation is necessary in the non-organizedsetting—and there is no need to show that the right is of some extreme level of useful-ness—because in the non-organized setting the very act of being accompanied by a co-worker is, in and of itself quite plainly “concerted activit[y] for the purpose of . . . mutualaid or protection.”

61. Epilepsy Found., 2000 WL 967066, at *16 (Member Brame, dissenting).62. Id. at *12 (Member Hurtgen, dissenting).



view, the employer is free to deny the request and demand that theemployee attend the meeting alone. As Member Brame put in his dis-sent, “Non-unionized employees would clearly have the right to requestthat a co-worker attend an investigatory interview, but their employersjust as clearly are permitted to deny that request.”63

From the point of view of a logically thinking employee advocate,this concession—though meant by management advocates to be a lim-ited one—leads inexorably to the conclusion that Epilepsy Foundationwas correctly decided. The reason begins with the recognition that notevery request that an employee can make in this situation will be pro-tected by the NLRA. For instance, it would probably be perfectly lawfulunder the act to terminate an employee in a non-organized workplacemerely for requesting the presence of a random friend if that friendwere not a co-worker. Though that hypothetical termination is absurdand harsh, it is hard to argue that it violates section 8(a)(1) because ishard to argue that the presence of the non-co-worker friend will con-stitute concerted activity among employees for mutual aid or protectionwithin the scope of section 7. The point proven by this negative hypo-thetical, we submit, is that the reason the mere request for a co-worker’s presence is protected (as even many critics of Epilepsy Foun-dation concede that it is), such that the employee cannot be fired simplyfor making the request, is that the thing requested (i.e., the co-worker’spresence) is itself protected under section 7. This is the difference be-tween the hypothetical friend and the Epilepsy Foundation co-worker:The co-worker’s presence is concerted activity for mutual aid or protec-tion, where the friend’s is not. That, as a matter of language and logic,means that the employer cannot interfere with the co-worker’s presenceif there is to be such a meeting; because that presence is protected bysection 7, an employer will violate section 8(a)(1) by interfering with it.This is the plain meaning of the NLRA’s plain language, and all ofmanagement’s arguments as to why this is a bad result from a policyperspective are therefore beside the point. The act, after all, does notdeclare that an employer can interfere with concerted activities when-ever they become arguably more burdensome to the employer than theyare useful to the employees. The command of section 8(a)(1), at leastas applied to this factual context, is pure and simple.

The management advocates who make this concession about theprotected nature of the request, of course, have a different spin. Theirargument, in short form, is that there are many types of requests thatare protected by the NLRA in the sense that an employer cannot ter-minate an employee for the mere request; they say that the act doesnot require the employer to grant such requests. Declining a request,they say, is not the same as interfering with section 7 rights. The anal-

63. Id. at *28 (Member Brame, dissenting) (footnote omitted).



ogy is sometimes offered to employees (in a non-organized setting) whoconcertedly request a raise. It is generally common ground (under thecurrent mainstream view of labor law) that employees cannot be ter-minated for making the request but that the employer is not requiredby the NLRA to grant the request. The Epilepsy Foundation right, man-agement advocates say, is of this sort: Employees are protected in themaking of concerted requests for mutual aid or protection, but the lawwill not make the employer grant those requests.64 Under this view,Epilepsy Foundation is a departure from the basic path of labor law.

The cleverness of this argument shows how very important it is forlawyers not to buy too quickly into their opponents’ language. For iflawyers are indeed talking about a request here, then management’sanalogy is a compelling one and its argument is hard to refute. The flawin the argument, however, is that the word request is too loaded a word.The verb request, in fact, assumes that the object of the verb is notsomething to which the subject has entitlement. People request thingswhen they have no legally enforceable right to demand them. The wordrequest in this context is a sleight-of-hand that purports to make theanalogy a logical and compelling one but which in fact begs the ques-tion. One can just as well say, “Employees, of course, have the right torequest the opportunity to speak among themselves about working con-ditions in the break room on break time, but the employer is not obli-gated to grant the request.” Though this statement may seem absurdto all who are adherents of mainstream labor law, it is merely anotherutilization of the very same semantic technique that underlies thisthread of criticism of Epilepsy Foundation.

The real question here—for the NLRB and for a reviewing court—is whether request is actually the correct word to describe the conver-sation in which the employee expresses her preference that she be ac-companied by a co-worker. It is our view—and, we believe, the view ofthe NLRA—that this is not in fact a request but an invocation of aright. It is an invocation rather than a request because, for the reasonswhich have already been discussed herein, being accompanied by a co-worker to an investigatory meeting called by the employer is “concertedactivit[y] for the purpose of . . . mutual aid or protection” within thescope of section 7. It is not a thing that is in the power of an employerto grant or refuse. It is a thing, a right, with which the employer mustnot interfere under section 8(a)(1), and it is therefore indisputable thatby refusing to allow the co-worker to enter the meeting room, or byterminating the employee for refusing to abandon the right, the em-

64. The authors heard this argument made (with great skill) by severalmanagement-side participants at the 2001 Mid-Winter Meeting of the American BarAssociation’s Committee on the Development of the Law under the National Labor Re-lations Act to which an earlier version of this article was presented.



ployer interferes and thus subjects itself to liability under section8(a)(1).

Ultimately, the opposition to Epilepsy Foundation comes down toan assertion that is so dear to the heart of management advocates thatit seems completely obvious to them: An employer has the right to de-cide how to conduct an interview (or, by and large, how to do just aboutanything else) in a non-organized workplace. Management advocates,in our experience, tend to think of this as so obvious as even to rise tothe level of natural law. Member Hurtgen put it this way, without anytrace of a recognition that anyone can possibly disagree:

In a nonunion setting, the employer makes the judgment as towhether the interview would be enhanced by the presence of a thirdparty. If the employer makes the judgment that the interview wouldbe impaired, it is not the role of the Government to say that thisjudgment is incorrect.65

The basic point of the NLRA, though—when correctly under-stood—is that this putatively obvious principle reserving such rightsto management is not so obvious and is not correct. There is no reason,as a matter of logic or natural law, why an employer should have theunilateral right to dictate to an employee as to who will be allowed toattend an investigatory meeting, rather than having that decision restwithin the authority of the employee. This is not a matter of logic, def-inition, philosophy, or natural law; it is a matter of policy. It makes justas much sense to say that—at least in certain instances—the employeeshould have at least an equal say in the decision.

If one proceeds from the premise that employer and employeestand on equal footing, with equal say in the employment relationship,then there is no reason to subscribe to the bold assertion that the em-ployer has the right to decide this sort of thing—any more than oneneeds to subscribe to the opposite viewpoint, which is that the employeehas the right to tell the employer which management personnel cancome to such a meeting. Congress, in declaring the broad existence ofa right to concerted action in section 7 even in non-organized work-places, adopted a broad framework for labor policy that does not placethose decisions solely in the hands of management.

Thus, to say that Epilepsy Foundation keeps management frommaking such decisions unilaterally is no real criticism under the law;instead, it is simply a recognition that Epilepsy Foundation is Americanlabor law and that in American labor law (even in non-organized set-tings) the employee occasionally has some say in her fate. We havepointed out that the board and the courts have for decades recognizedthat employees in non-organized workplaces do have the right to take

65. Epilepsy Found., 2000 WL 967066, at *14 (Member Hurtgen, dissenting) (em-phasis in original).



collective action against the wishes of their employer in a variety ofsettings. Epilepsy Foundation is simply one more in that long line ofcases.

IV. Building on Epilepsy FoundationThe real question as to Epilepsy Foundation is not whether it goes

too far—for, as this article shows, it clearly does not—but whether itgoes far enough. Much remains to be decided in this area, and it shouldnot merely be whether to accede to the sorts of quibbling and nibblingexceptions that employers will want to litigate (e.g., whether the em-ployer can require a meeting in the absence of a requested co-workerwhen the co-worker is not immediately and conveniently available).The next major decisions, instead, should focus on whether section 7 infact requires something beyond the initial steps taken in EpilepsyFoundation. Should the employer be required—as a matter of case ad-judication or as a matter of rulemaking—to notify employees of theirright under Epilepsy Foundation? Should the right be extended to othersorts of meetings beyond disciplinary investigations? Do employees innon-organized workplaces have the right to be accompanied by a non-co-worker representative (perhaps a union representative in an orga-nizing situation or an attorney hired collectively by several co-workersjointly)?

Along with further refinement and expansion of Epilepsy Foun-dation, there should be a renewed focus on other aspects of section 7rights in the non-organized workplace. Advocates for employees shouldbe creative, within the parameters of reasonable argument, in identi-fying and advocating potential cases in which the board should expandits recognition of non-organized employees’ rights. Such creative ad-vocacy in an attempt to push the envelope and expand rights will benecessary and appropriate despite some expected cynicism and despairamong employee advocates in the current political climate.

We do not predict with confidence that, in the next few years, anewly appointed general counsel will advocate, or that a changingNLRB will accept, broad new rights for employees. On the other hand,we are not such cynics as to despair of any such progress. Most impor-tantly, we believe that—just as management advocates have cried vo-ciferously at the purportedly extreme unfairness of rather modest de-cisions such as Epilepsy Foundation during the last several years ofboard activity—so it will be necessary for employee advocates to ensurethat the other end of the spectrum of debate is still heard during theforeseeable future. Employee advocates must ensure that the labor lawdebate, for the next few years, is not merely about whether to tiltheavily or only somewhat more slightly in favor of employers. To coun-teract that tendency, employee advocates must continue to seek oppor-tunities to expand the rights of employees under section 7.


221

Epilepsy Foundation of NortheastOhio: A Case of QuestionableReasoning and Consequences

M. Jefferson Starling III*

I. IntroductionOn July 10, 2000, the National Labor Relations Board (NLRB) is-

sued its decision in Epilepsy Foundation of Northeast Ohio,1 overturn-ing long-standing NLRB precedent and holding that nonunion employ-ees had the right to a co-worker representative during interviews thatmight lead to disciplinary action. This article focuses on the history ofrepresentational rights in the nonunion workplace, the shortcomingsin the majority’s opinion in Epilepsy Foundation, and the likely unin-tended consequences of that decision. The article concludes by callingon the NLRB to take the first opportunity to reverse its decision inEpilepsy Foundation.

II. The History of Weingarten Rights in the NonunionWorkplace

A. NLRB v. Weingarten, Inc.The Supreme Court’s opinion in NLRB v. Weingarten, Inc.,2 serves

as the starting point for any discussion of an employee’s right—or lackthereof—to have a co-employee present during an investigatory inter-view. Weingarten involved a union-represented employee who was ter-minated for refusing to participate in an investigatory interview afterthe employer had refused to permit her union steward to be present atthe interview.3 In upholding the NLRB’s finding of a section 8(a)(1)violation by the employer, the Supreme Court recognized for the firsttime that a represented employee has a right to have a union repre-

* Jeff Starling is a partner in the Birmingham, Alabama, law firm of Johnston BartonProctor & Powell LLP. Mr. Starling acknowledges the assistance of associate ChristopherM. Michalik. An earlier version of this article was presented in Kauai, Hawaii, at the2001 Midwinter Meeting of the Labor and Employment Section’s Committee on the De-velopment of the Law under the National Labor Relations Act (February 2001).

1. 331 N.L.R.B. No. 92, 164 L.R.R.M. (BNA) 1233, 2000 WL 967066, at *1 (2000).2. 420 U.S. 251 (1975).3. Id. at 252.



sentative present at any investigatory interview after which the em-ployee reasonably believes that discipline may follow.4

The Weingarten Court espoused a number of justifications for itsdecision. The Court recognized that the NLRB was burdened with thedifficult task “of reconciling conflicting interests of labor and manage-ment.”5 The Court then proceeded to show why the board had struck“a fair and reasoned balance” between those interests by holding thatthe represented employee had such a right.6 The Court reasoned thata bargaining unit employee’s request for a union representative’s as-sistance at an investigatory interview “clearly falls within the literalwording of Section 7,” even though the employee may have been theonly person with “an immediate stake in the outcome” of the interviewand the employee had been seeking “aid or protection” against the pos-sibility of individual discipline.7 The rationale for such reasoning wasthat the union representative was

safeguarding . . . the interests of the entire bargaining unit by exer-cising vigilance to make certain that the employer does not initiateor continue a practice of imposing punishment unjustly. The repre-sentative’s presence is an assurance to other employees in the bar-gaining unit that they, too, can obtain his aid and protection if calledupon to attend a like interview.8

The Court also emphasized a number of practical reasons for suchan outcome. It noted that the inclusion of a “knowledgeable union rep-resentative” on the front end could benefit both the employee and theemployer by saving time and money.9 Among other things, the Courtreasoned that the representative could assist both employer and em-ployee by helping to clarify the situation, the facts, and any collectivebargaining agreement clause that might have been implicated by theinvestigation.10 In that vein, the Court also noted that many collective-bargaining agreements already contained provisions according employ-ees the right to representation and that many arbitrators upheld sucha right even when it was not explicitly provided for in the collectivebargaining agreement.11 In essence, the Court viewed the right as ex-isting industry practice within the unionized workforce.

The right to representation set forth in Weingarten was not an un-limited one. In particular, the Court recognized the right within the

4. Id. at 253 (citing National Labor Relations Act, § 8(a)(1), 29 U.S.C. § 158(a)(1)(1994)).

5. Id. at 267.6. Id.7. Id. at 260–61 (citing Mobil Oil v. NLRB, 482 F.2d 842, 847 (7th Cir. 1973)).8. Weingarten, 420 U.S. at 260–61.9. Id. at 262–63 (recognizing that “[t]he Board’s construction also gives recogni-

tion to the right when it is most useful to both employee and employer”).10. Id.11. Id. at 267.


Epilepsy Foundation of Northeast Ohio 223

limitations and confines constructed by previous NLRB decisions.12 Theright to representation arose only where an employee actually re-quested the presence of a union representative and only when the em-ployee had a reasonable belief that the investigation would result insome sort of disciplinary action.13 Moreover, although the employercould not force the employee to participate in an interview, it couldrefuse to conduct the interview with the representative present andproceed without interviewing the employee.14 Also, if the employer didconduct an interview with a union representative in attendance, it hadno duty to engage in bargaining with the representative.15 Finally, thepreceding NLRB cases and the Weingarten Court focused on—and onlyconsidered—the existence of such a right for represented employees.

B. Materials Research Corp.In the ten-year period after the Weingarten decision, the NLRB

struggled with the propriety of expanding so-called Weingarten rightsinto the nonunion arena. Although this struggle has now been ongoingfor some twenty-five years, the legal positions were essentially devel-oped—and remain relatively unchanged—in the first board decision totackle the issue.16 The positions roughly break down to (1) the Mate-rials Research majority’s expansive view that Weingarten compelled theapplication of the right to non-represented employees; (2) ChairmanVan de Water’s dissenting view that the National Labor Relations Act(NLRA) compelled that unrepresented employees not be given such aright; and (3) Member Hunter’s view in dissent that neither positionwas compelled by the NLRA or Weingarten but that the restrictive viewwas the one supported by reason and a balancing of the interests en-compassed within the act.

The Materials Research majority held that Weingarten compelleda finding that unrepresented employees had a right to have a co-workerpresent at an investigatory interview, which they reasonably believemay lead to discipline.17 The majority supported its position by focusingon the Weingarten Court’s grounding of the representational right inemployees’ section 7 rights.18 According to the majority, unrepresentedemployees should have been accorded the same right because, for themost part, section 7 protections did not vary, based on an employee’srepresentational status.19 In addition, the majority pointed to Wein-

12. Id. at 256–58.13. Id. at 257–58.14. Weingarten, 420 U.S. at 258.15. Id. at 258–60.16. Materials Research Corp., 262 N.L.R.B. 1010, 110 L.R.R.M. (BNA) 1401 (1982),

overruled in part by Sears, Roebuck & Co., 274 N.L.R.B. 230, 118 L.R.R.M. (BNA) 1329(1985).

17. Id. at 1014.18. Id. at 1012.19. Id. at 1012, 1014.



garten’s language indicating that requiring a lone employee to attendan investigatory interview perpetuated the inequality that the NLRAwas designed to eliminate—“the perceived imbalance of economicpower between labor and management.”20 Similar to its section 7 anal-ysis, the majority argued that this consideration came into play re-gardless of whether an employee was represented by a union.21 More-over, the majority asserted that unrepresented employees might havehad an even greater need for support during the interview because theywere without the safeguards of a collective-bargaining agreement.22

Chairman Van de Water and Member Hunter each strongly dis-sented in the Materials Research opinion. Chairman Van de Water fo-cused on several issues. His main argument contended that the appli-cation of the Weingarten right to unrepresented employees was inviolation of the NLRA’s exclusivity provision.23 In support of this con-tention, he pointed out that employers were not statutorily obligatedto recognize a representative of their employees unless that represen-tative had been recognized by the employer or certified by the NLRB.24

Without such recognition or certification, employers were free to dealwith employees on an individual, group, or wholesale basis with regardto all terms and conditions of employment, including discipline.25 Incontrast to that, he noted that section 9(a) of the NLRA required anemployer with a unionized workforce to deal with the union rather thanwith individual employees on matters related to terms and conditionsof employment.26 He further noted that previous NLRB cases dealingwith the right of unionized employees to representation at investiga-tory interviews had recognized that an employer’s refusal to grant anemployee’s request for representation frustrated this right not to dealindividually with the employer when the collective-bargaining rela-tionship required the employer to deal with the employee’s represen-tative.27 Clearly, he argued, Weingarten was centered on the existenceof a collective-bargaining relationship.

In light of his arguments regarding section 9(a), Chairman Van deWater explained that extending the Weingarten right to the non-unionized workforce would create a “hybrid relationship” that was notforeseen or permitted under the NLRA.28 He noted that, pursuant tothe Supreme Court’s Weingarten decision and previous NLRB deci-sions, employers had to allow the Weingarten representative to partici-

20. Id. at 1014 (quoting American Ship Bldg. Co. v. NLRB, 380 U.S. 300, 316 (1965)).21. Id. at 1014.22. Materials Research Corp., 262 N.L.R.B. at 1014.23. Id. at 1016–17.24. Id. at 1016.25. Id.26. Id. at 1016–1017.27. Id.28. Materials Research Corp., 262 N.L.R.B. at 1019.



pate in the interview in an active way.29 This, Chairman Van de Waterasserted, was “strikingly similar to the role of a labor organization inits dealings with an employer.”30 Consequently, the extension of theright to bargain individually with the employer would create a situationwhere employees had the rights of a labor organization without thecommensurate obligations and responsibilities.31 In addition, Chair-man Van de Water argued, it would alter the employee-employer rela-tionship with regard to one condition of employment while not affectingany others.32 Neither situation was consistent with the NLRA andtherefore was in violation of it.

In addition to his section 9(a) argument, Chairman Van de Watercriticized the majority’s assertion that section 7 compelled the exten-sion of the Weingarten right to the non-unionized arena. He notedthat—contrary to the majority opinion—employees’ section 7 rightswere affected by whether or not they had opted to select a collective-bargaining representative.33 As a specific example, he noted that em-ployees were no longer free to deal with their employer on individualbases.34 Likewise, a union was permitted to waive bargaining unit em-ployees’ right to strike.35 To Chairman Van de Water, this was clear evi-dence that section 7 rights were not necessarily the same for representedand unrepresented employees. Consequently, the majority’s argumentthat the rights should have been extended based solely on the groundthat Weingarten had focused on section 7 rights was untenable.

Chairman Van de Water also criticized the majority’s assertion thatthe Weingarten Court’s concern—the “perceived imbalance of economicpower between labor and management”—with regard to representedemployees applied equally or even more forcefully with respect to un-represented employees.36 He argued that this was a misunderstandingof the NLRA. The act, he asserted, sought not to improve employees’positions through any means possible, but sought to give employees thepower to improve their positions by selecting a collective-bargainingrepresentative.37 Accordingly, Chairman Van de Water argued that Wein-garten was focused on the existence of a collective-bargaining relation-ship and could not be transposed onto unrepresented employees.38

Member Hunter’s dissent took a different track than that of Chair-man Van de Water. Unlike Chairman Van de Water, Member Hunter

29. Id.30. Id.31. Id.32. Id.33. Id. at 1020.34. Materials Research Corp., 262 N.L.R.B. at 1020.35. Id.36. Id. at 1018.37. Id.38. Id.



did not assert that the NLRA compelled a holding that Weingartenrights could not be applied to unrepresented employees. Instead, heargued that either view was permissible under the statute. To MemberHunter, both Weingarten and practical considerations supported thepolicy of restricting the right to represented employees.

Member Hunter asserted that the majority’s position was not sup-ported by the Weingarten opinion. In so doing, he noted that the Court’sdecision in Weingarten flowed from the status of the union as acollective-bargaining representative, in particular “the unique rightand obligation” of the union representative.39 In that vein, he criticizedthe majority’s reliance on the Weingarten Court’s section 7 language.40

Rather than support the application of the right to a co-worker in anonunion setting, Member Hunter believed the language served as evi-dence that the Court’s opinion relied heavily on the unique attributesof the union representative.41 Member Hunter argued that a regularemployee was not charged with the unique responsibility inherent in aunion representative position of protecting the rights of not just anindividual, but all of the members of a bargaining unit.42 In the absenceof these considerations, he asserted that reliance on the WeingartenCourt’s section 7 analysis was misplaced.43

In addition, Member Hunter asserted that practical considera-tions argued against extending Weingarten. Though not going intogreat depth, he noted that the knowledgeable role a union represen-tative could play in assisting employer and employee alike was absentin the context of unrepresented employees.44 An unrepresented co-worker almost certainly would lack the unique skills, knowledge, andresponsibility that the Weingarten Court found so compelling, therebydiminishing his or her value to both the employee and the employer.45

The usefulness would be further reduced because of the probabilitythat the co-worker was likely to be emotionally involved with the in-terview if for no other reason than his or her friendship with the per-son being investigated.46 Member Hunter also noted the increasedworkload that such an extension would create for the NLRB, whichhad already begun to be overwhelmed.47 Essentially, he contendedthat the board was making Weingarten a “Pandora’s box,” which itwas never intended to be.48

39. Id. at 1021.40. Materials Research Corp., 262 N.L.R.B. at 1021.41. Id.42. Id.43. Id.44. Id.45. Id.46. Materials Research Corp., 262 N.L.R.B. at 1021.47. Id.48. Id. at 1022.



C. Sears, Roebuck & Co.Approximately three years after the Materials Research decision,

the NLRB revisited the issue of Weingarten’s application to unrepre-sented employees in Sears, Roebuck & Co.49 This time the majorityaccepted and adopted Chairman Van de Water’s Materials Researchdissent. The majority held that the application of Weingarten to unrep-resented employees “wreak[ed] havoc with fundamental provisions ofthe Act.”50 It did so because the NLRA provides that, when no union ispresent, an employer is free to deal with its employees on individual,group, or wholesale basis, whichever it chooses.51 Enforcing a Weingar-ten right, however, forces the employer to do just the opposite—recog-nize and deal with the equivalent of a union representative.52 In sodoing, such action contradicts the NLRA’s exclusivity provisions.53

Therefore, the majority held that the act compelled the restriction ofthe right to represented employees.

Member Hunter concurred in this result but reiterated—and ex-panded on—his reasoning for reaching the same result and how it dif-fered from the theory that had originally been espoused by ChairmanVan de Water and later endorsed by the majority. Member Hunter againasserted that both the expansionist and restrictive views were permis-sible under the NLRA but only the restrictive view was reasonable.54

In support of his contention, he essentially reiterated his Materials Re-search dissent.

D. E.I. Du Pont De NemoursThree years after Sears, Roebuck & Co., the NLRB once again vis-

ited the Weingarten issue in E.I. Du Pont De Nemours.55 This time, themajority disregarded the position propounded by Chairman Van de Wa-ter and instead adopted the theory put forth by Member Hunter in hisMaterials Research dissent and Sears, Roebuck & Co. concurrence. Inso doing, it overruled its earlier holding that the NLRA compelled afinding that unrepresented employees were not entitled to a Weingartenright.56 Though acknowledging that granting unrepresented employeesa right to the assistance of a co-worker was not prohibited by the act,the majority maintained that such an application was not a reasonablebalancing of the interests involved.

The NLRB majority began its analysis by asserting that the issueof whether an unrepresented employee was entitled to the presence of

49. 274 N.L.R.B. 230, overruled in part by E.I. Du Pont and Co., 289 N.L.R.B. 627,128 L.R.R.M. (BNA) 1233 (1988).

50. Id. at 231.51. Id.52. Id.53. Id.54. Id.55. 289 N.L.R.B. 627.56. Id. at 628.



a co-worker could not be resolved by resorting to the plain language ofsection 7.57 Although a literal reading of that provision appeared tosupport such a contention, the majority reasoned that further analysiswas necessary. It pointed out that the language of section 7 was so broadthat almost any activity—including, for example, soliciting duringwork time—could be considered protected, concerted activity.58 In thecase of solicitation, the majority noted that the NLRB had neverthelessapplied a balancing test, weighing the employer’s interest in maintain-ing discipline against the employee’s interest in engaging in the activ-ities covered by the broad language of section 7.59 Citing to the Wein-garten Court’s observation that the board’s duty involved the “difficulttask of ‘reconciling conflicting interests of labor and management,’ ” theDu Pont majority elected to apply the same analysis to the issue athand.60

In balancing the competing interests of employees and employers,the majority reasoned that the interests of both pointed to the sameresult: not granting an unrepresented employee a right to have a co-worker present at an investigatory interview.61 The board majority es-sentially adopted Member Hunter’s position, stressing the practical dif-ferences between a co-worker representative and the trained unionrepresentative that the Weingarten Court had found so valuable.62 Ac-cording to the majority, the co-employee would not have the skill orexperience necessary to provide the assistance to both employee andemployer envisioned by the Supreme Court.63 Similarly, an unrepre-sented co-employee would not have the obligation to represent the in-terests of an entire bargaining unit, thereby ensuring the same degreeof collective protection as the presence of a union representative.64 Ata minimum, the board concluded, these differences made it far lesslikely that the “useful objectives,” which the Weingarten Court hadlisted, would be achieved.65

The Du Pont board also stated that granting an unrepresentedemployee the right to a co-worker’s attendance at an investigatoryhearing might well have been harmful to the requesting employee.66

Here, the board noted that the absence of any sort of grievance proce-dure in the nonunion setting meant that if the employer elected toforego the interview process, the unrepresented employee would not

57. Id. at 627–30.58. Id.59. Id.60. Id.61. Du Pont, 289 N.L.R.B. at 627–30.62. Id.63. Id.64. Id.65. Id.66. Id.



have the fall back of a grievance procedure to tell his or her side of thestory.67 Therefore, by refusing to participate in an investigatory inter-view because the employer would not allow the presence of a requestedco-worker, the unrepresented employee could actually be harming him-self or herself.

The board majority also recognized that, in contrast to the dimin-ished or even harmful effects of extending the Weingarten right to un-represented employees, a nonunion employer had a significant interestin conducting investigations in accordance with its own establishedpractices and procedures and in maintaining the efficiency of its opera-tions.68 Consequently, the board held that the proper balance betweenthe interests of the employee and the employer warranted not extend-ing the Weingarten right to unrepresented employees.69

E. Epilepsy Foundation of Northeast OhioThis past year, the NLRB yet again visited the issue of an unrep-

resented employee’s right to insist on the presence of a co-worker at aninvestigatory interview that the employee reasonably believes may leadto discipline.70 Throughout the eighteen-year period following Materi-als Research, the arguments had essentially remained the same. Thistime, however, the board majority overruled the Du Pont holding andreturned to the rule set forth by the Materials Research majority.71 Forthe first time in fifteen years, an unrepresented employee now has theright to refuse participation in investigatory interviews if an employerdenies her request for the presence of a co-worker.

The Epilepsy Foundation majority relied on the same argumentsas the Materials Research majority to support its position. It, too, at-tached “much significance” to the fact that the Weingarten Court foundthat the right was grounded in section 7’s protection of the right toengage in “concerted activities for the purpose of mutual aid or protec-tion.”72 Arguing that section 7 rights were not dependent on union rep-resentation for their implementation, the majority asserted that theSupreme Court’s rationale was equally applicable to unrepresented em-ployees because the right to have a co-worker present “enhances theemployees’ opportunities to act in concert to address their concern that‘the employer does not initiate or continue a practice of imposing pun-ishment unjustly.’ ”73

The majority also took the opportunity to address the argumentsof the dissenting board members. In so doing, the majority dismissed

67. Du Pont, 289 N.L.R.B. at 627–30.68. Id.69. Id.70. Epilepsy Found., 2000 WL 967066, at *1.71. Id. at *3.72. Id. at *4.73. Id. (quoting Weingarten, 420 U.S. at 260–61).



as mere speculation Member Hurtgen’s contention that its decision al-tered the balance between the employer’s interest and the employees’interest.74 Likewise, the majority addressed Member Brame’s concernabout the differing treatment of one aspect of an unrepresented em-ployee’s terms and conditions of employment by asserting that theWeingarten decision only dealt with that aspect.75 According to themajority, any discussion of other terms or conditions would be merespeculation.76

As is evident, two board members, Hurtgen and Brame, vigor-ously dissented. Member Hurtgen began his dissent by asserting thatthe majority had too easily overruled existing NLRB precedent.77 Inparticular, he argued that the majority had not presented “compellingconsiderations” to justify such an abrupt reversal of precedent.78 Tohim, section 7, at most, protected an unrepresented employee in seek-ing assistance at an interview.79 It did not require that the employeraccede to the request, much less constitute justification for the rever-sal of precedent.

Member Hurtgen then reiterated the argument that MemberHunter had first explained, noting that the Weingarten Court had notenvisaged a right to representation in the nonunion arena.80 He pointedout that, in a unionized setting, an employer would act at its peril whendealing directly with an employee with respect to a term or conditionof employment.81 An employer in a nonunion setting, however, was freeunder the NLRA to deal with individual employees as it wished. Hecriticized the majority for “obliterat[ing]” this “clear line.”82

In addition, Member Hurtgen emphasized the NLRB’s duty to bal-ance the interest of the employer and the employee.83 He reiteratedthat the arguments of both Member Hunter and the Du Pont majorityhad shown the lessened benefit of the right in the nonunion situation.Member Hurtgen contended that the employer had an interest in con-ducting unhindered interviews and maintaining efficiency.84 In addi-tion, he argued that the expansion of the right would also serve as alitigation “trip wire” that would lie in wait for unsuspecting employersas they pursued legitimate investigations of employee conduct.85 Facedwith the combination of these factors, Hurtgen asserted that the Du

74. Id. at *4 n.11.75. Id.76. Epilepsy Found., 2000 WL 967066, at *5.77. Id. at *12.78. Id.79. Id.80. Id.81. Id.82. Id. at *13.83. Epilepsy Found., 2000 WL 967066, at *13.84. Id. at *14.85. Id.



Pont majority had struck the proper balance between employee andemployer.86

Member Brame’s dissent followed more along the lines of Chair-man Van de Water’s Materials Research dissent. He asserted that byfinding that non-unionized employees have a Weingarten right to rep-resentation, the majority forced non-unionized employers to deal col-lectively with employees who had not selected a collective-bargainingagent.87 This, he argued, was “completely at odds with the intent andstructure of the Act.”88

In addition, Member Brame argued that the majority was effec-tively creating a hierarchy of the terms and conditions of employmentfor unrepresented employees. On the one hand, employers would beforced to treat employees collectively with regard to a request for thepresence of a co-worker at an investigatory interview89; on the otherhand, the employer would be free to deal individually with its unrep-resented employees as to every other term and condition of employ-ment.90 In the alternative, the majority’s opinion created a situationin which unrepresented employees would be at least entitled toWeingarten-type representation at any meeting in which terms andconditions of employment might be affected.91 Member Brame arguedthat either alternative altered the structure of the “long-standing in-terpretation” of the NLRA.92

Member Brame also propounded the arguments of MembersHunter and Hurtgen and the Du Pont majority by pointing out thepractical pitfalls of the majority’s position. In essence, he was assertingas a second position that a balancing of the interests would lead to aconclusion contrary to that reached by the majority.93

II. The NLRB Should Reverse Its Decision in EpilepsyFoundation and Return to E. I. Du Pont & Co.Although there is significant merit to the majority opinions in

Sears, Roebuck & Co. and Member Brame in his Epilepsy Foundationdissent, it appears unlikely that a majority of current NLRB memberswill conclude that the NLRA compels a finding that unrepresented em-ployees are not entitled to the presence of a fellow employee during aninvestigatory interview. Instead, the focus more likely will turn onwhether extending Weingarten rights fairly balances the interests of

86. Id.87. Id. at *16.88. Id. at *28.89. Epilepsy Found., 2000 WL 967066, at *28.90. Id.91. Id.92. Id.93. Id. at *29–30.



the act. This is precisely where the majority in Du Pont began, and ananalysis of any new case at this time should bring the board to thesame conclusion.

As the Du Pont majority pointed out, a literal reading of section 7

might indeed suggest that it bestows on nonunion employees the rightin question here, because an employee who insists on the presence ofanother employee when facing the employer in a matter that maylead to discipline thereby attempts to engage in concerted activitiesfor ‘mutual aid or protection,’ insofar as there is an implicit promisethat the employee enlisting support would offer his own support werethe other facing such an interview.94

That, however, is only part of the analysis. Historically, courts and theboard have balanced employee and employer rights in assessing theparameters of section 7.95 Here, a fair balancing favors restricting Wein-garten rights to the unionized setting. In short, the Epilepsy Founda-tion majority was incorrect in granting nonunion employees Weingartenrights because that conclusion (1) is neither compelled nor supportedby the Supreme Court’s decision in Weingarten; (2) is inconsistent withthe purposes of the NLRA and other board decisions construing theextent of nonunion employees’ section 7 rights; and (3) does not servethe interests of employees, employers, or the NLRB as an institution.

A. Weingarten Is Limited to Union-Represented EmployeesIn determining the proper balance, it is appropriate to look first at

the interests served by extending Weingarten rights to unrepresentedemployees. In Epilepsy Foundation, the majority reasoned that “theright to the presence of a representative is grounded in the rationalethat the Act generally affords employees the opportunity to act togetherto address the issue of an employer’s practice of imposing unjust pun-ishment on employees.”96 This finding arose from the majority’s com-bining the actual language of section 7 with the rationale of the Su-preme Court in Weingarten, which stated,

The union representative whose participation he seeks is howeversafeguarding not only the particular employee’s interest, but also theinterests of the entire bargaining unit by exercising vigilance to makecertain that the employer does not initiate or continue a practice ofimposing punishment unjustly. 97

Of course, the majority’s synthesis left out the fact that the represen-tative in Weingarten was a statutory union representative of an estab-lished bargaining unit.98 The majority attempted to address this prob-

94. Du Pont, 289 N.L.R.B. at 628 (citing Weingarten, 420 U.S. at 261).95. See, e.g., Republic Aviation Corp. v. NLRB, 324 U.S. 793, 797–98 (1945).96. Epilepsy Found., 2000 WL 967066, at *3.97. Id. at *13 (quoting Weingarten, 420 U.S. at 260–61).98. Weingarten, 420 U.S. at 254–56.



lem by pointing out that the Court in Weingarten had been confrontedwith a very specific factual setting and therefore had not been com-pelled to address the nonunion situation.99 Nevertheless, this does notalter the fact that substantial differences exist between union and non-union representatives or that those differences were significant factorsin the Court’s opinion in Weingarten.

First, a union representative has a statutory obligation to repre-sent the interests of the entire bargaining unit; a nonunion co-employeerepresentative does not. Second, as the Weingarten Court pointed out,a union representative generally is trained and “knowledgeable,” suchthat he can assist the employer and employee in eliciting favorable factsand in avoiding formal grievances.100 A nonunion co-employee repre-sentative would not likely be trained or knowledgeable and thus wouldbe much less helpful in avoiding a (normally nonexistent) formal griev-ance process. Finally, the Court’s emphasis on the fact that permittingunion representation at an investigatory interview was “in full har-mony with actual industrial practice” because collectively bargainedrights or arbitrary authority cannot be applied to the nonunion set-ting.101 In short, far from compelling an extension of Weingarten rights,the Court’s reliance on the unique status of the union representativein reaching its conclusion in Weingarten implicitly militates against it.

B. Epilepsy Foundation Is Inconsistent with Other NLRBDecisionsThe gist of Epilepsy Foundation is not that an employee has the

right to seek mutual aid and protection, but that an employer violatesthe NLRA if it discharges an employee who refuses to attend a disci-plinary meeting without a co-employee representative.102 This ruling,as Member Hurtgen pointed out, destroys an employer’s interest inhaving an unfettered investigation of allegations of misconduct, includ-ing misconduct that may go to the core of the employer’s propriety in-terests.103 The majority’s failure to accord any weight to this interestdemonstrates that it did not “engag[e] ‘in the difficult and delicate re-sponsibility’ of reconciling conflicting interests of labor and manage-ment.”104 Moreover, it represents an extension of employee rights be-yond other board decisions delineating the parameters of section 7.

For example, while an employee has the right to request the pres-ence of a co-worker at an employer-called meeting to discuss wages,benefits, or issues such as work schedules, the employer is free to de-

99. Epilepsy Found., 2000 WL 967066, at *3.100. Weingarten, 420 U.S. at 262 n.7, 263.101. Id. at 267.102. Epilepsy Found., 2000 WL 967066, at *6.103. Id.104. Weingarten, 420 U.S. at 267 (quoting N.L.R.B. v. Truck Drivers Local Union

No. 449, 353 U.S. 87, 96 (1957)).



mand that the employee meet with it individually and to discipline theemployee if she refuses that demand. Likewise, employees can engagein protected concerted activities by requesting that an employer meetwith them to discuss pending changes to wages, hours, or working con-ditions. While the employer may not discipline the employees for simplymaking the request, the employer is free to refuse the meeting, imple-ment the changes, or even require the employees to meet with it indi-vidually. In neither of these examples does the employee’s protectedactivity grant her a correlative right to insist on her demands or refusethe employer’s request. This was the position taken by Member Hurt-gen when he opined that section 7, at most, protected an employee inseeking assistance, but that nothing required the employer to accedeto the request.105

An analogous balancing of employee and employer interests can befound in the NLRB’s and the Supreme Court’s approach to solicitationand distribution rules. For example, while an employee who solicitsother employees in support of organizing a union is engaged in con-certed activity for mutual aid or protection, the board has not held thatsuch activity will necessarily be protected and therefore could precludepossible disciplinary action by the employer. Instead, the board hasbalanced the employee’s interest against the employer’s interest inmaintaining discipline and productivity to find that an employer mayprohibit certain solicitation and discipline employees who violate sucha rule.106 Here, there is no similar balancing of interests.

The Epilepsy Foundation decision also arguably broke new groundin defining the scope of protected concerted activity under section 7.Section 7 extends protection to employees who “engage in other con-certed activities for the purpose of . . . mutual aid or protection.”107 Un-der current NLRB doctrine, a single employee is not engaged in con-certed activity unless he is acting “with or on the authority of” fellowworkers.108 In an Epilepsy Foundation setting, it is hard to understandhow the individual employee requesting a co-employee representativeis engaged in concerted activity. In all likelihood, the co-employee willhave no idea that the employee being investigated has requestedhis/her presence or even that an investigatory meeting is taking place.Certainly it would be unreasonable to say that the employee is acting“with or on the authority of” another employee.

The same doubts can be raised with regard to the mutual aid orprotection prong of section 7. In most cases, an employee being inves-

105. Epilepsy Found., 2000 WL 967066, at *12.106. See, e.g., Republic Aviation Corp., 324 U.S. at 797–98.107. 29 U.S.C. § 157.108. Meyers Indus., Inc., 268 N.L.R.B. 493, 115 L.R.R.M. (BNA) 1025 (1984), rev’d

sub nom., Prill v. N.L.R.B., 755 F.2d 941 (D.C. Cir. 1985), cert. denied, 474 U.S. 971 (1985),decision on remand sub nom., Meyers Indus., Inc., 281 N.L.R.B. 882, 123 L.R.R.M. 1137(1986), aff’d, 835 F.2d 1481 (D.C. Cir. 1987), cert. denied, 487 U.S. 1205 (1988).



tigated is simply looking out for his own interest when he requests aco-employee representative. At the time of the employee’s request,there may not appear to be any concerted activity for the purpose ofproviding mutual aid or protection to other employees. Unlike a rep-resented employee in a union workplace, in the nonunion workplacethere is no collective bargaining agreement to be interpreted, arbitraryprecedent to be established, or other mechanism by which the presenceof a co-worker at an investigatory meeting might have an impact onother employees such that his presence could be construed as offeringmutual aid or protection to them.

The troubling aspect of Epilepsy Foundation is that the issue ofwhether the employee had actually been engaged in protected con-certed activity was never addressed. In fact, it had not been addressedin any of the cases leading up to Epilepsy Foundation. Arguably, theSupreme Court’s decision in Weingarten implicitly answered the ques-tion when it found that the right to a union representative wasgrounded in section 7. However, the fact remains that the issue has notbeen fully litigated, and an argument could be made that while therequest for a co-employee representative in the union workplace is pro-tected under the Interboro Contractors109 doctrine, such a requestwould not be protected in a nonunion workplace under the Meyers In-dustries110 standard. In sum, the NLRB’s decision in Epilepsy Foun-dation appears inconsistent with a number of prior decisions.

C. The Purposes of the NLRA Are Not Served by ExtendingWeingarten Rights to Nonunion Employees1. Unintended Consequences and Rights without RemediesWhile it is unfair to assume that the majority failed to foresee

many of the likely consequences of its holding in Epilepsy Foundation,the fact that it gave short shrift to the practical points raised by mem-bers Hurtgen and Brame tends to lead to the conclusion that thosepoints were at least not given due consideration. It is just those pointsthat demonstrate the impropriety of the majority’s decision in EpilepsyFoundation.

The most obvious unintended consequence of Epilepsy Foundationis that some employers will forego conducting investigatory interviewsof employees who demand to exercise their Weingarten rights, thusleaving the employee without an opportunity to tell her side of the story.This point was made by Member Hurtgen (as well as Member Hunter,Chairman Van de Water, and others in earlier opinions) but dismissedby the majority who found it was “based wholly on speculation, and

109. 157 N.L.R.B. 1295, 61 L.R.R.M. (BNA) 1537 (1966), enforced, 388 F.2d 495 (2dCir. 1967).

110. 281 N.L.R.B. 882.



assumes the worst in employer motives.”111 Regardless of motive, Mem-ber Hurtgen’s warning was prescient.

Employers who are aware of Epilepsy Foundation should developa comprehensive policy to address representation requests so that theycan ensure that their supervisors respond uniformly to avoid discrim-ination claims under section 8(a)(3), Title VII, the Americans with Dis-abilities Act, and other nondiscrimination laws. In developing such apolicy, employers generally must choose between granting or denyingall such requests. Given that some employers will be uncomfortable inhaving a co-employee representative present during certain investi-gatory interviews, they may choose not to allow a representative to bepresent. The result is that many employees who make a Weingartenrequest will not be granted one, and those employees will be denied anopportunity to present their side. Instead, most employers will simplymake their disciplinary decision based on the facts they have prior tothe interview. (Other employers might provide an opportunity for theemployee to submit a written response, but without the give-and-takeof an interview, it is unlikely the employee will be able to fully respondto the allegations).

A good example of why employers are suspicious of co-employeerepresentatives at investigatory interviews can be found in the contextof sexual harassment investigations. Most sexual harassment claimsinvolve the disclosure of personal and often embarrassing informationby the victim of harassment. Because victims are often reluctant tocome forward with their claims, most employer policies provide thatthe complaint will be kept as confidential as possible. In fact, theEEOC’s Guidance on Vicarious Employer Liability for Unlawful SexualHarassment by Supervisors provides that an essential element of a le-gally valid harassment policy is “[a]ssurance that the employer willprotect the confidentiality of harassment complaints to the extent pos-sible.”112 Needless to say, if the alleged harasser is allowed to have aco-employee representative present during the investigatory interview,the confidentiality of the victim’s claims will be compromised by disclo-sure to an uninterested, uninvolved third party. Whether the represen-tative could actually be forced to maintain such confidentiality is highlyquestionable and beside the point: Victims are much less likely to reportharassment if they believe they have to confront or disclose their alle-gations to not just the harasser, but also to her buddy.

Another scenario where representational rights interfere withother, more significant interests is the case of conspiratorial miscon-duct. For example, if two employees jointly engage in theft from their

111. Epilepsy Foundation, 2000 WL 967066, at *6.112. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, GUIDANCE ON VICARIOUS EM-

PLOYER LIABILITY FOR UNLAWFUL SEXUAL HARASSMENT BY SUPERVISORS 9 (1999), avail-able at 1999 WL 33103140.



employer, the employer will be severely restricted if it is required tointerview each employee in the presence of the other. Unlike the unionrepresentative whose interest as an employee advocate is counterbal-anced by his obligation to represent the entire bargaining unit, an em-ployee representative who is involved in the same misconduct as theinvestigated employee surely would not serve the type of role or func-tion the Supreme Court found beneficial to the purposes of the NLRA.

For those employers who do allow a co-employee representative tobe present, there also exists a possibility that an employee’s opportu-nity to present a defense during the interview may be hampered or,worse yet, harmed because of an overzealous or inadequate represen-tative. While the Epilepsy Foundation majority dismissed such concernas purely speculative, the fact is that no one is providing training topossible representatives. It is also far from speculative to assume thatthe chosen representative will often be the employee who is viewed byothers as regularly challenging management and willing to go to batfor other employees—even to a degree inconsistent with the purposesof the meeting.

The truth is that extending Weingarten rights to nonunion em-ployees actually does little in terms of granting them substantiverights. As even the Weingarten majority noted, an employer is free toignore an employee’s representation request and discipline the em-ployee without the benefit of an investigatory meeting.113 In the unionworkplace, the aggrieved employee has a significant chance of havingthe imposed discipline overturned because the employee can file agrievance and pursue arbitration under the terms of a collective bar-gaining agreement (CBA). The employee could then argue both (1) thatthe employer violated the CBA by refusing the employee a contractualright to a union representative and (2) that the employer’s refusal toprovide the employee an opportunity to be heard constitutes a failureon the part of the employer to demonstrate just cause for the discipli-nary action. In most cases, an arbitrator will at least be skeptical ofthe employer’s action and offer the employee a fair opportunity to pres-ent her case.

The same cannot be said of the nonunion employee. That employeehas no recourse other than filing a charge with the NLRB or pursuingsome other form of legal action. In the case of an NLRB charge, anemployee’s alleging and even proving that she was denied a represen-tative would entitle her to no more relief than a cease and desist orderand a notice posting.114 As the majority in Epilepsy Foundation noted,Taracorp makes it clear that unless the discipline was the direct resultof an employee’s assertion of Weingarten rights, reinstatement, back

113. Weingarten, 420 U.S. at 258–59.114. Taracorp Indus., 273 N.L.R.B. 221, 117 L.R.R.M. (BNA) 1497 (1984).



pay, or other make-whole remedies are inappropriate.115 It is (as theTaracorp board explained) a rare occasion in which the employee canprove that her assertion of Weingarten rights was the reason for thediscipline.116

2. Increased LitigationAll of those consequences should be considered in conjunction with

the increased litigation that undoubtedly will arise from the decisionin Epilepsy Foundation. In his dissent, Member Hurtgen claimed thatemployers would “face an unknown trip-wire placed there by the Board”and that “[t]he workplace has become a garden of litigation and theBoard is adding another cause of action to flower therein, but hiding inthe weeds.”117 The majority claimed to have found no force in MemberHurtgen’s argument because it disagreed that employers would be com-pletely unaware of Epilepsy Foundation rights.118 This conclusion isironic in light of the fact that the majority decided to apply its decisionretroactively, in part because there was no evidence “even remotelysuggesting that the Respondent was relying on the state of Board lawwhen it decided to take action against Borgs.”119

Without question, some employers are aware of the NLRB’s deci-sion in Epilepsy Foundation, and some of them are likely to implementpolicies to avoid meetings with co-employee representatives. The vastmajority of employers do not know of this new right, just as the vastmajority of employees do not know of it. While first impressions mightsuggest Epilepsy Foundation will result in few charges and little liti-gation, the fact is that such decisions have a tendency to slowly becomepart of the lore of the workplace (some unions are already distributingto employees wallet-sized instruction cards explaining how to requestrepresentational rights). The likely result will be significant confusionand litigation.

Because most employers and employees will have little compre-hension of the parameters of Epilepsy Foundation rights, the NLRBshould expect numerous unintended consequences. Employees will in-sist on representatives for purposes other than investigatory inter-views, and some employers will discharge them. Employers will grantrepresentational rights selectively and face discrimination charges ofall kinds. Representatives will misunderstand their role, suffer disci-pline, and file charges. Employers and employees will not understandbasic issues such as who is an appropriate representative or when Ep-

115. Epilepsy Found., 2000 WL 967066, at *7 n.14.116. Taracorp Indus., 273 N.L.R.B. at 223.117. Epilepsy Found., 2000 WL 967066, at *14.118. Id. at *6.119. Id. at *7.



ilepsy Foundation rights attach. Furthermore, the board will have toresolve numerous other issues, including the following:

• Is a representative entitled to pay for the time spent in the in-terview?• Preparation time?• Meetings after work hours?

• At what point does a representative exceed the bounds of pro-tected conduct?• Can he/she be disciplined?

• How much time must an employer allow for an employee to finda representative?• How many choices does the employee have?• What if the representative leaves during the meeting?• What if the only possible representative is unavailable?

• Can an employee select a co-employee union steward/repres-entative?

While some precedent may exist from the litigation of Weingartenrights in the unionized workplace, it will take time for the board toresolve these and other issues as applied to nonunion workplaces. Moreimportantly, it will take years (if ever) for most nonunion employers tobe educated on the vagaries of Weingarten rights and to develop legallyconsistent policies. In the meantime, employers face something moreakin to a minefield than a trip-wire and the resultant increase incharges is likely to be significant.

Simply pointing to the number of charges currently being filed thatallege the denial of Weingarten rights is meaningless in terms of eval-uating the potential impact of Epilepsy Foundation. As repeatedthroughout, union and nonunion workplaces are not comparable. Forexample, most issues surrounding the invocation of Weingarten rightsin the union setting are now well settled. Consequently, the practicaladvice addressing such issues has been communicated to, and imple-mented by, union representatives. It is unlikely that most seasonedemployers or union representatives will act in contravention of thoselegal principles. In addition, most collective bargaining agreementsprovide contractual Weingarten rights, which further place employerson notice of an employee’s rights. Likewise, as the Supreme Court notedin Weingarten, the union workplace often provides an alternative mech-anism to charging-filing for the resolution of Weingarten issues; namely,the grievance process incorporated into the parties’ collective bargain-ing agreement.120 Finally, the simple fact is that unionized employeesconstitute only 13.5 percent of the workforce (16,258,000). Now,104,528,000 nonunion employees and their employers will face this le-

120. Weingarten, 420 U.S. at 262–64.



gal gauntlet without the benefit of the knowledge and experience foundin the union workplace. To say that Epilepsy Foundation does not opena proverbial Pandora’s box is simply wishful thinking.

III. ConclusionWhile the NLRB should be cautious in reversing important legal

doctrine, it should not be hamstrung by that tenet in this particularsituation. In fact, the board has ample reason for overturning EpilepsyFoundation: (1) it would simply be reversing a decision that reversedfifteen years of precedent; (2) it has precedent for doing exactly what itshould do now;121 and (3) the decision improperly balances the interestsof labor and management and, importantly, frustrates the purposes ofthe NLRA. Simply put, a recount is in order.

121. See Sears, Roebuck & Co., 274 N.L.R.B. 230, overruled in part by E.I. Du Pontand Co., 289 N.L.R.B. 627.


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