How do you prove your employee electronically signed that agreement?

How do you prove your employee electronically signed that agreement?

Remember Dawn Davis, the paralegal? She left her job at a Dallas law firm and moved to the Austin suburbs with her two kids, hoping she would eventually make more money as a sales person for Paula Payne Windows.

I wrote about this typical scenario in The Problem With Non-Competes. But I need to update it.

My original fact pattern had Dawn’s boss giving her a stack of documents to sign on her first day. But that’s so, like, GenX. You can’t expect Gen Y to sign documents on paper. And Gen Z? You might as well expect them to answer their phones when you call.

No, today Paula Payne Windows has an automated onboarding procedure. They worked with a software developer to build an online-only hiring application. The app automatically sends a welcome email to the email address Dawn provided when she was recruited and interviewed.

The email provides a unique hyperlink that leads to an online account-registration page where Dawn creates a unique user ID and password and selects security questions. Dawn has to enter her ID, password, and security-question answer every time she logs in.

Once the account is set up, the program presents Dawn with several agreements, starting with an Electronic Disclosure Agreement in which Dawn consents to be bound by her electronic signatures on the agreements, as if signed in writing. She has to agree to this before going any further.

Once Dawn agrees that her electronic signature is binding, the app presents her with three additional agreements, including an Employee Confidentiality, Non-Solicitation, and Non-Competition Agreement. The program allows her to sign the agreements in any order, but all of the agreements have to be signed before the app allows her to complete the electronic onboarding process.

This onboarding app keeps an electronic record of each document the candidate electronically signs, assigning a unique identifier and timestamp to each signed document. Once the app records that information, there is no way to change it (absent some extraordinary measures).

Dawn, of course, is not about to say “sorry, I can’t agree to this non-compete.” She already quit her old job, her kids are registered at new schools, and she paid a security deposit at a new apartment. So she doesn’t say anything about it.

For the next few years, Dawn doesn’t even think about the non-compete. Turns out she has a knack for the window game, and she becomes Paula Payne’s top sales performer. She’s so good that a competitor, Real Cheap Windows, offers her more money to take over its sales department. Dawn accepts.

You know the rest. The lawyer for Paula Payne Windows sends Dawn a nasty gram, files a lawsuit, and asks the judge for an injunction enforcing the non-compete.

“This is unfair,” Dawn tells her lawyer, “I never agreed to any non-compete when I accepted the job.”

“Ok,” her lawyer says, “but did you sign it?”

No way, Dawn says. “I never signed that non-compete agreement with Paula Payne Windows, electronically or otherwise.” And she signs an affidavit swearing to that.

But the HR manager at Paula Payne Windows signs an affidavit detailing how the electronic onboarding app works. “There’s no way Dawn could have completed the onboarding process without signing the non-compete agreement,” she says. “Plus, the electronic records show she signed it.” “Someone very sophisticated would have to hack into the system to change a record,” the HR manager says, “and there is no indication that has ever happened.”  

Suppose you’re the judge in Paula Payne Windows v. Dawn Davis. Paula Payne Windows files a motion for partial summary judgment, asking you to rule as a matter of law that Dawn signed the non-compete. Dawn’s lawyer argues that her affidavit creates a fact issue for the jury to decide, precluding summary judgment.  

What’s your ruling?

If you would grant summary judgment for Paula Payne Windows, then you’ll like the Texas Supreme Court’s decision in Aerotek, Inc. v. Boyd, No. 20-0290, 2021 WL 2172538 (Tex. May 28, 2021). (Justice Boyd wrote a dissenting opinion.)

Aerotek was an employment discrimination case, not a non-compete case, and the agreement at issue was an arbitration agreement called an MAA. But the facts concerning the computerized onboarding process were essentially the same as what I outlined in my hypothetical.

If you know something about summary judgment procedure, you might be thinking “wait, this is all wrong, how does the employee’s testimony not create a fact issue?”

But there’s one thing I’ve left out: The Texas Uniform Electronic Transactions Act (TUETA), found in Chapter 322 of the Texas Business and Commerce Code.

Under the TUETA-lage of SCOTX

The purpose of TUETA is “to facilitate electronic transactions” consistent with “reasonable practices concerning electronic transactions and with the continued expansion of those practices.” Tex. Bus. & Com. Code § 322.006.

With some exceptions, like signing a will, the statute applies to most transactions, including business and employment transactions. See Tex. Bus. & Com. Code § 322.003.

Duke Ellington released “East St. Louis Toodle-O” in 1927. 80 years later Texas enacted TUETA. Coincidence?

Assuming TUETA applies, it has two major policies. First, if a law requires an agreement to be in writing, an “electronic record” satisfies the law. Second, if a law requires a signature, an “electronic signature” satisfies the law. Tex. Bus. & Com. Code § 322.007.

This makes sense in today’s digital world, but it doesn’t really answer our question. Dawn isn’t arguing that an electronic signature on the agreement is invalid, she’s arguing that she never signed the agreement. The question isn’t whether an electronic signature is valid, but how you prove someone electronically signed.

But TUETA touches this topic too. And that’s really what Aerotek was about. As the court said:

Once parties to a transaction have “agreed to conduct [it] by electronic means”, the Act provides a standard for attributing electronic signatures to them. Section 322.009(a) provides that an “electronic signature is attributable to a person if it was the act of the person.” That “may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.”

Aerotek, 2021 WL 2172538, at *5.

TUETA defines “security procedure” to include . . . well, you get the idea. Bottom line: “A record that cannot be created or changed without unique, secret credentials can be attributed to the one person who holds those credentials.” Id.

Aerotek offered detailed evidence that, if believed, was sufficient to satisfy this standard. But the trial court wasn’t having it. The trial court judge in Aerotek denied the motion to compel arbitration, impliedly finding that the employees did not sign the MAA. Id. at *3.

A little background on procedure: On a motion to compel arbitration, the trial court judge is the finder of fact. If there is conflicting evidence about whether the employee signed the agreement, the trial court judge decides. The trial court is free to disregard evidence it does not find credible. And the trial court’s decision will be upheld on appeal, unless the evidence “conclusively” establishes that the trial court judge was wrong.

The Texas Supreme Court does not make factual determinations (in theory), so Aerotek had the heavy burden of showing that the evidence before the trial court conclusively established that the employees signed the MAA.

The employees argued that the trial court judge was free to disregard the testimony of Aerotek’s witnesses and to credit the testimony of the employees, but the Texas Supreme Court disagreed, for several reasons.  

First, the employees conceded that they completed the computerized hiring application and electronically signed the documents included, except for the MAA. Id. It might have been different if the employees claimed they didn’t use the electronic onboarding system at all.

Second, Aerotek offered specific, detailed evidence showing that the employees must have electronically signed the MAA:

  • To enter the application, a candidate was required to create for himself a unique identifier, a user ID, a password, and security questions, all unknown to Aerotek.
  • The candidate was required to enter personal information and sign documents by clicking on them.
  • The application recorded and timestamped the candidate’s every action.
  • The application’s business rules made it so that the application could not be submitted until all steps were completed and all required signatures provided, including on the MAA.
  • Once a candidate submitted his application, Aerotek could not modify its contents.
  • Aerotek provided the signed MAAs marked with timestamps identical to those in its database records showing each Employee’s progress through the application.

Id. In short, the testimony from Aerotek’s program manager, Marsh, showed that “it was impossible to complete the hiring application without signing the MAA.” Id. at *6.

Third—and this is probably the key—Marsh’s testimony was uncontroverted.

Yes, the employees testified they did not sign the MAA, but that’s all they said. They did not offer any evidence disputing the points made by the program manager.

For example, “the Employees could have requested forensic tests of the hiring application to show that it did not operate as March described, but they did not.” Id. The employees were “free to seek discovery to discredit Aerotek’s evidence,” the court said, but “[t]hey chose not to.” Id.

TUETA-loo to signing employment documents on paper?

We can draw several practice tips from Aerotek.

First, if you represent employers who have employees sign agreements when they start—and who doesn’t, these days—you should recommend an electronic onboarding process. (I’m assuming software for this is readily available and doesn’t have to be custom-made.)

Aerotek shows us that not only is an electronic onboarding process adequate, it is in some ways superior to getting wet signatures on paper.

Think about it. Suppose Dawn Davis signs the non-compete agreement, you scan it in to the system, and the hard copy gets shuffled away to who knows where. Years later, the company offers a signed copy of the agreement as evidence. “Yes, that looks like my signature,” Dawn testifies, “but I’m quite sure I never signed that document.” Someone must have faked it, she says.

How is the employer going to refute that testimony? Maybe if they’re lucky, Paula Payne Windows has a witness who will testify, “I have a clear recollection of watching Dawn sign the agreement that day.” But even then, Dawn’s contrary testimony is still going to create a fact issue. See Ward v. Weaver, 34 S.W.2d 1093, 1094 (Tex. Comm’n App. 1931, judgm’t affirmed) (discussed in Aerotek).

An electronic process like the one in Aerotek avoids that problem.

Second, if you represent the employer in a lawsuit and the employee denies signing the agreement, offer specific testimony as close to the evidence in Aerotek as possible. You can use the bullet-pointed facts above as a checklist.

Third, if you represent an employee who swears up and down she never electronically signed that agreement, just offering the employee’s denial is not going to cut it (assuming the employer offers evidence like the testimony in Aerotek). You’re going to have to offer something more to discredit the employer’s evidence.

This may require some judgment calls. Do you really want to embark on an expensive forensic inquiry into the employer’s onboarding system just because your client says “I’m pretty sure I didn’t sign that”?

On the other hand, if the client is 100% certain she didn’t sign the agreement at issue, and if the issue is important enough—often it will be—then you may have no choice but to roll up your sleeves and get your hands dirty (electronically speaking).

Maybe Dawn should consider forensic investigations for her next job.

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Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

Top 15 Drafting Considerations for Texas Non-Competes

Top 15 Drafting Considerations for Texas Non-Competes

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When I think about drafting a Texas non-compete, I think about these words to a song I liked in the 80s:

Freedom of choice, is what you got. Freedom from choice, is what you want.

It would be so much easier if we didn’t have so many choices, especially when drafting non-competes.

You’ve got two basic choices at the start. You can just cut and paste from a form, like my Plain-Language Non-Compete, or you can take the time to consider the client’s particular needs, the legal issues raised, and the practical considerations, and then draft accordingly. If you do the latter, here are my top 15 things to think about.

1. Does your client really want or need a non-compete?

This is not really a “drafting” tip. But before you start drafting a non-compete, you might want to ask the client “are you sure you really want a non-compete?” I explain why in The Most Effective Form of Non-Compete in Texas (or Anywhere). Spoiler alert: the answer is that you are better off with a happy employee than with an unhappy employee who was required to sign an airtight non-compete (if such a thing existed).

2. Should you include a choice of law clause?

If you’re drafting a non-compete for an employee working in Texas, can you improve the chance of enforcing the non-compete by including a choice of law clause selecting some other state’s law?

Probably not. There are two reasons for this.

First, you are probably not going to find a state that is significantly more favorable to non-competes than Texas. There are some things about Texas law that are favorable to the employee, such as the fact that you can’t get damages for breach of an overbroad non-compete (see no. 6) and the prohibition of industry-wide exclusions (see no. 9) But overall, Texas law is relatively friendly to non-competes.

So if you’re going to select some other state’s law (Delaware is a likely contender), you should at least take the time to understand whether that state’s law is actually better for your client.

But even then, there’s a second reason choosing another state’s law won’t work: Texas law on choice of law.

If the employee is working in Texas, a choice of law clause selecting some other state’s law is probably not going to be enforceable in a Texas court. I cover this in “This Stuff’s Made in New York City!” How Texas Courts Decide Which State’s Law Applies to a Non-Compete.

I say “probably” because there is some wiggle room in the three-part test for enforcing a choice of law clause. But in most cases you’re better off just avoiding this complication and selecting Texas law.

3. Which state’s law will apply?

We’ve been assuming the employee is going to work in Texas. But what if the employee is going to work outside of Texas? Will your Texas choice-of-law clause be enforceable? If not, what requirements of the other state’s law do you need to comply with?

This can get complicated. And your client probably doesn’t want to pay for you to spend hours researching the nuances of Oklahoma’s choice-of-law jurisprudence.

But here’s what I suggest. Assume there is a good chance the other state’s law will apply, and spend an hour researching the basic requirements of that state’s non-compete law. You might be surprised what you find. For example, Louisiana requires a non-compete to expressly state which parishes it covers.

Second, make the non-compete as narrow as reasonably possible (see nos. 6-9). That will tend to enhance its enforceability no matter which state’s law applies.

4. How do you meet the “ancillary” requirement?

Texas law requires a non-compete to be “ancillary to an otherwise enforceable agreement.” There is a lot of case law on what this means, some of it now obsolete. It boils down to two categories: (1) a non-compete tied to a confidentiality agreement and (2) everything else.

The most common way to meet the “ancillary” requirement for an at-will employee is to tie the non-compete to a confidentiality agreement. The Texas Supreme Court simplified this in the Alex Sheshunoff case. The court said the employer can meet the “ancillary” requirement by doing two things: agree to provide the employee confidential information and then actually provide the promised confidential information.

A corollary to this rule is that the employer can do the same thing by agreeing to provide specialized training and then actually providing such training.

Given this clear guidance from SCOTX, you’d be surprised how many Texas non-competes don’t expressly state that the employer will provide the employee with confidential information (or specialized training).

Not to worry. The Texas Supreme Court said in the Mann Frankfort case that the agreement to provide confidential information can be implied, if the nature of the employee’s work necessarily requires access to confidential information.

But why chance it? It’s so easy to include an express agreement to provide confidential information. Same for specialized training. And it helps if the training is actually “specialized.”

A harder question is how to make sure your client actually provides confidential information to the employee. I have one form of non-compete that includes a form for the employee to fill out 60 days later acknowledging that the employee has received confidential information.

Of course, after signing this acknowledgment the employee could still claim later that the information was not really confidential, but the signed form at least gives the employer’s litigation counsel good impeachment material.

On the other hand, what if the employer forgets to have the employee sign the acknowledgment? Now the evidence is messier, possibly creating a fact issue. For that reason, I stopped including the acknowledgment in my standard form of non-compete.

But it’s still an option to consider.

The next most common way to meet the “ancillary” requirement is to tie the non-compete to the sale of a business. I addressed this in Non-Competes in the Sale of a Texas Business. Generally, Texas law is friendlier to non-competes in this scenario.

My main drafting tip for a non-compete tied to the sale of a business is to make sure that the asset purchase agreement expressly states the buyer is obtaining the goodwill of the business. Protecting the goodwill is the rationale for allowing the non-compete, so you don’t want any ambiguity about whether the goodwill is being sold.

5. As to customers, should you include both a non-solicit and a non-compete?

It is very common for a Texas non-compete to have both a “non-solicitation” section and a separate non-compete section. The non-solicitation section will say, for example, that for two years the employee agrees not to solicit any person who was a customer or prospect of the employer during the last year of employment. The non-compete will more broadly prohibit competing with the employer. This means the non-solicit is really just a subset of the non-compete.

Why do lawyers draft it this way? And is it a good idea?

In my opinion, it’s generally a bad idea, although I admit this is more art than science.

First, let’s get one thing out of the way. A non-solicitation agreement is a form of a “covenant not to compete” and is therefore subject to the requirements of the Texas non-compete. See Is a Non-Solicitation Agreement a Non-Compete? This is one area of non-compete law where the Texas Supreme Court has not put form over substance.

That means including a separate non-solicitation section isn’t going to do anything to avoid the requirements of the statute.

So what’s the benefit? I think the idea is that the non-solicit is a sort of insurance policy. If a court finds the non-compete too broad, the employer can still fall back on the non-solicit, which is narrower and more likely to be found reasonable.

But tying the non-compete to “solicitation” creates practical problems of its own.

Here’s a familiar scenario that will illustrate what I mean:

Chris Customer: [answers phone] Hello? 

Dawn Davis: Hey, Chris. It’s Dawn. How have you been? 

Chris: Oh pretty good, Dawn. You know, just trying to keep up with all my construction projects.

Dawn: I hear you. I guess that’s a good problem to have.

Chris: Yeah, I can’t complain. So how are things going at Paula Payne Windows?

Dawn: Fine, I guess. But I’m not working there anymore. I’m the sales manager at Real Cheap Windows now.

Chris: Oh, cool. I didn’t know that. How do you like it so far?

Dawn: So far it’s great. We’ve got an excellent team here. We’re really doing good things for our customers. 

Chris: Glad to hear it. Well it’s nice hearing from you. Will I see you at the kids’ soccer game Saturday?

Dawn: Yup, I’ll see you there.

Question: did “solicitation” just happen in this phone call? The problem is that there will almost always be a factual dispute about whether the communication at issue was solicitation. And the particular problem for the employer is that the customer will tend to back up the employee’s assertion that there was no solicitation.

Perhaps you could solve this problem by including a definition of “solicit” in the agreement. But now you’re creating more opportunities for argument and interpretation.

And there’s an additional, more subtle problem with solicitation: causation. Even if the employer proves the employee solicited the customer and the customer left, that doesn’t necessarily prove the solicitation caused the customer to leave. What if Chris testifies under oath, “I’ve gone to church with Dawn and her husband for over ten years, and I would have taken my business to Dawn regardless of whether she solicited my business or not.” Wouldn’t that evidence negate causation?

For all these reasons, I tend to favor tying the non-compete to doing business with the company’s customers, not solicitation of the company’s customers. Whether the employee has done business with the customer, i.e. providing goods or services to the customer for money, is usually a more objective fact.

6. In general, should you make the non-compete broad or narrow?

I think you know what I’m going to say. But it’s worth taking a moment to explain why.

The employer’s instinct is to make the non-compete as broad as possible. If you represent the employer, part of your job is to explain why that’s not in the client’s best interest. There are two main reasons for this.

First, it will be easier to get a temporary injunction enforcing the non-compete if the non-compete is enforceable as written. True, the trial court judge can enter a temporary injunction that only partially enforces the non-compete, but as a non-compete litigator I would much rather go into the courtroom defending a non-compete I know is already reasonable in scope.

Second, if a court finds that the non-compete was not reasonable as written, the court can reform the agreement, but the employer cannot recover damages that occur before reformation. See Tex. Bus. & Com. Code § 15.51(c). In practical terms, that means drafting an overbroad non-compete is going to cost your client a significant bargaining chip.

When you explain those two facts to your employer client, the client may start to understand the need to resist the instinct to make the non-compete as broad as possible. Instead, a good rule of thumb is to “narrow the non-compete until it hurts.” When your client’s reaction is “ouch, only one year, that’s going to hurt,” you know you’re on the right track.

7. How do you meet the reasonable time period requirement?

Like I said, shorten the time period until it hurts. Texas courts have enforced non-competes as long as 3-5 years, but why chance it? The time period must be no longer than necessary to protect the employer’s legitimate interest, which usually means goodwill and confidential information. That usually means no more than two years. And one year is even better.

8. How do you meet the reasonable geographic area requirement?

There are Texas cases that, despite the command of the statute, you don’t need to have an express geographic limitation if there is a reasonable limitation on the scope, but again, why risk it? Put some geographic limitation in, even if it’s broad. Better yet, make the geographic scope as narrow as possible. The rule of thumb is that it should match the territory the employee is actually going to be responsible for.

9. How do you meet the reasonable scope requirement?

This is where I see the most mistakes in Texas non-competes. It seems many lawyers who draft agreements with non-competes are not aware that Texas law generally prohibits an “industry-wide exclusion.” I explained this in Burning Down the Haass: The Industry-Wide Exclusion Rule in Texas Non-Compete Law. (Again with the 80s songs.)

There are exceptions to the industry-wide exclusion rule, but again, why chance it? It’s best to limit the non-compete to customers the employee deals with or learns confidential information about while working for the company.

10. Should you include stipulations that the non-compete is enforceable, that a breach will cause irreparable injury, etc.?

You see clauses like this all the time. Essentially, these are just attempts to have the employee waive objections to enforceability.

Do clauses like this have any legal effect? Texas law is unsettled. Usually the court will cite a clause like this as an additional reason for enforcement, without saying the clause is dispositive. I don’t think I’ve seen any case that says, for example, that a stipulation that a breach will cause irreparable injury is conclusive.

My personal opinion is that these clauses should be given exactly zero weight. You can’t waive a public policy issue. And I don’t think private parties can change the requirements for obtaining an injunction any more than they could stipulate to different rules of evidence or procedure.

Despite my personal view, do I still include clauses like this when I draft a non-compete for an employer? Yes, of course. It doesn’t hurt. And it can help in cross examination of the employee.

How? You can’t expect me to give away all my secrets.

11. Should you include a tolling clause?

A tolling clause says that the time period of the non-compete will be extended by the amount of time that the employee is in breach. I’m starting to see more of these.

These clauses strike me as introducing more potential uncertainty than they are worth. A time period of one year from termination is objective and usually easy to apply. Figuring out the period of time the employee has been in breach can present a factual dispute. If you’re the employer, the last thing you want is to add yet another potential fact issue.

The court might even say the tolling clause renders the time period too indefinite to be enforced. I haven’t seen a case on this, but if I represent the employee I might at least make the argument.

12. Should you include a liquidated damages clause?

A liquidated damages clause specifies a specific amount of damages for a breach. I covered the requirements of a liquidated damages clause generally in Liquidated Damages Lessons from the Stormy Daniels Settlement.

I don’t like liquidated damages clauses in non-competes. It’s usually not that hard to calculate actual damages after the fact; in most cases it’s lost profits. But coming up with a dollar amount in advance that reasonably estimates what the actual damages are likely to be is difficult. For these reasons, you’re likely to have an argument over whether the liquidated damages clause is enforceable. That’s one more argument the employer doesn’t need.

If you do include a liquidated damages clause, be sure you also include a clause expressly stating that the employer can still obtain injunctive relief in addition to the liquidated damages. Otherwise, a court might say the liquidated damages are the employer’s exclusive remedy.

13. Can you avoid enforceability problems by structuring the non-compete as a forfeiture clause?

The short answer is no. If the agreement says the employee is free to compete but will forfeit his equity ownership in the company if he does so, the reasonableness requirements for Texas non-competes could still apply. And even if the court doesn’t consider the agreement a non-compete, it would still have to be reasonable.

For the longer answer, see my post When Is a Forfeiture Clause a Non-Compete?

The bottom line is that structuring the non-compete as a forfeiture clause—as opposed to an express prohibition on competition—won’t necessarily avoid enforceability issues, and if you do go the forfeiture route, you should still include reasonable limitations on time period, geographic area, and scope.

14. Can you improve the effectiveness of the non-compete by including severance pay? Garden leave?

When employees consult with me about non-competes, I sometimes suggest that if the employer is going to require a one-year non-compete, for example, then maybe the employee should ask for one year of severance pay. The rationale is that if the employee is going to sit out of the industry for a year, she should at least get paid for that year.

There is a certain logic to this, but of course that doesn’t mean employers will like it. Companies don’t usually like paying people to do nothing.

Still, there could be a benefit to the employer. This is why you sometimes see “garden leave” provisions. Under garden leave, the employee technically remains employed by the company for some period of time but is no longer actively doing anything for the company. The idea is that it’s easier to enforce a non-compete against a current employee than a former employee. Plus, competing with the employer while still employed would usually violate the employee’s limited “fiduciary” duty. See Fiduciary Duty Lite: What Employees Can and Can’t Do Before Leaving.

I don’t have as much experience with non-competes tied to garden leave, but it’s an idea employers should at least consider.

15. Can you draft an effective non-compete in the middle of employment? When the employee is on the way out the door?

The short answer? It’s hard, but not impossible. And it’s easier to do it in the middle than at the end.

The problem, in a word, is consideration. If the employee is already working for the company and has already received confidential information, what’s the new consideration for the non-compete?

Typically, the agreement in this situation will recite continued employment as consideration. But to improve the argument for enforceability, the employer should try to tie the new non-compete to a promotion, a higher level of responsibility, and/or increased access to confidential information.

Having the employee sign a non-compete after notice of termination is usually not going to work, even if the employer agrees to pay severance for it. Traditionally, a mere agreement to pay money has not satisfied the “ancillary to an otherwise enforceable agreement” requirement. But you can try. And feel free to be creative.

Like another song says, freedom’s just another word for nothin’ left to lose.

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IMG_4571Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.

The Only Form of Employment Agreement You Need

The Only Form of Employment Agreement You Need

A Modest Proposal: The Uniform Employment Agreement

Does anyone else feel like employment agreements are getting longer and longer? And don’t get me started on employee handbooks, employee policies, etc.

There are a lot of law firms making a lot of money by writing, re-writing, and updating these agreements and policies to keep up with all the latest developments in employment law.

As much as I favor lawyers making exorbitant amounts of money, this seems like an unnecessary drain on the profits of corporate America, which could be put to much better use. Like a nicer private jet for the CEO.  So I think some serious reform is needed.

I propose the Uniform Employment Agreement. This will be a short form of agreement that employers can use to accomplish the same things they are trying to do with the ever-expanding employment agreements and policies drafted by lawyers.

The Uniform Employment Agreement provides as follows:

_______ (“Employee”) agrees to be an at-will employee of _______ (“Employer”) at a salary of $_____/month.  To the fullest extent permitted by applicable law, Employee waives all legal rights against Employer and agrees that Employer can do anything it wants to Employee that is not illegal or barred by public policy.

That’s it. Nothing else. I know that employers and their lawyers will want to add more details to the agreement to make it more favorable to the employer, but why? What more could be accomplished than having the employee waive all rights? Just like deductions in the tax code, once you start adding things to the form, it’s hard to stop, and then you’ve defeated the purpose of keeping it simple.

I guess if an employer really wants to, it could add an arbitration clause or a jury trial waiver. That would still be consistent with the spirit of the Uniform Employment Agreement.

And yes, the employer could also add a confidentiality agreement and the typical Texas non-compete, but employees already have a quasi-fiduciary duty of confidentiality. And who needs a non-compete when you have the Texas Uniform Trade Secrets Act and the federal Defend Trade Secrets Act? Every employee who leaves with a customer list, i.e. every employee with a smartphone, can now be sued in federal court for misappropriation of trade secrets. (If you really, really want a non-compete, you can check out my Plain-Language Non-Compete.)

Employee advocates will object that the Uniform Employment Agreement is an outrageous over-reach by employers that should be against public policy.  But I’ve solved that problem with the disclaimer: “To the fullest extent permitted by applicable law . . .”

So in those states where bleeding-heart judges put employees first, the employee still has recourse. And is the waiver of all rights any more one-sided than what employers are already requiring in their 20-page single-spaced employment agreements?

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Zach Wolfe (zwolfe@fleckman.com) is a Texas trial lawyer who handles non-compete and trade secret litigation at his firm Fleckman & McGlynn, PLLC. Thomson Reuters named him a 2020 Texas “Super Lawyer”® for Business Litigation.

These are his opinions, not the opinions of his firm or clients, so don’t cite part of this post against him in an actual case. Every case is different, so don’t rely on this post as legal advice for your case.