Non-Competition requires “Consideration”

Non-Compete and other restrictive covenants (contracts) are generally enforceable in Kentucky if they are reasonable in geographic and temporal scope and as long as they are supported by “consideration”. These restrictions are contracts which therefore that must be supported by consideration, e.g. something new of value. For a new employee, the offer of employment is sufficient consideration.

When the employer requires an existing employee to sign a non – compete, particularly if it contains additional restrictions, new consideration is required such as a raise, bonus or some other compensation or benefit to the existing employee.

Any employer planning to require existing employees to sign a new Non- Compete (or Non-Solicitation or confidentiality provision) should plan any such initiative carefully.

Wages Defined: Commissions, Vacation Pay and Bonuses under Kentucky Wage and Hour law

The Kentucky Wage and Hour Act contains a definition of wages to include “any compensation due to an employee by reason of his or her employment, including salaries, commissions, vested vacation pay, overtime pay, severance or dismissal pay, earned bonuses and other similar advantages agreed upon by the employer and employee or provided to employees as an established policy.”

When vacation may be vested or when bonuses and commissions are “earned” and therefore payable as wages can be problematic but the employers’ best defense is to commit such benefits entitlement (or non entitlement) to writing or at least as a general company policy. If the employer requires all vacation time to be used before separation of employment, or it intends that no commissions received by the employer should be paid post separation, it should clearly express that policy.

Wages must be paid within 18 days of the last day worked and the failure to pay wages may subject the employer to liability for the wages and an equal amount as liquidated damages plus the employee’s attorney fees.

FMLA-Good Faith Belief Defense

Under the FMLA, an eligible employer (with more that 50 employees in a 75 mile radius) may not interfere with, or retaliate against, any eligible employee. Retaliation requires a demonstration that the Employer was motivated by retaliatory intent.

The 6th Circuit Court of Appeals has recently held that a belief that is “reasonably grounded on particularized facts”, that the employee’s request for FMLA was fraudulent or sufficiently suspicious that the employer denies the request may be a defense to the subsequent FMLA -even if the suspicions are not subsequently proven.

Employment Termination and Employer Risk Management

Human Resource Risk Management begins with the establishment of compliant policies and the consistent documentation and enforcement of those policies. Termination of employment presents potential risks that can understood evaluated and managed.

Most employees in Kentucky are employees at will but employment contracts, if any, may alter or expand the at -will nature of employment relationships. Terminations usually involve the most direct risk to the employer. Insurance coverages such as ELP policies may cover the cost of defense but rarely provide coverage for the underlying claim.

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Unemployment claims represent the most frequent employer experience with employment law. Claims made by eligible employees are decided by the Office of Employment and Training by Hearing officers conducting hearings by phone.

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Non-Compete Agreements

Non-Competes are generally enforceable in Kentucky as long as the contract has sufficient “consideration”. Generally conditioning on the job on execution of the non-compete would be enough consideration but where a non-compete is required after employment has begun without additional consideration like a raise or bonus.

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Recent Kentucky Verdicts

Barber v UPS:

5.3 million was issued 5 million of which was in non economic damage like embarrassment and humiliation. Eight Affrican American UPS workers alleged.

Isaacs v Novelis:

130K back pay 300K non economic ,Plaintiff sustained an injury while allegedly performing and unsafe act, she was fired upon release to return to work and she sued alleging that she was fired because she filed a Workers Compensation claim. Plaintiff prevailed and the jury found that the timing of the termination relative to the workers compensation return was a significant factor.

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Independent Contractors

The US Department of Labor has recently recently refocused its definition of independent contractor status in the context of wage and hour and overtime exemption status. The “economic reality” of the alleged employment status will be primary standard for evaluation misclassification which looks to the degree of economic dependence between the parties 

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