Employment Law This Week®: Non-Solicitation Violation, SOX 304 Clawback, NLRB’s Joint-Employer Standard, OSHA’s “Walk Around” Rule

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This week’s stories include …

(1) Non-Solicitation Violation Leads to $6.9M in Damages

Our top story: Former employees turned competitors in Pennsylvania are hit with $4.5 million in punitive damages. An insurance brokerage firm sued a group of employees, claiming that they violated their non-solicitation agreements by luring away employees and clients to launch a new office for a competitor. A lower court awarded the firm nearly $2.4 million in compensatory damages and $4.5 million in punitive damages because of the defendants’ outrageous conduct. On appeal, the appellate court agreed and upheld all damages. Anthony Laura, from Epstein Becker Green, has more.

“Punitive damages were awarded in this case for what I think were several reasons. Initially, the court did sustain tort claims against these defendants, which supports an award of punitive damages. Secondly, the defendants’ conduct in this case was particularly egregious. They willfully took information from their former employer; that was the plan that they had all along. And, in fact, their first year of business was derived solely from the clients of their former employer. . . . And lastly, I think the court was annoyed with these particular defendants for having ignored his discovery rulings and orders in the case, and, in fact, having violated a preliminary injunction order that the court put in place. That’s certainly a recipe for punitive damages.” For more on this story, click here: http://bit.ly/2cWCcLw

(2) No Personal Misconduct Required for SOX 304 Clawback

Executive pay is subject to clawback regardless of fault, the U.S. Court of Appeals for the Ninth Circuit says. The Securities and Exchange Commission recently sued a former CEO and CFO, seeking to take back compensation under Section 304 of the Sarbanes-Oxley Act (SOX), after their former company restated its financial results due to accounting improprieties. The executives argued that they personally did not engage in misconduct, so their pay should not be subject to the clawback. The Ninth Circuit disagreed, finding that Section 304 applies whenever companies restate results due to misconduct. While we’ve seen similar rulings from lower courts, this is the first time a federal circuit court has taken this view.

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