The Lipp Law Firm, PC

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The Lipp Law Firm, PC

There are different laws tech companies and government contractors should be aware of.

Government contractors

I’ll address government contractors first. Of course, government contractors must comply with the Federal Acquisition Regulation (FAR). For example, the FAR mandates that government contractors maintain a drug free workplace. This has created some conflict for new state laws involving the legalization of marijuana. For example, in the District of Columbia marijuana is legal. When you combine the zero tolerance regime outlined in the FAR with full legalization, you can have a grey legal area where you need to seek legal counsel.

We’ve advised our government contractor clients through various scenarios where they have a good employee they want to keep who uses marijuana for medical reasons, but they’re faced with the drug free workplace mandate in the FAR. For example, if an employee has been diagnosed with cancer, glaucoma, or anxiety which are common conditions where medical marijuana is prescribed, we help our clients navigate these situations. A large part of our firm’s employment practice involves issues relating to employee disabilities, medical issues, drug use, and accommodations under the Americans with Disabilities Act (ADA).

With the federal government shutdown, many of our government contracting clients sought our help on pay issues. The shutdown created difficult business choices for our government contracting clients, and resulted in multiple layoffs. We assisted our government contractor clients with those layoffs to ensure they complied with legal and HR best practices.

Tech Companies

Tech companies should be aware of the various employment laws in the states that they have employees working in. Each state can have very different laws that apply to it, and courts that apply different rules. Most tech companies have their employees sign non-compete or non-solicitation agreements, which have varying levels of enforceability by state.

We frequently get involved on behalf of tech companies when they receive a cease and desist letter from another company because they’ve hired a new employee or started working with a new customer. Our first step with those matters is to look at the applicable contract. I want to see a copy of the contract containing the non-compete, and will determine what state law controls the contract.

Tech companies tend to have multiple non-compete matters which we love to handle throughout DC, Maryland and Virginia. In the DMV area employers can generally enforce these clauses, also called restrictive covenants, provided they were drafted in a reasonable way and are narrowly tailored to protect the company’s legitimate business interests.

We also audit our tech clients’ non-compete restrictions to ensure they are enforceable. That way, when an employee leaves their company and violates the restrictions, then the company can enforce them in court.

How Do We Legally Discipline an Employee or Contractor and Avoid Potential Litigation?

First, what laws apply to the employee or contractor? Applicable laws will vary depending on what state the employee works in and the number of employees the employer has. Once you determine the applicable laws, you turn to the specific employee and see if they fall within any protected classes, which vary based on where the employee is working.

Second, is there a contract that governs the parties’ relationship, like an employment contract or collective bargaining agreement?

It’s more common not to have an employment contract, but many high-level employees, such as executives, are going to have an executive employment contract. Sometimes, high level executives are subject to a change in control agreement, which applies when their employer is sold or acquired by another company. If we are assisting with an employment termination, then I want to ensure that we are not violating any applicable contract.

Third, what company policies or agreements apply? We want to closely follow any applicable company policies when disciplining employees. The reason you have these policies is so you can abide by them and instill trust in your employees that there is going to be a predictable process that occurs.

Another less common situation is if the employee is also a shareholder of the company or owns a piece of the company, then you want to make sure that you’re abiding by any corporate documents that would place any restrictions on the company’s actions in carrying out the discipline.

However, let’s assume there’s NO policy or agreement that governs the company’s actions. Then you want to review what you have done in the past for a similar infraction; this lets you put things into context and treat employees similarly. For example, let’s say the employee is consistently late to work and it’s causing harm to the business. If there’s no policy in place, then what do you do if other employees are consistently late to work? What have you done in the past? You want to make sure with any disciplinary situation that you’re treating employees the same. What creates legal exposure in situations like this is that you’re treating people differently. If you’re treating a female employee differently than a male employee for the same infraction, then you’re creating legal exposure for your company.

What type of discipline to apply is another topic we frequently encounter. One type of discipline is called progressive discipline, which is common with a unionized workforce. Progressive discipline escalates punishment each time you commit an infraction. For example, if you are late once, you receive a verbal warning. If you’re late a second time, you receive a written warning. If you are late third time, you are terminated. It’s not just one strike and you’re out. Progressive discipline gives the employee a chance to fix their behavior; it can be a fair system for the employee to operate in.

However, for companies I represent, I advise that they’re typically not legally required to have progressive discipline policies, unless they are operating in a union environment. In the union context you generally will have a progressive discipline policy in your collective bargaining agreement, which is the contract between the labor union and the employer. In the private non-union context, progressive discipline policies should be removed from workplace policies. There’s no reason to have a progressive discipline policy in the private non-union context, because it provides greater flexibility to operate the company the way you want. You don’t want to be restrained by a particular policy if at all possible, so in some circumstances, it can be better to have no policy at all.

If you are dealing with an independent contractor, you should have an independent contractor agreement that governs the relationship between the company and the contractor. That agreement should have terms regarding how the parties’ relationship is terminated and offers as much protection as possible to the company, while still being fair to the contractor.

If there’s no agreement in place, then there’s no requirement to keep the contractor on for any specific time period. It’s easier to terminate a contractor than it is an employee because the difference between the two relationships is control. How much control does the company exercise over the contractor? Generally, with a contractor there’s not much control that you exercise over how the contractor does the work, and the contractor is able to work for other companies at the same time. The only restrictions you’ll have when you’re terminating the relationship with an independent contractor will be in an independent contractor agreement (ICA). If there’s no ICA in place, the company doesn’t have many restrictions in severing the relationship, so long as it’s not for an improper or fraudulent reason.

For more information on Laws for Tech Companies and Government Contractors, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (571) 660-4077 or emailing our firm at katie@lipplawfirm.com.

Kathryn Megan Lipp, Esq.

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