To address this threat, gig companies can take some relatively easy steps to prevent contractors and departing employees from taking confidential information in the first place, and to protect that information from use by competitors.

Defending Trade Secrets

Businesses in the gig economy create and retain a trove of information that could be valuable in the hands of competitors: customer lists, purchase histories, customer preferences, and all kinds of financial information. And that’s just scratching the surface. Most gig employers have policies restricting employee or contractor use of and access to such information, and most states have laws to protect employers against trade secret theft.

As of 2016, federal law also provides a civil cause of action for trade secret misappropriation.  However, in order to recover punitive damages or attorneys’ fees under the law, the Defend Trade Secrets Act (DTSA) requires employees or contractors to be given notice of whistleblower immunities in all agreements dealing with trade secrets and confidential information. Gig businesses should take advantage of the trade secret protections afforded by this new law by reviewing policies and agreements to ensure they comply with the DTSA’s various provisions.

Protecting Relationships

A gig business’s relationships with its customers, contractors, and vendors are among its most valuable assets. Some employees and contractors are expected to develop lasting relationships on behalf of the company. Well-drafted agreements with these individuals should include a provision prohibiting them from soliciting customers, contractors, and vendors – especially those with whom they interact directly ­– for a reasonable period of time. State laws regarding the validity of non-solicit agreements can vary and can be complicated. That said, an enforceable agreement can be a potent tool to prevent individuals from poaching customers, contractors, or vendors on behalf of a competitor.

Non-Competition Agreements

One of the more sweeping measures a business can take to protect its relationships and confidential information is to ask workers to sign a non-competition agreement. These agreements generally prohibit departing workers from joining a businesses that competes with the company in a specified geographic area for a limited amount of time after their tenure with the company ends. Though a handful of businesses use non-competition agreements liberally, we generally recommend that companies limit these restrictive covenants to higher-level positions. As with the non-solicitation agreements discussed above, state laws vary widely regarding the enforceability of non-competition agreements, so well-tailored agreements are crucial.

Conclusion

With the deluge of stories about data security, now is an opportune time to review and update employment and independent contractor agreements and policies to protect trade secrets, confidential information, and relationships. On this front, an ounce of effort on the front end can save a ton of headaches in the event that an employee or contractor decides to take the company’s valuable information or relationships to a competitor.

We’ve all struggled with what to do when we’re given conflicting orders.  Grandma says “have some pudding,” and Pink Floyd’s Roger Waters responds, “how can you have any pudding if you don’t eat your meat?!” Employers are increasingly facing similar (though perhaps less-existential) wage-related conflicts.

We’ve recently written about the steady stream of states and localities that have implemented their own minimum-wage laws.  These laws, which often create rights and obligations in addition to increased minimum-wage rates, can give some employers heartburn befitting a meal of pot-roast and pudding.

Sure, employers may be required to pay workers more in some places under these laws.  But multi-state employers often also have to decide whether to implement varying pay policies that mirror the patchwork of local, state, and federal laws, or to implement blanket nationwide policies that are based upon the highest applicable standards.

Recent tip-credit developments illustrate these points.

Example:   Colorado’s New Tip-Ownership Option

These decisions can become even more complicated when provisions intersect.  For example, on January 1, 2017, Colorado’s new minimum wage of $9.30 per hour took effect.  The state also raised the direct cash wage to at least $6.28 per hour for tipped employees for whom an employer takes the balance as a “tip credit” under state law.  (See our previous posts on tip-credits for more information – the details are not as simple as you might assume.)

Presumably as part of a lawmakers’ bargain underlying these changes, Colorado’s legislature also added a provision that supposedly allows employers to claim ownership of an employee’s tips. The employer must display a “conspicuous notice” to the general public stating that all tips are the employer’s property, rather than the employee’s.

We say “supposedly”, because Colorado’s new tip-ownership provision directly conflicts with the U.S. Department of Labor’s current tip-credit regulations under the federal Fair Labor Standards Act.  Those regulations prohibit an employer from diverting or asserting control over an employee’s tips for any reason, except:

◊       To the extent necessary to cover a proper credit against its FLSA minimum-wage obligations to the employee; or

◊       To use them in furtherance of a valid tip pool.

Litigation is ongoing as to whether USDOL’s position is valid with respect to employers who take no FLSA tip credit. But at least some courts have backed the USDOL in this respect.

Consequently, Colorado’s new “conspicuous notice” tip-ownership provision will be of no help to employers who are using the FLSA tip-credit for workers in that state. Moreover, even employers who are not taking an FLSA tip-credit for Colorado workers must keep in mind the possibility that eventually a court consensus will emerge to the effect that asserting control over their employees’ tips runs afoul of the FLSA.

The Bottom Line

The Colorado illustration is by no means the only one.

For instance, New Hampshire’s minimum-wage rate is currently the same as the FLSA’s − $7.25 an hour. But that state’s law requires a higher direct-wage for tipped workers − $3.27 an hour − than today’s $2.13-an-hour FLSA figure. An employer of tipped workers in New Hampshire must ensure that the employees’ pay plan properly melds both state and federal obligations.

As another example, California takes a different approach altogether. That state’s law requires employers to pay tipped workers the full state minimum wage, without regard to tips.

Employers must take into account the requirements and restrictions of all jurisdictions in which they employ tipped workers, as well as how these provisions interact with the FLSA’s requirements. Sometimes the correct approach is obvious, but sometimes it is not. Given that many new state and local requirements take effect early in the year, now is a good time for employers to make sure that they are in compliance with all applicable laws.

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