THE FUTURE OF WAGE INCREASES

The Bureau of National Affairs (BNA) has recently completed a Wage and Benefits Survey of over 1300 union contract settlements in 2007.

Collectively, these settlements provide a reliable guidepost for wage and benefit trends nationally. Of course, regional and industry specific factors, as well as each company’s operating results, strongly influence wages and benefits at any given firm. The following are some highlights from the survey:

• The average wage increase for 2007 was 3.6 % up
  from 3.4% in 2006.
• The average wage increase for manufacturing companies in 2007 was 4.3%, up significantly from 3.8% in 2006.
• The settlements provided for wage increases averaging 3.3% in 2008 and 3.2% in 2009.
• Not surprisingly, the most frequently changed benefit was health insurance, with employees generally being required to pay more of the cost through higher deductibles, co-pays, or premiums.

The general consensus from the survey is that given the effects of inflation and increasing healthcare costs, the wage increases are barely sufficient to allow employees to maintain their status quo in terms of purchasing power.

EMPLOYEE RETENTION

Everyone agrees that employee turnover is expensive and that it is cheaper to retain experienced employees than to recruit and train new workers. A recent Wall Street Journal article (11/19/07) contained a special report outlining what some companies are doing to increase employee retention and to reduce turnover. The programs included:

• Stock options for employees who stay for 3 years and meet attendance and performance goals
• Requiring supervisors to say hello to employees each day
• Intensive computer driven performance management systems that provide employees with continuous positive and negative feedback, combined with rewards in the form of promotions for consistently good performance
• Replacing birthday recognition events with celebrations on the anniversary of an employee’s hire date – in effect, recognizing employees for completing another year of service with the company instead of another year of life
• Group rewards and activities such as company sponsored scavenger hunts, picnics, and dinners for meeting significant performance goals

While some of these programs carry costs, others do not. The companies using these programs reported significant improvement in turnover rates.

U.S. SUPREME COURT TO REVIEW CALIFORNIA LAW RESTRICTING COMPANIES’ RIGHT TO OPPOSE UNIONS

In 2001, California implemented legislation designed to require companies to remain neutral during union organizing. Specifically, the law provided that it was the policy of the State of California that employers should not “interfere with an employee’s choice about whether to join or to be represented by a labor union.” The effective part of the statute provided that companies doing business with the State of California must certify annually that no part of the money received from the State was used to oppose union organizing.

The U.S. Chamber of Commerce and the National Right to Work Legal Defense Foundation filed a legal challenge to this statute, contending that it represented an effort by the State of California to interfere with the function of the National Labor Relations Board, which under Federal law has the responsibility to regulate union organizing activities. In effect, the lawsuit said that the Federal law trumped this state statute. Not surprisingly, the very liberal Federal Appeals Court in San Francisco ruled that the California statute was valid.

The U.S. Supreme Court has recently agreed to hear this case, which is some indication that it disagrees with the lower court ruling.

Interestingly, the National Labor Relations Board (NLRB) itself filed a brief in the case and endorsed the positions taken by the Chamber of Commerce and the National Right to Work Legal Defense Foundation. The NLRB said that the California law interfered with its ability to enforce Federal law regarding union organizing.

The case is considered significant because at least 15 other states (none in the Southeast) are considering legislation similar to the California statute if the U.S. Supreme Court upholds this law.

A ruling on this issue is expected in 2008.

NON-COMPETE AGREEMENTS – TWO INTERESTING DEVELOPMENTS

Man Bites Dog

John Wilkerson and Sharon Tullman were employees of Navigant Consulting, Inc. in Dallas, Texas. The two employees managed Navigant’s Dallas Office which specialized in the administration of complex class action settlements. They were at will employees who were bound by non-compete, non-solicitation and confidentiality agreements.

One of Navigant’s competitors, First Union, contacted Wilkerson and expressed interest in purchasing the Claims Administration Business from Navigant. In response, Wilkerson and Tullman prepared a proposal for First Union that disclosed significant business information about Navigant and proposed a purchase price of $22.5 million. The problem is, the employees did not tell Navigant of their plans. Instead, they apparently intended to strike a deal with First Union, purchase the Claims Administration Business from Navigant themselves at a lower price, and pocket the difference.

The deal with First Union fizzled, but the employees took the package and shopped it with other competitors, eventually reaching a tentative deal with one of them. Part of the deal allowed the two employees to go to work for the competitor once they were able to negotiate a purchase of the Claims Administration Business from Navigant.

Navigant got wind of this development and was prepared when the two employees approached Navigant with an offer to buy the Claims Business. When Navigant refused their offer, the two employees resigned (just ahead of being fired) and accepted jobs with the competitor.

Navigant sued the two employees for breach of fiduciary duty, breach of contract, and misappropriation of trade secrets. A Texas jury ordered the employees to pay Navigant over $4 million in damages, and the Federal Appeals Court in New Orleans affirmed the jury’s award.

This case is significant because while most non-compete litigation involves claims for injunctive relief where companies are trying to prevent an employee from jumping ship to a competitor, in this instance Navigant allowed the employees to jump ship, but sued for monetary damages. Although the general thinking is that juries are reluctant to award monetary damages in favor of a company against employees, this case shows that juries are not reluctant to punish employees for truly underhanded activities.

Jail Time for Misappropriation of Trade Secrets

A Dupont scientist downloaded documents containing company trade secrets just before announcing his resignation to accept a job with another company. This type of activity happens all too often and normally results in civil litigation seeking injunctive relief.

Here, however, Dupont took a different course of action and asked the U.S. Attorney to prosecute the scientist under a Federal statute that makes it a crime to appropriate trade secrets with the intent to provide them to others. Faced with a criminal indictment, the scientist pled guilty and received a sentence of 18 months in prison, a fine of $30,000, and a requirement to reimburse Dupont $14,500. He probably would have preferred an injunction.

This case serves as a reminder of other options available to protect truly confidential information.