Noncompete Agreements
As April comes to a close, we bring you another edition of the Ag Law Harvest. This month’s harvest brings you laws and regulations from across the country regarding a national drinking water standard, the Endangered Species Act, Ag-Gag laws, noncompete agreements, and pollution.
EPA Finalizes First-Ever PFAS Drinking Water Standards
Earlier this month, the U.S. Environmental Protection Agency (“EPA”) announced a final rule, issuing the “first-ever national, legally enforceable drinking water standard to protect communities from exposure to harmful per-and polyfluoroalkyl substances (PFAS), also known as ‘forever chemicals’”. The final rule sets legally enforceable maximum contaminant levels for six PFAS chemicals in public water systems. The EPA also announced nearly $1 billion in new funding to “help states and territories implement PFAS testing and treatment at public water systems and to help owners of private wells address PFAS contamination.” The EPA suggests that this final rule “will reduce PFAS exposure for approximately 100 million people, prevent thousands of deaths, and reduce tens of thousands of serious illnesses.”
Interior Deptartment Finalizes Rule to Strengthen Endangered Species Act
The Department of the Interior has announced that the U.S. Fish and Wildlife Service finalized revisions to the Endangered Species Act (ESA). These revisions aim to enhance participation in voluntary conservation programs by promoting native species conservation. They achieve this by clarifying and simplifying permitting processes under Section 10(a) of the ESA, encouraging greater involvement from resource managers and landowners in these voluntary initiatives. For more information about Section 10 of the ESA visit the U.S. Fish and Wildlife Service’s website.
Kentucky Passes Ag-Gag Statute
On April 12, 2024, the Kentucky legislature overrode the governor’s veto to pass Senate Bill 16 into law. The new law, titled “An Act Relating to Agricultural Key Infrastructure Assets,” expands the definition of “key infrastructure assets” to include commercial food manufacturing or processing facilities, animal feeding operations, and concentrated animal feeding operations. It criminalizes trespassing on such properties with unmanned aircraft systems, recording devices, or photography equipment without the owner's consent. The first offense is a Class B misdemeanor with up to 90 days imprisonment and a $250 fine, while subsequent offenses are Class A misdemeanors with up to 12 months imprisonment and a $500 fine.
Federal Trade Commission Bans Non-Compete Agreements
The Federal Trade Commission (“FTC”) announced a final rule banning noncompete agreements and clauses nationwide. This move aims to promote competition by safeguarding workers’ freedom to change jobs, increasing innovation and the formation of new businesses. Under the FTC’s new rule, existing noncompetes for the vast majority of workers will no longer be enforceable after the rule’s effective date. However, existing noncompetes for senior executives – those earning more than $151,164 annually and in policy making positions – remain enforceable under the new rule. Employers will have to notify workers bound to an existing noncompete that the noncompete agreement will not be enforced against the worker in the future. The final rule will become effective 120 days after publication in the Federal Register.
EPA Announces New Rules to Reduce Pollution from Fossil Fuel-Fired Power Plants
The U.S. Environmental Protection Agency (“EPA”) unveiled a set of final rules designed to decrease pollution from fossil fuel-fired power plants. These rules, developed under various laws such as the Clean Air Act, Clean Water Act, and Resource Conservation and Recovery Act, aim to protect communities from pollution and improve public health while maintaining reliable electricity supply. They are expected to substantially reduce climate, air, water, and land pollution from the power industry, aligning with the Biden-Harris Administration's goals of promoting public health, advancing environmental justice, and addressing climate change.
Tags: EPA, ag law harvest, ag-gag, FTC, Noncompete Agreements, endangered species act, Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act
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In this rendition of the Ag Law Harvest, we bring you some contracts! Over the course of February, there were three Ohio cases that demonstrate the importance of having a written contract, the ability to form a contract through your actions, and the need to make sure specific terms within a contract can be enforceable.
Handshake Agreements Can Be a Double-Edged Sword.
In this case we are introduced to two brothers (the “Plaintiffs”), who were equal partners in a farming business that included buying and selling livestock. As part of their business, Plaintiffs sold cattle to Defendants between 2009 and 2017. The parties did not have a formal contract in place and conducted business on a “handshake agreement.”
The Plaintiffs claim that the Defendants acted as intermediaries, purchasing heifers from them, and reselling them to other dairy farmers or at market. According to Plaintiffs, it was customary for the Defendants to pay for the cattle immediately upon delivery or within 30 days. However, around 2016, Defendants allegedly wrote checks for seven transactions but asked Plaintiffs not to cash them due to insufficient funds. Plaintiffs assert that Defendants never honored these checks, resulting in an outstanding amount of $128,950. Despite Plaintiffs' attempts to collect, Defendants denied owing any money, arguing that Plaintiffs were fully paid through later payments or third-party transactions. This disagreement led to the filing of Plaintiffs' lawsuit.
In February of last year, the trial court granted Plaintiffs summary judgment and awarded them $120,150. Defendants appealed the trial court’s decision arguing that summary judgment was inappropriate because whether or not Defendants owed Plaintiffs any money was in dispute. The appellate court agreed.
In its opinion, the appellate court stated that it was clear that “the trial court weighed the credibility of the parties. . .” The appellate court also made it clear that “[s]ince resolution of the factual dispute will depend, at least in part, upon the credibility of the parties or their witnesses, summary judgment in such a case is inappropriate.” Furthermore, the court noted that because there was no written contract between the parties, the only evidence to demonstrate the particulars and common practices of the handshake agreement comes from the personal knowledge of the Plaintiffs and Defendants. Therefore, because both parties disagree as to whether Defendants owe any money to Plaintiffs, the trial court should not have ruled in favor of Plaintiffs on summary judgment. Consequently, the case is remanded to the trial court for further proceedings, potentially including a trial.
This case shows us two things, the importance of having a written contract and the importance of recordkeeping. The parties to this lawsuit must now argue that their recollection of events is the true and accurate recollection. Both parties will likely be judged by a group of jurors and one party is bound to be out a large sum of money. A written contract could have avoided much of the dispute by including language about the process for payment, record keeping requirements, and other terms and conditions that would have governed the relationship of the parties. Now, because there is no written contract, this case becomes a case of “he said-he said.”
Implied Contracts Can Be Formed Based on a Tacit Understanding.
The second case demonstrates that the surrounding facts and circumstances can create an implied contract even when no signed contract exists. In this case Plaintiff, a residential construction company, provided the Defendant-homeowners with two written quotes for roofing and other work at their home. The quotes included various services and specified a 30% upfront payment with the remainder due upon completion of the work. Although the Defendants did not sign or date the quotes, they paid Plaintiff $6,815, which was stated to be a 30% prepayment for the total quoted amount of $22,717.
After completing the roof, Plaintiff submitted a bill to the Defendants for the balance due on the roof. The Defendants took issue with the invoice for two reasons: (1) the price did not match the quotes, and (2) Defendants believed that payment would not be due until all items on both quotes were completed. Ultimately, the parties parted ways and Defendants asked Plaintiff to not return to their home leaving the remainder of the work listed on the two quotes uncompleted.
Plaintiff sued the Defendants alleging breach of contract, seeking payment for the finished roof. The matter proceeded to a bench trial where the trial court found that the two quotes and the 30% payment operated as an implied contract and not an express one. The trial court also held that Plaintiff did partially perform the agreement and should be paid for the roof installation.
The Defendants appealed, arguing that Plaintiff could not recover in this case because Plaintiff only alleged a breach of an express contract and did not seek recovery for breach of an implied contract. The appellate court disagreed. The court noted that under Ohio law there are three types of contracts: (1) express contracts, (2) implied in fact contracts, and (3) implied in law contracts.
The court went on further to explain when the three different kinds of contracts are created. An express contract is created when there is an offer and acceptance of written terms. An implied in fact contract requires a “meeting of the minds” and that “is shown by the surrounding circumstances which [make] it inferable that [a] contract exists as a matter of tacit understanding.” Lastly, with an implied in law contract “there is no meeting of the minds” but the law will create civil liability for a person in receipt of benefits which they are not justly entitled to retain.
The appellate court held that the trial court correctly found there was no express contract between the parties, rather there was an implied in fact contract. The court reasoned that the two written quotes and the 30% prepayment created a tacit understanding amongst the parties. Furthermore, the court concluded that because an implied contract existed amongst the parties, Plaintiff is entitled to recover for the work they did do. Lastly, the trial court noted that Defendants should have been aware that Plaintiff’s breach of contract claim would not only apply to express contracts but also to implied contracts.
Noncompetition Agreement Found to be Unenforceable.
In our final case we are introduced to a salesman that was being sued by his former employer for breach of a non-competition agreement (the “NCA”) after going to work for a direct competitor. Plaintiff, Kross Acquisition Co., LLC (“Kross”), is a basement waterproofing contractor. Kross provides service in southwestern Ohio, southeastern Indiana, and northern and eastern Kentucky. Kross’s former employee Roger Kief left to work for Groundworks Ohio, LLC (“Groundworks”). Groundworks is engaged in substantially the same business as Kross and serves the entire state of Ohio as well as Kentucky, Indiana, and many other states.
Kief began working for Kross in 2017 and signed the NCA. The NCA prohibits Kief from disclosing confidential information and from working anywhere in Ohio or Kentucky for any competing company for a period of two years after leaving Kross. In February of 2022, Groundworks offered Kief an identical position with a start date of March 2022.
Kross filed lawsuit against Kief for failing to adhere to the NCA. The trial court found the NCA unenforceable and granted summary judgment in favor of Kief. Kross filed an appeal arguing that the trial court erred when it found the NCA unenforceable. The appellate court disagreed. The court noted that the following factors are used to analyze whether a noncompetition agreement can be enforceable:
1. Time and space limitations: Whether the agreement specifies a reasonable duration and geographic scope for its restrictions.
2. Sole contact with the customer: Whether the employee is the primary or sole contact with the employer's customers.
3. Confidential information or trade secrets: Whether the employee has access to and possesses confidential information or trade secrets of the employer.
4. Limitation of unfair competition: Whether the covenant aims to prevent unfair competition or if it overly restricts ordinary competition.
5. Stifling of inherent skill and experience: Whether the agreement unreasonably stifles the employee's inherent skill and experience in the industry.
6. Disproportionate benefit to the employer: Whether the benefit gained by the employer from the agreement outweighs the detriment imposed on the employee.
7. Bar on sole means of support: Whether the agreement bars the employee's only means of earning a livelihood.
8. Development of restrained skills during employment: Whether the skills restricted by the agreement were actually developed during the employee's tenure with the employer.
9. Incidental nature of forbidden employment: Whether the forbidden employment is merely incidental to the employee's primary employment with the employer.
Based on the foregoing factors, the court found that the geographic and time limitations “exceeded what is necessary to protect Kross’s legitimate business interests.” Therefore, the appellate court found the NCA unenforceable.
Happy 2024! We hope your new calendar year has gotten off to a delightful start. As we close out the first of twelve months, we bring you another edition of the Ag Law Harvest. In this blog post, we delve into the intricate world of employment contracts and noncompete agreements, classifying workers as independent contractors or employees, Ag-Gag laws, and agricultural policy.
Ohio Man Violates Employer’s Noncompete Agreement.
Kevin Ciptak (“Ciptak”), an Ohio landscaping employee, is facing legal trouble for allegedly breaching his employment contract with Yagour Group LLC, operating as Perfection Landscapes (“Perfection”). The contract included a noncompete agreement, which Ciptak is accused of violating by running his own landscaping business on the side while working for Perfection. Perfection eventually discovered the extent of Ciptak’s side business, leading to Perfection filing a lawsuit.
During the trial, Ciptak testified that Perfection was “too busy” to take on the jobs he completed. Additionally, Ciptak stated that the profits from his side jobs amounted to over $60,000. Perfection countered that they would have been able to perform the work and, because of the obvious breach of the noncompete agreement, Perfection lost out on the potential profits. The trial court ruled in favor of Perfection, ordering Ciptak to pay the $60,000 in profits along with attorney's fees and expenses, exceeding $80,000. Ciptak appealed, arguing that, according to Ohio law, Perfection could only recover its own lost profits, not Ciptak's gains from the breach. He also claimed that Perfection was not harmed as they were "too busy," and Perfection failed to provide evidence of lost profits.
The Eighth District Court of Appeals ultimately found in favor of Perfection. The court reasoned that “[t]his case came down to a credibility determination.” The court held there was no dispute that Ciptak had violated the noncompete agreement. What was in dispute was whether Perfection could have and would have performed the work. The Eighth District held that the trial court’s finding that Perfection could have performed the work was not unreasonable. The Eighth District noted that although Ciptak claimed that Perfection was “too busy” to do any of those jobs, Ciptak “provided no other evidence to support this assertion.” The Eighth District ruled that the evidence presented at trial showed that Perfection would have realized approximately the same amount of profit on those jobs as Ciptak did and, therefore, Perfection was damaged as a result of Ciptak’s breach of the noncompete agreement.
New Independent Contractor Rule Announced by Department of Labor.
The U.S. Department of Labor (“DOL”) has published a final rule to help employers better understand when a worker qualifies as an employee and when they may be considered an independent contractor. The new rule gets rid of and replaces the 2021 rule. As announced by the DOL, the new rule “restores the multifactor analysis used by courts for decades, ensuring that all relevant factors are analyzed to determine whether a worker is an employee or an independent contractor.” Thus, the new rule returns to a “totality of the circumstances” approach and analyzes the following six factors: (1) any opportunity for profit or loss a worker might have; (2) the financial stake and nature of any resources a worker has invested in the work; (3) the degree of permanence of the work relationship; (4) the degree of control an employer has over the person’s work; (5) whether the work the person does is essential to the employer’s business; and (6) the worker’s skill and initiative. The new rule goes into effect on March 11, 2024.
Federal Appeals Court Reverses Injunctions on Iowa “Ag-Gag Laws.”
On January 8, 2024, the U.S. Court of Appeals for the Eighth Circuit issued two opinions reversing injunctions against two Iowa “ag-gag laws”. At trial, the two laws were found to have violated the First Amendment of the United States Constitution. In its first opinion, the Eighth Circuit Court of Appeals analyzed Iowa’s “Agricultural Production Facility Trespass” law which makes it illegal to use deceptive practices to obtain access or employment in an “agricultural production facility, with the intent to cause physical or economic harm or other injury to the agricultural production facility’s operations . . .” The Eighth Circuit found that the intent element contained within the Iowa law prevents it from violating the First Amendment. The court reasoned that the Iowa law “is not a viewpoint-based restriction on speech, but rather a permissible restriction on intentionally false speech undertaken to accomplish a legally cognizable harm.”
In its second opinion, the Eighth Circuit reviewed an Iowa law that penalized anyone who “while trespassing, ‘knowingly places or uses a camera or electronic surveillance device that transmits or records images or data while the device is on the trespassed property[.]’” The court found that the Iowa law did not violate the First Amendment because “the [law’s] restrictions on the use of a camera only apply to situations when there has first been an unlawful trespass, the [law] does not burden substantially more speech than is necessary to further the State’s legitimate interests.” The court noted that Iowa has a strong interest in protecting property rights by “penalizing that subset of trespassers who – by using a camera while trespassing – cause further injury to privacy and property rights.”
Both cases have been remanded to the trial courts for further proceedings consistent with the forgoing opinions.
USDA Announces New Remote Beef Grading Program.
Earlier this month, the U.S. Department of Agriculture (“USDA”) announced a new pilot program to “allow more cattle producers and meat processors to access better markets through the [USDA’s] official beef quality grading and certification.” The “Remote Grading Pilot for Beef” looks to expand on the USDA’s approach to increase competition in agricultural markets for small- and mid-size farmers and ranchers. The pilot program hopes to cut expenses that otherwise deter small, independent meat processors from having a highly trained USDA grader visit their facility.
Under the pilot program, trained plant employees capture specific images of the live animal and the beef carcass. These images are then sent to a USDA grader that will inspect the images and accompanying plant records and product data, who then assigns the USDA Quality Grade and applicable carcass certification programs. The “Remote Grading Pilot for Beef” is only available to domestic beef slaughter facilities operating under federal inspection and producing product that meets USDA grading program eligibility criteria. More information can be found at https://www.ams.usda.gov/services/remote-beef-grading.
USDA Accepting Applications for Value-Added Producer Grants Program.
On January 17, 2024, the U.S. Department of Agriculture (“USDA”) announced that it is “accepting applications for grants to help agricultural producers maximize the value of their products and venture into new and better markets.” These grants are available through the Value-Added Producer Grants Program. Independent producers, agricultural producer groups, farmer or rancher cooperatives, and majority-controlled producer-based business ventures are all eligible for the grants. The USDA may award up to $75,000 for planning activities or up to $250,000 for working capital expenses related to producing and marketing a value-added agricultural product. For more information, visit the USDA’s website or contact your local USDA Rural Development office.
Tags: Noncompete Agreements, Employment Contracts, labor, Independent Contractor, Employee, Grants, USDA, Department of Labor, Beef
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