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Legal 500: Recession Boosts Employment Practice

By Alicia McNally, LAW WEEK COLORADO

DENVER – During a time when many legal professionals have been out of work, a practice focused on work continues to grow.

The labor and employment practice has risen as a result of the recent recession, says a national overview of the sector from the Legal 500. “Employee benefits litigation has continued to grow apace, as increasing recognition of the opportunities for lucrative settlements has combined with the economic turbulence of the past two years,” the overview reports.

Because the hostile climate of 2009 brought millions of layoffs or terminations, many of which still cannot find jobs, there has been much more scrutiny in reasons for unemployment, experts say.

“Many employees who have been separated from employment, either from a lay off or an outright termination, find themselves in a situation where they cannot become reemployed,” said Steve Moore, managing partner of the Denver office of labor and employment law firm Ogletree Deakins. “As a result, some have challenged their employers’ reasons for terminating them and alleged a variety of different claims including discrimination, retaliation, and wrongful discharge. This has led to more litigation work for our office in Denver.”

Many of those layoffs and terminations gave way to a rise in non compete agreement litigation. Non compete agreements are set to limit employees from sharing trade secret information and other IP-related goods with other companies. Some agreements bar employees from working with a competitor for up to two years.

“Employees are more willing to risk violating their non compete agreements because they need to work, and they are trading on valuable IP and trade secret information as leverage for an employment opportunity,” said Jessica Brown, a partner at the Denver office of Gibson Dunn & Crutcher.

More than half of departing employees steal proprietary company data, reports a 2009 study from the Arizona-based research company Ponemon Institute, which was based off a survey of 950 laid off employees.

“A lot of litigation involves whether those agreements are enforceable,” Brown said. “They’re not enforced like most contracts, because of the public policy issues involved. So the contracts aren’t always upheld as written. Courts will scrutinize them more closely as to whether they’re necessary, and if they are, to what extent. Courts want to strike the right balance between protecting an employer’s intellectual property and making sure people aren’t being precluded from earning a living. That job with the competitor may be the only thing an employee knows how to do, and it may be the best and highest use of employees’ skills.”

Another trend includes an increase in the trend of potential employers misclassifying employees as independent contractors, Brown said.

“The IRS has gotten really interested in reclassifying employees and making sure that workers really are independent contractors,” she said. “In order to be an independent contractor, you have to be in business for yourself, in essence, rather than under control of an employer. If the employer exerts a great deal of control over the manner in which the work is performed, the timing, and so forth, the worker may in fact be an employee and not a contractor. And this has all sorts of tax and other consequences for the employer and the employee.”

The rise in employment work has also seen a spike in national employment law firms opening offices in Denver in recent years. Among those law firms include Ogletree Deakins, which is based out of Atlanta and Greenville, S.C., which opened its office in February. Others include Atlanta-based Fisher & Phillips and New York-based Jackson Lewis, San Francisco-based Littler Mendelson and Atlanta law firm Ford & Harrison (“Employment Lawyers Offer Choices,” May 31).

“In this new economic climate, we are seeing clients seek to reduce the numbers of firms they employ and to utilize firms with a deep bench of experience in a certain area of the law,” Moore said.

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