Trade Secrets & Noncompete Blog

Trade Secrets & Noncompete Blog

News & Updates On Developments in the Law of Restrictive Covenants, Unfair Competition & Trade Secrets

Category Archives: Non-Compete Agreements

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Which States Are Likely to Enact Laws Restricting Non-Compete Agreements in 2017?

In 2016, several states enacted laws that were designed, in varying degrees, to limit non-competes, including Illinois, Utah, Connecticut and Rhode Island. Which states are most likely to do the same in 2017?

Idaho:  A bill proposed in January, House Bill 61, would amend an existing Idaho law that has made it easier for employers to enforce non-competes against the highest paid 5% of their employees and independent contractors.  The bill would alleviate the burden placed on such “key” personnel by the existing law by, among other things, eliminating the rebuttable presumption of irreparable harm to the employer … Continue Reading

Even If a Trial Court Denies Your Injunction, If Your Request Is Well-Founded, Consider an Immediate Appeal

In non-compete matters, it is often said that trial judges dislike enjoining individuals and will go out of their way to avoid doing so. A recent decision by the Florida Court of Appeals, Allied Universal Corporation v. Jeffrey B. Given, may be a good example of such a situation – as well as an example of an employer that took an immediate appeal and got the relief it wanted.

In Allied Universal, the trial court denied a motion for a preliminary injunction to enforce the terms of a non-compete with a former employee, even though the employee failed … Continue Reading

Lack of Actual Knowledge of The Existence of a Non-Compete Defeats Tortious Interference Claim

Matthew Savage Aibel

In Acclaim Systems, Inc. v. Infosys, the U.S. Court of Appeals for the Third Circuit recently rejected a claim for tortious interference with a non-compete, because the plaintiff introduced no evidence of actual knowledge that the individuals in question were covered by non-competes.

Infosys, an IT services company, bid on a job from Time Warner Cable (“TWC”) that had been serviced by a competitor, Acclaim. TWC decided to transfer the project over to Infosys, but wanted Infosys to hire four contractors who previously worked with Acclaim on the project.

Infosys acceded to TWC’s request, but first reached out to … Continue Reading

Key Trade Secret and Non-Compete Developments in 2016 – Employment Law This Week

The year-end episode of Employment Law This Week  looks back at the biggest employment, workforce, and management issues in 2016.

Our colleague Jonathan Shapiro discusses the impact of the Defend Trade Secrets Act (DTSA)—which opened federal courts to trade secrets claims, regardless of the dollar value—and the White House’s call to action encouraging states to ban non-compete agreements in some circumstances.

Watch the segment below and read Epstein Becker Green’s recent Take 5 newsletter, “Top Five Employment, Labor & Workforce Management Issues of 2016.”

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“List of Holiday-Related Trade Secret/Non-Compete Cases”

LightsWhether you are a young child missing teeth, or a grown-up taking account of her life, or Santa Claus himself checking up on everyone else’s life, many of us make lists at holiday time.  They can be lists of gifts we want, or those we need to get, or people we wish to see or write to, or things we need or want to do before the end of the year.  Sometimes they are just lists of things that happened this year or that we want to happen next year.  Certainly there are lots of “Top Ten” holiday lists.  This … Continue Reading

White House Issues Call to Action on Non-Competes – Employment Law This Week

The top story on Employment Law This Week:  The White House is calling on states to combat what it describes as the “gross overuse of non-compete clauses today.”

The call to action recommends legislation banning non-competes for certain categories of workers and prohibiting courts from narrowing overly broad agreements. New York Attorney General Eric Schneiderman answered the call immediately, announcing that he would introduce relevant legislation in 2017. Our colleague Zachary Jackson, from Epstein Becker Green, comments.

Watch the segment below and see our blog post on this topic.

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DOJ and FTC Release Antitrust Guidance for Human Resource Professionals – Employment Law This Week

The top story on Employment Law This Week: The DOJ intends to investigate anti-competitive trade practices.

The Department of Justice and the Federal Trade Commission released joint guidance for HR professionals on how antitrust laws apply to employment. The guidance explains that agreements among employers not to recruit certain employees—or not to compete on terms of compensation—are illegal. Notably, the DOJ announced that they plan to criminally investigate “naked no-poaching or wage fixing agreements” that are unrelated to legitimate collaboration between businesses. In the past, both agencies have pursued civil enforcement. Peter Altieri, co-editor of this blog and a Member … Continue Reading

White House Call to Action Could Spur More States, Including New York, to Act Against Non-Competes

Political winds disfavoring non-compete agreements for low wage and rank-and-file workers continue to blow, and appear to be picking up speed.

On October 25, 2016, the White House took the unusual step of issuing a “Call to Action” to states regarding non-compete agreements, as part of the President’s initiative to stoke competition across the economy.  Calling non-competes an “institutional factor that has the potential to hold back wages and entrepreneurship,” the Call to Action seeks to reduce the misuse of non-compete agreements nationwide.

President Obama called on state policymakers to join in pursuing best-practice policy objectives, including:

  1. Banning
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Aggressive New Antitrust Guidance for Human Resources Professionals Threatens Criminal Prosecution for Certain Unlawful Wage Fixing and No Poaching Agreements

Following up on a string of civil enforcement actions and employee antitrust suits, regarding no-poaching agreements in the technology industry, on October 20, 2016 the Department of Justice (“DOJ”) and Federal Trade Commission (“FTC”) issued Antitrust Guidance for Human Resources Professionals (the “Guidance”). The Guidance outlines an aggressive policy to investigate and punish employers, and individual human resources employees who enter into unlawful agreements concerning employee recruitment or retention.

The Guidance focuses on three types of antitrust violations:

  • Wage fixing agreements: agreements among employers to fix employee compensation or other terms or conditions of employment at either a
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Employer Must Abide by Non-Compete Payment – Employment Law This Week

Featured on Employment Law This Week: An employer cannot waive its own non-compete agreement to avoid payment, unless the agreement specifically grants it the right to do so.

An employee of a financial services firm in Illinois signed an agreement that required a six-month post-employment non-competition period in exchange for $1 million from his employer. When the worker resigned, the employer sent a notice waiving the agreement and telling the employee that it would not pay him the $1 million. After waiting out the six months, the employee filed suit against his former employer. The Illinois Court of Appeals found … Continue Reading

Employer’s Waiver Of Non-Compete Period In Order To Avoid $1 Million Payment Held Ineffective

In Reed v. Getco, LLC, the Illinois Court of Appeals was recently faced with an interesting situation: under a contractual non-compete agreement, the employer was obligated to pay the employee $1 million during a six month, post-employment non-competition period.  This was, in effect, a form of paid “garden leave” —  where the employee was to be paid $1 million to sit out for six months – perhaps to finally correct his golf slice or even learn the fine art of surfing.  It was a win-win situation that seemingly would be blessed by most courts; it was for a reasonable … Continue Reading

Employers Under the Microscope: Is Change on the Horizon? – Attend Our Annual Briefing (NYC, Oct. 18)

Employers Under the Microscope: Is Change on the Horizon?

When: Tuesday, October 18, 2016 8:00 a.m. – 4:00 p.m.

Where: New York Hilton Midtown, 1335 Avenue of the Americas, New York, NY 10019

Epstein Becker Green’s Annual Workforce Management Briefing will focus on the latest developments in labor and employment law, including:

  • Latest Developments from the NLRB
  • Attracting and Retaining a Diverse Workforce
  • ADA Website Compliance
  • Trade Secrets and Non-Competes
  • Managing and Administering Leave Policies
  • New Overtime Rules
  • Workplace Violence and Active-Shooter Situations
  • Recordings in the Workplace
  • Instilling Corporate Ethics

This year, we welcome Marc Freedman and Jim Plunkett from the U.S. Chamber of Commerce. Marc and Jim will … Continue Reading

Illinois Passes Law Banning Noncompete Agreements for Low Wage Workers

Illinois Capitol BuildingIllinois recently became one of the first states to ban non-compete agreements for low wage workers when it passed the Illinois Freedom to Work Act. The law, which takes effect on January 1, 2017 and applies to agreements signed after that date, bars non-compete agreements for workers who earn the greater of 1) the Federal, State, or local minimum wage or 2) $13.00 an hour.  At present, because the State minimum wage is below $13.00 per hour, $13.00 an hour is the operative figure in Illinois.

While Illinois is one of the first states to enact this type of blanket … Continue Reading

New York Attorney General Targets Non-Competes for Rank-and-File Workers

This summer, New York Attorney General Eric T. Schneiderman has reached agreements with a number of companies curtailing their use of non-competition agreements with respect to non-executive and low-wage employees in New York. The issue appears to have caught the attention of Mr. Schneiderman, who stated recently that “restricting rank-and-file workers from being able to find other jobs is unjust and inappropriate” and “workers should be able to change jobs without fear of being sued.”

For example, on August 4, 2016, Examination Management Services, Inc. (“EMSI”), a medical information services provider headquartered in Texas, agreed to stop using non-compete agreements … Continue Reading

Connecticut and Rhode Island Enact Statutes Restricting Physician Non-Competes

David J. Clark

David J. Clark

Last month, two New England states enacted laws restricting the use of non-competition provisions in agreements governing an employment, partnership or other professional relationship of a physician.

Broadly speaking, the aim of both of these laws is to protect patients’ choice regarding medical care by limiting the ability of employers or partners to contract with physicians such that the physicians’ ability to practice medicine would be restricted at the end of the professional relationship.

Effective on July 12, 2016, the new law in Rhode Island (R.I. Gen. Laws §5-37-33) prohibits non-compete language in most physician agreements.  It … Continue Reading

No New Non-Compete Law for Massachusetts in 2016

David J. Clark

David J. Clark

The Massachusetts legislature ended its 2015-2106 session on July 31, 2016, and lawmakers did not pass new legislation regarding non-compete agreements before doing so.

For the last few years, numerous efforts have been made in the Commonwealth to limit the use of non-compete agreements, resulting in several bills introduced in the Statehouse.  The latest bills, introduced in the House in June and the Senate in mid-July, would have set clear boundaries on the use of non-compete agreements by employers, including by establishing requirements that such non-compete provisions be signed and in writing, not exceed 12 months … Continue Reading

Assignment Lessons: 8th Circuit Finds Assigned Non-Competes Enforceable — Under Certain Facts

The 8th Circuit’s recent decision in Symphony Diagnostic Servs. No. 1 v. Greenbaum, No. 15-2294, __ F.3d __ (8th Cir. July 6, 2016), upheld the enforceability of non-compete and confidentiality agreements assigned by Ozark Mobile Imaging to Mobilex as part of Mobilex’s purchase of Ozark’s assets.  Although the 8th Circuit is careful to ground its analysis in that case’s specific factual and legal framework, this decision is helpful in providing some guidance to those dealing with the assignability of rights under non-compete and confidentiality agreements.

The non-compete and confidentiality agreements at issue were (1) “free standing” … Continue Reading

Consideration in Restrictive Covenants: Courts Take a Closer Look

Our colleagues Peter Steinmeyer and Scarlett Freeman of Epstein Becker Green authored an article in Workforce Magazine titled “Courts Take Closer Look at Noncompete Clauses.”

Following is an excerpt:

In the past few years, courts have been re-examining what constitutes adequate consideration for a restrictive covenant. In 2013, the Illinois Court of Appeals held, contrary to longstanding precedent, that in the absence of other considerations, mere employment constitutes adequate consideration for a restrictive covenant only if the employee remains employed for at least two years after signing the restrictive covenant.

This two-year rule applies regardless of whether the employee … Continue Reading

Companies on Notice as White House Releases Report on Non-Competes

Matthew Savage Aibel

Matthew Savage Aibel

On May 6, the White House released a report entitled: “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses” (the “White House Report”).  This report comes on the heels of the United States Department of Treasury’s Office of Economic Policy releasing a similar report about non-competes in March 2016 (the “Treasury Report”).  While the U.S. economy has recovered since the last recession, the Obama Administration has identified a decline in competition for workers as a structural problem worth tackling in its final months.  The Administration believes that non-competes restrict workers’ ability to … Continue Reading

Massachusetts Legislature Makes Another Attempt to Pass a Non-Compete Law

Barry A. Guryan

Barry A. Guryan

Over the last several years, I have blogged about the Massachusetts Legislature’s many unsuccessful attempts to pass a statute establishing guidelines applicable to non-competes.  (See my latest blog posted last March “Proposed Legislation to Place Limits on Enforcement of Non-Competes in Massachusetts.”)  Former proposed bills have contained several types of provisions to accomplish this including ones that: a) prohibited the enforcement of all non-competes following California’s approach; b) created presumptions of reasonableness regarding the time and geographic scope; and c) banned the enforcement of non-competes signed by non-exempt and lower paid employees. (See my previous … Continue Reading

Defend Trade Secrets Act of 2016 Signed Into Law – Employment Law This Week

David Clark, contributor to this blog and Senior Counsel at Epstein Becker Green, is featured on Employment Law This Week, discussing the Defend Trade Secrets Act of 2016 (DTSA).

Under the DTSA, employers can now sue in federal court for trade secret misappropriation. Though there is some overlap with the Uniform Trade Secrets Act—adopted in some version by 48 states—the DTSA marks a notable change in how these cases are litigated, creating a federal civil cause of action. The new law contains broad whistleblower protections and new requirements for employers to give notice of these protections.

View the episode … Continue Reading

Former Workers Violated Ex-Employer’s Trade Secret Rights – Employment Law This Week

Peter Steinmeyer, co-editor of this blog, is featured in the top story on Employment Law This Week.

As the story explains, the U.S. Court of Appeals for the Sixth Circuit has upheld a ruling that a group of workers at a fastener company used confidential drawings from the company to design, manufacture, and sell competing parts for their new business venture. On appeal, the former workers argued that they were “filling a gap” for customers, not competing with the original company. But the Sixth Circuit found that this argument ignored undisputed evidence in the case.

Mr. Steinmeyer discusses steps that … Continue Reading

Are Courts Still Willing to “Blue Pencil” Overbroad Restrictive Covenants to Make Them Enforceable?

Restrictive covenant agreements are traditionally governed by state law and thus subject to various jurisdictions’ rules regarding enforceability. They stand on a different footing than most other contracts, in that their enforcement is typically susceptible to a court’s equitable powers, and may not always be enforced as written, if at all. States differ on whether their courts will deny enforcement of a restrictive covenant deemed overbroad as written by the parties or instead modify it to meet the particular state’s standards of enforceability. In those states where such modification is authorized, a court may strike out (or “blue pencil”) certain … Continue Reading

Treasury Department Calls for Transparency in Non-Competes – Employment Law This Week

Featured on Employment Law This Week: Non-competes are coming under the microscope of the U.S. Treasury.

A recent report from the Treasury calls for more transparency in non-compete agreements and better communication around their use. Approximately 18 percent of the workforce is subject to these restrictive covenants, and there is increasing scrutiny around them on both the state and federal levels. A recent Utah statute restricts non-competes to no more than one year, while Oregon and Alabama recently tightened their statutory restrictions.

View the episode below or read more about this story in a previous blog post.

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