Trade Secrets & Employee Mobility

Many physicians and other health care workers are familiar with restrictive covenants like non-competition and/or non-solicitation agreements, either as employees who have been asked to sign such covenants as a condition of their employment or as business owners seeking to enforce such covenants to protect their medical practices from competition. These covenants are usually designed to prohibit physicians or other practitioners from leaving and setting up a competing practice nearby using patient contacts, information, and/or training that they received during their ...

On May 10, 2018, the New Jersey Assembly Labor Committee advanced Assembly Bill A1769, a bill that seeks to provide stricter requirements for the enforcement of restrictive covenants.

If enacted, the legislation would permit employers to enter into non-competes with employees as a condition of employment or within a severance agreement, but such non-competes would only be enforceable if they meet all of the requirements set forth in the legislation. Thus, if enacted, employers will have to comply with the following requirements in order for a New Jersey non-competition agreement ...

Legislative efforts to limit or ban the use of non-compete provisions in employment agreements have proliferated in the early months of 2018.

Perhaps most eye-catching was legislation (titled the “Workforce Mobility Act”) introduced in the U.S. Senate in late April 2018 that would prohibit employers from enforcing or threatening to enforce non-compete agreements with employees and require employers to post prominently a notice that such agreements are illegal.  Co-sponsored by Democratic Senators Chris Murphy (CT), Elizabeth Warren (MA) and Ron Wyden (OR), the bill ...

A recent decision from an Arkansas appellate court raises two important issues of enforceability of non-competition agreements: (1) the enforceability of a non-compete after expiration of the contractual non-compete period and (2) the applicable standard for determining whether a valid protectable interest exists.

In Bud Anderson Heating & Cooling, Inc. v. Neil, the plaintiff Bud Anderson Heating and Cooling, Inc. (“BAHC”), a HVAC vendor and service provider, appealed a lower court’s denial of BAHC’s petition for a one-year prospective injunction seeking to ...

We non-compete lawyers often rely on an old rule of thumb when analyzing the enforceability of a non-compete: if the restriction is so broad that it would even prohibit an employee from working as a janitor for a competitor, then it is very unlikely to be enforced by a judge. And so when a federal judge expressly endorses such a rule of thumb, the urge to blog about it is simply irresistible.

In Medix Staffing Solutions Inc. v. Daniel Dumrauf, Judge Ellis of the Northern District of Illinois addressed the enforceability of a restrictive covenant which prohibited employment in any capacity

Two western states, Utah and Idaho, have recently passed or amended their statutes dealing with post-employment restrictions on competition.  This continues a national trend in which new state law in this area is increasingly the product of legislative action rather than judicial interpretation.  Thus, even if an employer has no current presence in these states, it is worth one’s time to understand these changes because they could soon be coming your way.

In Utah, the legislature amended the two-year old Post-Employment Restrictions Act (which we had written about before) to ...

Earlier this month, Colorado amended its law governing physician non-compete agreements (C.R.S. § 8-2-113(3)).  Since its enactment in 1982, that statute generally has prohibited agreements restricting the rights of physicians to practice medicine, but has allowed contractual provisions requiring a physician to pay damages arising from his or her competition if the damages are reasonably related to the injury suffered by the employer or other contracting party.  Under the amended statute, “a physician may disclose his or her continuing practice of medicine and new ...

A little-noticed decision from earlier this year rendered by the Supreme Court of New York, Westchester County, demonstrates how enforcement of post-employment restrictive covenants will often boil down to a single question: does the restriction protect a legitimate business interest of the employer?

In Cindy Hoffman, D.O., P.C. v. Raftopol, plaintiff applied for a preliminary injunction against its former employee, a physician’s assistant, who began working for a competitor in technical violation of her past employment non-compete restriction which barred her for two ...

The Colorado Court of Appeals, in Crocker v. Greater Colorado Anesthesia, P.C., recently examined several unique enforceability considerations with respect to a physician non-compete agreement.  Of particular interest was the Court’s treatment of a liquidated damages provision in the agreement.  Pursuant to a Colorado statute (8-2-113(3), C.R.S. 2017), the Court held that the provision was unenforceable because the liquidated damages were not reasonably related to the injury actually suffered.

Michael Crocker, a former physician-shareholder at Greater Colorado ...

We just published an article with Thomson Reuters Practical Law discussing non-compete agreements between employers and employees for private employers in Illinois. With Thomson Reuters Practical Law's permission, we have attached it here.

In managing workforces, particularly when addressing employee turnover, employers often find themselves facing issues regarding how best to safeguard their confidential business information and how to protect their relationships with clients and employees. In recent years, the legal landscape underlying these issues has been evolving, as lawmakers and judges grapple with the tension in these matters between protection and free competition.

In this Take 5, we examine recent developments, both in the courts and legislative bodies, concerning trade secrets and employee ...

Of the various types of post-employment restrictions imposed on employees, a restriction on the recruitment of former co-workers (sometimes referred to as a “no-poach” or “anti-raiding” clause) is the type most likely to be enforced by a court. As a result, this is one type of post-employment restriction that is frequently drafted without the careful thought generally put in to traditional non-competes and client non-solicitation clauses.  But in what could be a foreshadowing of closer judicial scrutiny of co-worker non-solicitation clauses nationwide, the Wisconsin ...

Several states in recent years have enacted laws that have been designed, in varying degrees, to limit non-competes, including California, Illinois, and Nevada. Which states and cities are most likely to do the same in 2018?

The New Hampshire and New York City legislatures have introduced bills that seek to prohibit the use of non-compete agreements with regard to low-wage employees. Under New Hampshire’s Bill (SB 423), a “low-wage employee” is defined as one who earns $15.00 per hour or less.  The New Hampshire Bill was introduced on January 24, 2018 and is scheduled for a ...

On October 20, 2016—just about three weeks before the presidential election won by Donald Trump—the Department of Justice and the Federal Trade Commission issued a remarkable document, entitled “Antitrust Guidance for Human Resources Professionals,” which outlined an aggressive policy promising to investigate and punish employers, and even individual Human Resources employees, who enter into unlawful agreements concerning recruitment or retention of employees.  As stated in that document, “[a]n agreement among competing employers to limit or fix the terms of ...

Epstein Becker Green attorneys Peter A. Steinmeyer, Robert D. Goldstein, and Brian E. Spang are pleased to be presenting 2017 Year in Review: Trade Secrets and Non-Compete Developments webinar on Wednesday, December 6, 2017 from 1:00 p.m. — 2:15 p.m. with Practical Law.

This webinar will provide insights into recent developments and expected trends in the evolving legal landscape of trade secrets and non-competition agreements. This webinar will focus on how to navigate this continually developing area and effectively protect client relationships and proprietary ...

The Florida Supreme Court ruled last week that referral sources in the home healthcare industry can be protected legitimate business interests under the state law governing non-compete agreements, thus finding enforceable such a restriction on a former marketing employee who left for a competitor.

Although the Florida statute in question (542.335) does not specifically list “referral sources” as one of the five categories of business interests subject to protection, the Court notes that those enumerated categories are prefaced by the phrase “including, but not limited ...

When: Thursday, September 14, 2017 8:00 a.m. – 4:30 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:

• Immigration
• Global Executive Compensation
• Artificial Intelligence
• Internal Cyber Threats
• Pay Equity
• People Analytics in Hiring
• Gig Economy
• Wage and Hour
• Paid and Unpaid Leave
• Trade Secret Misappropriation
• Ethics

We will start the day with two morning Plenary Sessions. The first session is kicked off ...

It is fairly uncommon for a circuit court to opine on the reasonableness of a restrictive covenant. In Ag Spectrum Co. v. Elder, No. 16-3113, 2017 U.S. App. LEXIS 14128 (8th Cir. Aug. 2, 2017), the Eighth Circuit issued a decision holding that an independent contractor’s non-compete was unreasonable and unenforceable.

Applying Iowa law, the Eighth Circuit explained that reasonableness depends on the circumstances, including consideration of several factors such as: (1) the employee’s closeness to customers; (2) the employee’s peculiar knowledge gained through ...

In a very thorough analysis following a 3 day Preliminary Injunction hearing Judge Jed Rakoff declined to issue injunctive relief to a former employer seeking to enjoin four former employees and their new employer from competing or from soliciting clients or employees. The decision is far ranging in the employee movement context touching upon inadvertent retention of confidential information, the propriety of new employers providing broad indemnifications and large signing bonuses to the recruits,  and the scope of allowable “preparatory conduct” in a one year non-compete ...

Featured on Employment Law This Week - An Illinois appellate court weighs in on social media and solicitation. The case involved a defendant who sent LinkedIn connection requests to three former coworkers, even though he had signed a non-solicit agreement. In considering whether social media activity violates non-solicitation agreements, other courts have drawn a distinction between passive social media activity and more active, direct activity. Though these requests were made directly to the former coworkers, the court in this case ruled that the content constituted ...

Nevada employers be advised: on June 3, 2017, Governor Brian Sandoval signed into law Assembly Bill 276, which amends Chapter 613 of the Nevada Revised Statutes and sets forth a new framework in which noncompetes are evaluated. The amended law includes the following four changes:

1. A noncompete is void and unenforceable unless the noncompete:
   1. Is supported by valuable consideration;
   2. Does not impose any restraint that is greater than is required for the protection of the employer for whose benefit the restraint is imposed;
   3. Does not impose any undue hardship on the employee; and
   4. Imposes ...

In this age of social media, a frequently asked question is whether social media activity can violate a non-compete or non-solicit.   Although the case law is evolving, courts which have addressed the issue have focused on the content of the communication, rather than the medium used to convey it.  In so doing, they have distinguished between mere passive social media activity (e.g., posting an update about a new job) as opposed to more targeted, active actions (e.g., not merely posting about a new job, but also actively recruiting former co-workers or clients).

A “LinkedIn” case ...

While agreements that restrict employees from leaving a job and working for a competitor (commonly known as “non-compete” agreements) are standard in many industries, they are relatively scarce in the media and journalism sectors. Outside of television companies restricting star talent, and media companies restricting executives, it has rarely been common practice for journalists to be subject to non-compete restrictions.  However, it appears that may be changing.

Citing the common reasons that are often put forth for non-compete clauses, two online based news companies ...

Peter A. Steinmeyer and Lauri F. Rasnick, Members of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s Chicago and New York offices, respectively, co-authored an article in Thomson Reuters Practical Law, titled “Garden Leave Provisions in Employment Agreements.”

Following is an excerpt (see below to download the full article in PDF format):

In recent years, traditional non-compete agreements have come under increasing judicial scrutiny, with courts focusing on issues such as the adequacy of consideration, the propriety of ...

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 ...

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 to rebut evidence that his non-compete was ...

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 ...

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."

Whether 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 one may be neither an exception nor exceptional, but here is a “Top Ten List of Holiday-Related Trade ...

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 ...

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 ...

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 ...

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 ...

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 ...

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 length of time, and ...

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

Illinois 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 ban on non-competes based on ...

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 ...

[caption id="attachment_1673" align="alignright" width="115"] David J. Clark[/caption]

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 ...

[caption id="attachment_1673" align="alignright" width="115"] David J. Clark[/caption]

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 ...

The 8^th Circuit’s recent decision in Symphony Diagnostic Servs. No. 1 v. Greenbaum, No. 15-2294, __ F.3d __ (8^th 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 8^th 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 ...

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 ...

[caption id="attachment_2177" align="alignright" width="113"] Matthew Savage Aibel[/caption]

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 ...

[caption id="attachment_2097" align="alignright" width="113"] Barry A. Guryan[/caption]

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 ...

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 ...

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 ...

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 ...

[caption id="attachment_2106" align="alignright" width="90"] Matthew Aibel[/caption]

[caption id="attachment_2105" align="alignright" width="90"] Anthony Laura[/caption]

With remote access technology becoming standard across industries, companies readily engage a multi-state workforce, with many employees residing outside of the employer’s home state.  While an expanded access to talent may be beneficial, one drawback is the ability to enforce restrictive covenants with out of state employees in a consistent manner and in the employer’s home state.  The case ...

A featured story on Employment Law This Week is a Massachusetts court's ruling that former counsel is not barred from giving advice to a competitor.

An in-house lawyer for Gillette left the company 10 years ago. Four years later, he became General Counsel for Shavelogic, a Gillette competitor. Gillette recently tried to obtain a broad injunction against the lawyer, who they claimed would inevitably disclose trade secrets in his position. The Massachusetts Superior Court’s Business Litigation Session ruled that there was insufficient evidence that trade secrets would be ...

[caption id="attachment_2093" align="alignright" width="120"] Barry A. Guryan[/caption]

The Speaker of the Massachusetts House of Representatives, Robert DeLeo, announced last week that he will introduce a compromise bill this session to place limits on the enforcement of non-competes in Massachusetts.

The Speaker’s stated motive is to find a balance between the goal of protecting businesses in Massachusetts and fostering a business environment that encourages the incubation for talent. The proposed bill would place a 12-month limit on non-compete agreements ...

Our colleagues Lauri F. Rasnick and Adriana S. Kosovych, attorneys in the Employment, Labor & Workforce Management practice at Epstein Becker Green, have a post on the Financial Services Employment Law blog that will be of interest to many of our readers: "Implementing and Applying the Employee Choice Doctrine: Employers Focus on Forfeiture to Protect Their Company’s Assets."

Following is an excerpt:

Employers seeking to protect their competitive advantage and find an alternative method of influencing employees to not compete are increasingly relying on ...

[caption id="" align="alignright" width="117"] Zachary C. Jackson[/caption]

At the end of January, the United States District Court for the District of Connecticut issued a decision in the matter of Roth Staffing Companies, L.P. v. Thomas Brown, OEM ProStaffing, Inc., OEM of CT, Inc., and David Fernandez (Case No. 3:13cv216).  Much of that opinion is devoted to analyzing the parties’ arguments about whether piercing the corporate veil was appropriate under the circumstances.  However, the opinion also addressed the plaintiff’s motion for summary judgment on its breach of ...

A recent case out of Ohio offers an instructive lesson for those looking to probe the geographical limits of a non-compete agreement.  A dentist sold his dental practice and also continued to work as an employee there.  As part of the sale, he agreed not to compete for five years and was prohibited from working “within 30 miles” of the practice.  The relationship between the parties deteriorated and the dentist went to work for a competing firm.  The purchaser dentist filed suit claiming a breach of the non-compete.

The trial court ruled against the seller, noting that although the new ...

Readers of this blog know that long settled understandings regarding what constitutes adequate consideration for a restrictive covenant in Illinois were turned upside down when the First District Appellate Court in Illinois held in Fifield v. Premier Dealer Services Inc., 2013 IL App. (1^st) 120327 that, absent other consideration, two years of employment are required for a restrictive covenant to be supported by adequate consideration, regardless of whether the covenant was signed at the outset of employment or after, and regardless of whether the employee quit or was fired.

Weighing in on an issue that is drawing attention nationwide, the Pennsylvania Supreme Court recently held, in Socko v. Mid-Atlantic Systems of CPA, Inc., that the mere continuation of employment is not sufficient consideration to support a restrictive covenant.  Rather, for there to be sufficient consideration, the Court held that the employee must receive “some corresponding benefit or a favorable change in employment status.”  As examples of such sufficient additional consideration, the Court cited “a promotion, a change from part-time to full-time employment, or ...

In a decision issued in late October, AssuredPartners, Inc. et al. v. William Schmitt, 2015 IL  App. (1^st) 141863 (Ill. App. 2015),  the Illinois Appellate Court struck down as overbroad and unreasonable, the noncompete, nonsolicit and confidentiality provisions in an employment agreement.  The Court then refused to judicially modify or “blue pencil” these provisions because the Court deemed their deficiencies “too great to permit modification.”  This decision is essentially a primer on current Illinois law regarding restrictive covenants and confidentiality ...

One of the top stories on Employment Law This Week – Epstein Becker Green’s new video program – is the Fifth Circuit’s ruling that a Texas bank cannot enforce non-compete agreements signed by four former employees based in Oklahoma, where courts do not recognize the pacts, because the agreements would violate Oklahoma's strong public policy favoring worker mobility. The fundamental law of the state trumped the choice of law.

See below to view the episode or read more about this important decision in an earlier post on this blog.

The United States Court of Appeals for the Fifth Circuit opened its October 29th opinion in Cardoni v. Prosperity Bank by noting that “[i]n addition to their well-known disagreements over boundaries and football” known as the Red River Rivalry, “Texas and Oklahoma do not see eye to eye on a less prominent issue: covenants not to compete.”   As the Court went on to note, “Texas generally allows them so long as they are limited both geographically and temporally… Oklahoma generally does not.”  “These different policy choices—Texas's view which prioritizes parties ...

A couple years ago, the Illinois First District Appellate Court decided the case of Fifield v. Premier Dealer Services, 2013 IL App. 120327.  There, the Court held that, absent other consideration, two years of employment are required to constitute adequate consideration for a restrictive covenant, regardless of whether the covenant was signed at the outset of employment or after, and regardless of whether the employee quit or was fired.  Since then, some Judges in the United States District Court for the Northern District of Illinois have applied Fifield, and others have declined ...

If you are an employer with employees in New York (or elsewhere) who have signed an agreement containing a Florida choice of law clause and non-compete and/or non-solicit restrictive covenants, it may be time to revise your agreement.

We blogged last year regarding a decision of the New York Appellate Division, Fourth Department in Brown & Brown, Inc. v. Johnson, holding that a Florida choice of law provision in an employment agreement among a Florida corporation, its New York subsidiary, and a New York based and resident employee containing restrictive covenants is unenforceable ...

Alabama has a new restrictive covenant statute.  A few weeks ago, Alabama Governor Bentley signed new legislation which will repeal the 1975 version of Alabama Code Section 8-1-1 titled “Contracts restraining business void; exceptions” and replace it with a new version effective January 1, 2016.

The new law stakes out the permissible scope and purpose of restrictive covenants such as non-compete and non-solicitation agreements.  Unlike some other states with restrictive covenant statutes, Alabama’s new law codifies a middle-of-the-road approach to restrictive ...

Readers of this blog know that long settled understandings regarding what constitutes adequate consideration for a restrictive covenant in Illinois were turned upside down when the First District Appellate Court in Illinois held in Fifield v. Premier Dealer Services, 2013 IL App. (1^st) 120327  that, absent other consideration, two years of employment are required for a restrictive covenant to be supported by adequate consideration, regardless of whether the covenant was signed at the outset of employment or after, and regardless of whether the employee quit or was fired.

The ...

California Business & Professions Code § 16600 contains a strong public policy against non-competition agreements.  To address this prohibition, some employers have included choice of forum provisions in their employment contracts to give them the option of initiating an action in a more non-compete friendly jurisdiction and obtain leverage in the litigation.  Some federal district courts have enforced those forum selection clauses.  Marcelo v. Ivy Ventures, LLC, No. C 10-04609, 2010 U.S. Dist. LEXIS 134333 (N.D. Cal. Dec. 9, 2010); Google, Inc. v. Microsoft Corp., 415 F. Supp ...

Over the past 24 months, one of the hottest issues in non-compete law has been whether continued at-will employment, by itself, is sufficient consideration for a non-compete.

Last week, in Runzheimer International v. Friedlen and Corporate Reimbursement Services, Inc., the Wisconsin Supreme weighed in on this issue, holding that continued employment is sufficient consideration for a non-compete signed by a current at-will employee.  However, the Court expressly qualified this holding by explaining that if an at-will employee is fired “shortly after signing” a ...

In a recent case in Massachusetts, a Superior Court Judge denied a former employer’s motion for a restraining order in a case alleging a violation of a non-compete agreement and granted the cross motion of the former employee and current employer to compel arbitration even though the current employer was not a party to the arbitration clause which was included in the former employee’s Employment Agreement.

Facts

In Tibco Software, Inc. v Zephyr Health, Inc. and Kevin Willoe, Civil Action No 2015-844-BLS1 (Mass. Superior Court March 31, 2015), Plaintiff Tibco Software, Inc ...

A bill has been introduced in the New York State Legislature, aiming to clarify the laws of non-compete and non-solicit agreements in New York.

Introduced by Assemblyman Phil Steck on January 15, 2015 and by State Senator Andrew Lanza on March 20, 2015, the bill (A2147/S4447) is entitled “Policy Against Restraint of Trade,” and operates from the premise that the Court of Appeals decision in BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999) has led to confusion in the law of non-competes, particularly in the application of a balancing test in which an employer’s interest in enforcing ...

Last week, Chicago district judge Charles Kocoras dismissed a declaratory judgment action challenging the enforceability of a facially broad form non-compete agreement signed by all employees of the Jimmy John’s sandwich chain.  Judge Kocoras held that the dispute was not judiciable because the plaintiffs lacked the requisite “reasonable apprehension” of litigation against them and because they failed to allege that they had actually engaged in conduct that would violate the non-compete.  (Judge Kocoras’ memorandum opinion also addressed significant joint ...

In another decision expansively interpreting California Business & Professions Code § 16600 and which could have a significant effect on employment litigation settlements, the Ninth Circuit Court of Appeals reversed the district court’s enforcement of a settlement agreement and remanded the case to the district court to determine whether a no employment provision in the agreement is a “restraint of substantial character” to the Plaintiff's medical practice.  Golden v. California Emergency Physicians Medical Group; Med America; Mark Alderdice; Robert Buscho, United ...

Readers of this blog know that in the summer of 2013, long held beliefs about the required consideration for a restrictive covenant under Illinois law were thrown a curve when the Illinois Appellate Court for the First District (i.e., Cook County) held in Fifield v. Premier Dealer Services, Inc., 2013 IL App (1st) 120327, that, absent other consideration, two years of employment is required for a restrictive covenant to be deemed supported by adequate consideration—even where the employee signed the restrictive covenant as a condition to his employment offer and even where the ...

To register for this webinar, please click here.

Join Epstein Becker Green Attorneys David J. Clark, Robert D. Goldstein, and Peter A. Steinmeyer on Tuesday, December 16, 2014 at 1:00 p.m. EST for a 60-minute webinar.

This webinar will discuss recent developments and what to expect in the evolving legal landscape of trade secrets and non-competition agreements. With some businesses progressively feeling that their trade secrets are at risk for attack by competitors – and perhaps, by their own employees – this session will focus on how to navigate this developing area and ...

The size of an injunction bond is not a common topic in appellate cases. Accordingly, a recent decision by the Indiana Appellate Court reversing the trial court’s setting of an injunction bond at only $100 in a non-compete case is noteworthy.

In Donald Moss v. Progressive Design Apparel, Inc., the Indiana Appellate Court affirmed a preliminary injunction which restricted a salesman’s ability to call upon customers of his former employer or disclose confidential information. As part of the trial court’s order granting injunctive relief, the trial court found that the ...

When recruiting an executive, or when being recruited, it is best practice for the future employer, the employee and any executive recruiting firm involved in the placement to address head-on the existence of any restrictive covenant limiting the future activities of the employee. The New York State Supreme Court - First Department Appellate Division - yesterday upheld a claim that by not clearly disclosing the existence of a non-solicitation restriction in an executive recruit’s employment agreement, the head hunter involved in the placement could potentially be held liable ...