Trade Secrets & Employee Mobility

A California Superior Court Judge in Orange County granted an attorneys’ fees award in the amount of $5.8 million to defendant Landmark Event Staffing Services, Inc. (“Landmark”) in Contemporary Services Corporation v. Landmark Event Staffing Services, Inc., Case No. 30-2009-00123939. This ruling reinforces the importance of carefully calibrating litigation strategy in trade secrets misappropriation cases to focus on vindicating legally protectable interests. Trade secrets litigation should not be used merely as an aggressive tactic to stifle a competitor.

In a pending trial in federal court in Boston in the case U.S. v. Haoyang Yu, et al., prosecutors accuse a design engineer and naturalized citizen from China of stealing microchips (monolithic microwave integrated circuits or “MMICs” used in radio, cellular and satellite communications) from his former employer Analog Devices, Inc. As reported in Law360, during opening statements last week, a federal prosecutor told the jury, “It’s a story of fraud. It’s a story of possession of stolen trade secrets. It’s a story of illegal exports and immigration fraud.” In support ...

On May 2, 2022, a bill “limiting certain provisions in restrictive covenants” was introduced in the New Jersey State Assembly.  In recent years, similar bills have been proposed in various state legislatures.  Some such bills, after much lobbying, haggling and revisions, have even been enacted into law, including, for example, in Massachusetts, Illinois and Washington.

As featured in #WorkforceWednesday:  There has been a wave of legislation restricting non-compete agreements in the states, as well as a focus on such agreements at the federal level.

The continued shift towards remote work has also complicated non-competes.

How do employers maintain compliance? Attorney Erik Weibust tells us more.

The Wyoming Supreme Court recently made an important change to the way restrictive covenant agreements are evaluated by courts in that state.  For many years, courts in Wyoming – as in many other states – have followed the so-called “blue pencil” rule when presented with a non-competition or non-solicitation agreement whose restrictions appear to be unreasonable.

The D.C. Council (the “Council”) is poised to further postpone the Ban on Non-Compete Agreements Amendment Act of 2020 (D.C. Act 23-563) (the “Act”). On March 1, 2022, Councilmember Elissa Silverman introduced emergency legislation (B24-0683) that would push back the Act’s applicability date from April 1 to October 1, 2022. Councilmember Silverman simultaneously introduced and the D.C. Council adopted an emergency declaration resolution (PR24-0603) allowing the measure to proceed directly to Mayor Muriel Bowser’s desk for signing after a single reading.

Many employers have granted their white collar workers increased flexibility to work remotely in response to the pandemic. As a result, some employees have moved away from the areas surrounding their offices and into places with lower costs or higher quality of living. In cases where an employee with a non-compete moves to a state such as California, which has a prohibition against any “contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind,” that can present potential problems for a Company. Cal. Bus. & Prof. Code. § 16600.

Employers, take note: certain amendments strengthening Oregon’s existing statutory restrictions on non-compete agreements, went into effect on January 1, 2022 – as previewed in our previous blog post.  Coupled with existing limitations in ORS 653.295, the newly-effective amendments mean that a non-compete entered into with an Oregon employee after January 1, 2022 will be “void” ab initio if:

Thomson Reuters Practical Law has released the 2022 update to “Preparing for Non-Compete Litigation,” co-authored by our colleague Peter A. Steinmeyer.

Colorado statutory law has traditionally limited enforcement of restrictive covenants.  C.R.S. § 8-2-113, entitled “Unlawful to intimidate worker – agreement not to compete,” provides that all contractual restrictions on a person’s post-employment competitive activity are “void” unless they fit into one of four categories: (1) contracts for the purchase and sale of a business or the assets of a business; (2) contracts for the protection of trade secrets; (3) contracts providing for recovery of expenses of educating and training an employee who have served an employer less than two years; and (4) agreements with executives, management personnel, and their professional staff.  This statute applies not only to non-compete agreements, but also to agreements not to solicit customers or employees.  Most companies trying to defend their restrictive covenants do so under the exception to protect trade secrets or the exception for executives/managers/professional staff.