Trade Secrets & Employee Mobility

The Connecticut Supreme Court recently held that continued employment may constitute sufficient consideration for noncompete agreements under Connecticut law, but left unclear the parameters of that holding.

In Dur-A-Flex, Inc. v. Dy, Dur-A-Flex, a commercial flooring company, hired Samet Dy as a research chemist in 2004. Years later, in 2011, Dur-A-Flex required Dy to execute a noncompete agreement as a condition of continued employment. The noncompete agreement prohibited Dy from performing any services for a competitor for twenty-four months after his employment terminated. In 2013, Dy resigned and Dur-A-Flex sought to enforce the noncompete. The trial court held that the noncompete was unenforceable because continued employment can never constitute sufficient consideration for a noncompete agreement.

On appeal, the case was transferred from the appellate division to the Connecticut Supreme Court. In a July 2, 2024 decision, the Supreme Court reversed the trial court, which had relied on a 2014 court of appeals decision entitled Thoma v. Oxford Performance Materials, Inc., to hold that “a party giving nothing more than the status quo of continuing employment … offers no consideration [in] exchange for his promise and the promise is, therefore, unenforceable.” The Supreme Court agreed with Dur-A-Flex that Thoma was distinguishable and that a 1934 Connecticut Supreme Court decision called Roessler v. Burwell was controlling. The Court held that under Roessler, “a promise of indefinite, continued employment for an at-will employee in exchange for the employee’s promise not to compete constitutes adequate consideration to form an enforceable agreement.”

As we have previously written, on April 23, 2024, the Federal Trade Commission (FTC) issued a sweeping final rule (“the Rule”) that purports to ban virtually all post-employment noncompete agreements in the United States. The Rule was formally published in the Federal Register on May 7, 2024, and will go into effect 120 days later, on September 4, 2024--if it survives the legal challenges that were filed in quick response.

While justice may not always be swift, the news about the Rule and challenges to it have developed at breakneck speed by many litigators’ standards over the ...

Last summer, the New York State legislature made waves when it passed a bill that effectively would have banned noncompete agreements.  New York’s Governor vetoed that bill in late December 2023.  This year, however, it is expected that the legislature will consider, and maybe pass, a less draconian bill that the Governor may be more likely sign.  Instead of an outright ban, such a bill might limit the use of noncompetes by, for example, prohibiting noncompetes only for certain types of employees, such as low wage earners.

While the business and legal communities await the state ...

In a bombshell ruling last year that upended longstanding Delaware law, the Delaware Chancery Court ruled in Ainslie v. Cantor Fitzgerald, L.P., 2023 WL 106924 (Del. Ch. Jan. 4, 2023), that forfeiture-for-competition clauses, under which departing employees must forfeit certain long-term incentive compensation if they join a competitor, are akin to post-employment noncompetes and other restraints of trade.  As a result, the Chancery Court determined these forfeiture provisions should be analyzed under a reasonableness standard rather than the employee choice doctrine ...

Our colleague attorney Phillip Antablin recently joined a roundtable discussion hosted by Russell Beck, regarding California’s expanded anti-restrictive covenants laws under Business and Professions Code Section 16600.

Phillip joined as many as 50 restrictive covenant, trade secrets, and employee mobility lawyers from around the country to discuss:

• the amendments to Business and Professions Code Section 16600 the new notice requirement to current and former employees that their restrictive covenant is void;
• Section 16600’s application as a whole, including Section ...

The Clash famously asked “Should I stay, or should I go?” on their 1982 album, Combat Rock, and with recent attacks on non-competes at both the state and federal level, some employers are imposing additional costs on employees who take advantage of an employer’s training opportunities only to leave and join a competitor. So-called “stay or pay” clauses, or training-repayment-agreement-provisions (TRAPs), typically require an employee to pay the employer the cost the employer incurred to train the employee if the employee leaves their employment within a certain ...