Post-Employment Restrictions

Within the last year, the U.S. Department of Justice (DOJ) brought its first indictments alleging criminal wage-fixing conspiracies and criminal no-poach conspiracies among competing employers.  In December 2020, DOJ indicted the president of a staffing company for violating Section 1 of the Sherman Act by allegedly conspiring with competitors to fix wages paid to physical therapists.  A month later, DOJ indicted a corporation for violating the Section 1 of the Sherman Act because it allegedly entered into “naked no-poach agreements,” pursuant to which it agreed not to solicit senior employees of two competitors   In March 2021, DOJ filed its second wage-fixing indictment, which also alleged a conspiracy to allocate workers.  As reported here and here, these indictments were the culmination of the DOJ’s Policy, contained in its 2016 Antitrust Guidance for Human Resource Professionals (“Antitrust Guidance”) to bring criminal charges against employers who conspired to suppress wages, either through wage-fixing agreements or naked no-poach agreements.

Continue Reading DOJ’s First Wage Fixing Indictment Survives a Motion to Dismiss Because Court Finds Wage-Fixing Agreements Are Illegal Per Se

Last week, the New York State Senate advanced two bills seeking to ban both “no-poach” clauses in franchise agreements and “no-rehire” clauses, which are commonly used in settlement agreements.

The first of these bills, known as the End Employer Collusion Act (Bill S562), prohibits no-poach agreements between franchisors and franchisees.  Such agreements restrict franchisees from soliciting or hiring current or former employees of the franchisor or other franchisees.  The End Employer Collusion Act would also provide a private right of action for any person denied employment on account of a no–poach agreement, and would allow for the recovery
Continue Reading New York State Legislature Aims to Prohibit Use of No-Poach and No-Rehire Clauses

Our colleagues at Epstein Becker Green have a post on the Financial Services Employment Law blog that will be of interest to our readers: “FINRA Issues New Guidance to Member Firms Regarding Customer Communications When Registered Representatives Depart.”

Following is an excerpt:

On April 5, 2019, FINRA published Regulatory Notice 19-10 (the “Notice”) addressing the responsibilities of member firms when communicating with customers about departing registered representatives.  As the Notice indicates, in the event a registered representative leaves a member firm, FINRA aims to avoid any disruption in the service of

Continue Reading New Guidance Issued by FINRA to to Member Firms

Thomson Reuters Practical Law published a Practice Note co-authored by Peter A. Steinmeyer and Robert D. GoldsteinMembers of the Firm, “Hiring from a Competitor: Practical Tips to Minimize Litigation Risk.”  This Practice Note discusses potential statutory and common law claims when hiring from a competitor, the need to identify any existing contractual restrictions a potential new hire may have, how to avoid potential issues during the recruitment process, ensuring the new hire is a “good leaver” during the resignation process, responding to cease and desist letters, and potential pre-litigation settlement concepts.

Following is an excerpt:

In

Continue Reading Hiring from a Competitor: Practical Tips to Minimize Litigation Risk

The Illinois Appellate Court recently declined to adopt a bright line rule regarding the enforceability of five year non-competes or three year non-solicits, and instead directed courts to interpret the reasonableness of any such restrictive covenants on a case-by-case basis.

In Pam’s Acad. of Dance/Forte Arts Ctr. v. Marik, 2018 IL App (3d) 170803, the plaintiff dance company sued a former employee for breaching a non-disclosure agreement and restrictive covenant by allegedly opening a dance studio within 25 miles of plaintiff and soliciting students and teachers by means of an “improperly obtained” customer list. Following a split resolution on
Continue Reading Illinois Appellate Court Declines to Adopt Bright Line Rule That a Five Year Non-Compete Or a Three Year Non-Solicit Are Unenforceable Per Se

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 passive activity because the defendant did not discuss his new job in any way, nor
Continue Reading Social Media Content Key for Non-Solicit Violations – 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 Must Abide by Non-Compete Payment – Employment Law This Week

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

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 Defend Trade Secrets Act of 2016 Signed Into Law – 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 Former Workers Violated Ex-Employer’s Trade Secret Rights – Employment Law This Week