Trade Secrets and Confidential Information

As we have previously reported, the Colorado Assembly passed sweeping changes to the state’s noncompete law that, among other things, (1) set compensation floors for enforcement of both noncompetes ($101,250) and customer non-solicitation agreements ($60,750), which will be adjusted annually based on inflation; (2) require a separate, standalone notice to employees before a new or prospective worker accepts an offer of employment, or at least 14 days before the earlier of: (a) the effective date of the restrictions, or (b) the effective date of any additional compensation or changes in the terms or conditions of employment that provide consideration for the restriction, for existing workers; and (3) prohibit the inclusion of out-of-state choice-of-law and venue provisions. Those amendments take effect today, August 10, 2022.

Compliance with these amendments is even more important due to a prior amendment, effective earlier this year, which provides that violations of Colorado’s noncompete law can subject employers to criminal liability (a Class 2 misdemeanor, which carries possible punishment of 120 days in prison, a $750 fine per violation, or both), as well as hefty fines and possible injunctive relief and attorneys’ fees to aggrieved workers.

Continue Reading Reminder: Amendments to Colorado Noncompete Law Take Effect Today

As readers of this blog likely know, many states have entirely different statutory schemes for noncompetes in the healthcare industry. Indeed, while 47 states generally permit noncompetes, more than a dozen expressly prohibit or limit them in certain sectors of the healthcare industry – typically for patient-facing clinicians.

For example, in Massachusetts, noncompetes are not permissible in “[a]ny contract or agreement which creates or establishes the terms of a partnership, employment, or any other form of professional relationship with a physician registered to practice medicine . . . , which includes any restriction of the right of such physician to practice medicine in any geographic area for any period of time after the termination of such partnership, employment or professional relationship.” The same restriction applies to Massachusetts nurses, psychologists, and social workers.

Continue Reading Healthcare Noncompete Laws Get a Checkup in Four States and the District of Columbia

Despite the Supreme Court’s recent 6-3 ruling in West Virginia v. EPA that regulatory agencies must have “clear congressional authorization” to make rules pertaining to “major questions” that are of “great political significance” and would affect “a significant portion of the American economy,” and the import of that ruling to the area of noncompete regulation (which we addressed in detail in Law360), the Federal Trade Commission (FTC) and National Labor Relations Board (NLRB) announced yesterday that they are teaming up to address certain issues affecting the labor market, including the regulation of noncompetes.

In a Memorandum of Understanding (MOU) issued on July 19, 2022, the FTC and NRLB shared their shared view that:

Continue Reading The FTC Seemingly Thumbs Its Nose at the Supreme Court

Welcome to Spilling Secrets, a new monthly podcast series on the future of non-compete and trade secrets law.

If you’re hiring from a competitor amid the Great Resignation, one of your top priorities is not getting sued.
Continue Reading Spilling Secrets Podcast: Hiring from a Competitor? Don’t Get Sued.

Washington, D.C. employers will not need to scrap all their non-compete agreements after all.  On July 12, 2022, the D.C. Council (the “Council”) passed the Non-Compete Clarification Amendment Act of 2022 (B24-0256) (the “Amendment”), which among other things, tempers the District’s near-universal ban on non-compete provisions to permit restrictions for highly compensated employees.  For further analysis on the original D.C. Ban on Non-Compete Act, please see our previous articles here and here.

The Council delayed the initial ban several times in response to feedback from employer groups.  However, barring an unlikely veto or Congressional action during the mandatory review period, the amended ban will take effect as of October 1, 2022.  We detail the key revisions to the ban below.

Continue Reading Washington, D.C. Scales Back Ban on Non-Competes

Exchange Act Rule 21F-17, adopted in 2011 under the auspices of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, prohibits any person from taking any action to impede an individual from communicating directly with the SEC, including by “enforcing, or threatening to enforce, a confidentiality agreement . . . .”  The SEC has prioritized enforcing this rule expansively, by requiring employers to provide SEC-specific carveouts to policies and agreements governing confidentiality.  According to an Order issued last week against The Brink’s Company ( “Brink’s” or “Brinks”), the SEC seems to suggest that employers must provide a specific carveout in restrictive covenant agreements permitting employees and former employees to report information to the SEC in addition to the statutory disclosure provided for in the federal Defend Trade Secrets Act (DTSA).

Continue Reading DTSA Whistleblower Language May Be Required, but Is It Sufficient? Not According to the SEC.

On March 24, 2022, Washington State signed into law the Silenced No More Act (the “Act”), greatly restricting the scope of nondisclosure and nondisparagement provisions employers may enter into with employees who either work or reside in Washington State. Effective June 9, 2022, the Act prohibits employers from requiring or requesting that an employment agreement contain a provision:

not to disclose or discuss conduct, or the existence of a settlement involving conduct, that the employee reasonably believed under Washington state, federal or common law to be illegal discrimination, illegal harassment, illegal retaliation, a wage and hour violation, or sexual assault, or that is recognized as against a clear mandate of public policy….

Continue Reading Washington State’s Silenced No More Act, Which Largely Prohibits Nondisclosure and Nondisparagement Provisions in Employment Agreements, to Go Into Effect June 9, 2022

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.

Continue Reading Superior Court of California Attorneys’ Fees Award Punishes Plaintiff’s Bad-Faith Litigation for Alleged Misappropriation of Trade Secrets

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 of its case, the government explained that
Continue Reading “Pikachu, Where Are You?” – Concealment Evidence Will Play Prominent Role in Trade Secrets Theft Trial Against Design Engineer Alleged to Have Disguised Stolen Files as Pokémon Pics

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.

Continue Reading Proposed New Jersey Non-Compete Law Aims to Provide a Little Bit of Everything