• Posts by David J. Clark
    Member of the Firm

    Businesses of all sizes—including financial services firms, advertising and media companies, consulting agencies, insurance companies, managed care organizations, and retail brands—turn to litigation attorney David ...

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2023 started off with a bang, and it is certainly not ending with a whimper. On January 4, 2023, the Federal Trade Commission (FTC) announced the settlement of two enforcement actions against employers arising out of their use and enforcement of noncompetes. The very next day, the FTC proposed a rule that would ban noncompetes nationwide if enacted (which we do not believe will ever happen), with only a very narrow exception for noncompetes entered into in connection with the sale of a business.

The year only continued to get more turbulent in this area of law, with Minnesota banning ...

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As we predicted when the New York legislature passed a bill that would ban noncompetes in the state without even an exception for the sale of a business, Governor Kathy Hochul has said that she wants changes to the bill – called chapter amendments – before she will sign it. According to Bloomberg, Governor Hochul told reporters, “What I’m looking at right now is striking the right balance between protecting low and middle-income workers, giving them flexibility to have mobility to go from job to job as they continue up the ladder of success. But those who are successful have a lot ...

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As we discussed earlier this year, the U.S. Department of Justice (“DOJ”) in recent years has brought numerous criminal prosecutions against companies accused of engaging in so-called “naked” no-poach agreements, i.e., agreements among competing businesses to restrict hiring or compensation of employees, outside of any legitimate collaborative relationship.  The DOJ’s efforts in this regard were spurred by the issuance in 2016 of Antitrust Guidance for Human Resources Professionals, which was a warning issued by the DOJ and the Federal Trade Commission ...

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Thomson Reuters Practical Law has released the 2023 update to “Non-Compete Laws: Massachusetts,” a Q&A guide to non-compete agreements between employers and employees for private employers in Massachusetts, authored by our colleagues David J. Clark and Erik Weibust, attorneys at Epstein Becker Green.

Following is an excerpt:

This Q&A addresses enforcement and drafting considerations for restrictive covenants such as post-employment covenants not to compete and non-solicitation of customers and employees. Federal, local, or municipal law may impose ...

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For many of us, summer holidays are over, the kids are back in school, and it is a good time to take stock of languishing items on our to-do lists.  For employers that have restrictive covenant agreements with employees in Georgia, one of those to-do items should be to review the employee non-solicitation provisions in their employment agreements.

Earlier this summer, in North American Senior Benefits v. Wimmer, the Georgia Court of Appeals issued a decision that likely will make it substantially more challenging for employers to enforce employee non-solicitation provisions.  That ...

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Thomson Reuters Practical Law has released the 2023 update to “Trade Secret Laws: Illinois,” a Q&A guide on trade secrets and confidentiality for private employers in Illinois, co-authored by Peter A. Steinmeyer and David J. Clark, Members of the Firm in the Employment, Labor & Workforce Management practice.

Following is an excerpt:

This Q&A addresses the state-specific definition of trade secrets and the legal requirements relating to protecting them. Federal, local, or municipal law may impose additional or different requirements.

Download the full Practice ...

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We wrote previously about how nobody seemed to be talking seriously about the noncompete bill that was passed by both the New York General Assembly and Senate last month. If signed by Governor Hochul, the bill would ban noncompetes without a carveout even in the sale of a business context, which both California and the Federal Trade Commission’s proposed rule include.

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As we previously reported, Minnesota will soon become only the fourth state (along with California, Oklahoma and North Dakota) to ban noncompetes. 

The state’s new law renders void and unenforceable all covenants not to compete entered by employees or independent contractors on or after July 1, 2023.  The only exceptions are noncompetes in agreements relating to the sale or dissolution of a business. 

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Earlier today (June 20, 2023) the New York State Assembly voted in favor of a noncompete ban that was passed by the New York State Senate on June 7.  In previous posts here and here, we have discussed in detail this bill that would ban noncompete agreements in New York State.  The next stop for the bill is the office of Governor Kathy Hochul, who many believe is likely to sign it into law.  Though it may be difficult to believe, New York is on the precipice of becoming the fifth state (after California, North Dakota, Oklahoma and, as of July 1, 2023, Minnesota) to ban noncompetes.  Stay tuned…

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Two states recently have enacted restrictions on noncompete agreements being used within certain professions.

In Maine, on June 1, 2023, the Governor signed into law LD 688/ HP 457, entitled “An Act to Protect Access to Veterinary Care by Prohibiting Noncompete Agreements.”  The act amends Maine Revised Statute title 26, § 599-A, which already prohibits an employer from entering into a noncompete with an employee if the employee is earning wages at or below 400% of the federal poverty level. The new amendment expands the noncompete ban to licensed Maine veterinarians, with a carveout for those with an ownership interest in a practice.

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Earlier this year, legislation was proposed in New York that would effectively ban all post-employment noncompetes. Few paid close attention to the proposals, ostensibly because similar legislation is proposed virtually every year in states across the country, including in New York, and typically nothing comes of it (Minnesota being the major exception, having recently passed a noncompete ban that goes into effect July 1, 2023).

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As expected, on May 24, 2023, Governor Tim Walz signed a new law banning noncompete agreements in Minnesota.  The ban will be effective for such agreements entered on or after July 1, 2023.

By enacting the Omnibus Jobs, Economic Development, Labor and Industry appropriations bill (MN SF 30035), Minnesota becomes only the fourth state (along with California, Oklahoma and North Dakota) to ban noncompetes. 

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A Ruling and Order issued on April 28, 2023 by the U.S. District Court for the District of Connecticut in United States v. Patel, et al. ran the government’s losing streak to four failed trials seeking to criminally prosecute alleged wage-fixing and no-poach agreements. 

To review, in 2016 the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) issued Antitrust Guidance for Human Resources Professionals that warned of potential criminal prosecution for so-called “naked” no-poach agreements, i.e., agreements among competing businesses to restrict hiring or compensation of employees, untethered to any legitimate collaborative relationship. 

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It is no secret that political winds are blowing against the practice of employers requiring certain employees to sign non-competition agreements, as demonstrated most saliently earlier this year when the Federal Trade Commission (“FTC”) introduced its proposed rule that would ban non-competes nationwide, with retroactive effect.  While thousands of comments have been submitted to the FTC regarding that proposed rule (and the comment period is scheduled to close this week), legislators in many states have been busy introducing legislation that would ban or limit the use of non-competes.

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As we predicted, earlier today, 100 industry organizations submitted a request to the Federal Trade Commission (FTC) to extend the comment period for its proposed rule banning noncompetes nationwide by an additional 60 days. According to the letter, “[t]he regulated community should be given sufficient time to assess the potential consequences of the rulemaking and develop insightful comments for the Commission to consider.” The letter further states:

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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.

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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.

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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:

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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.

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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.

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Effective January 1, 2022, the earning thresholds for employees and independent contractors in Washington who properly may be subject to noncompetition covenants will increase. The new adjusted earning threshold for employees will be $107,301.04 and the new adjusted earning threshold for independent contractors will be $268,252.59. Earnings is defined as the compensation reflected on box one of the form W-2 for employees or the payments reported on a form 1099 for independent contractors. Therefore, workers who earn amounts less than the new thresholds may not be subject to noncompetition covenants.

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On July 9, 2021, President Biden signed the Executive Order on Promoting Competition in the American Economy, which encourages the Federal Trade Commission (“FTC”) to employ its statutory rulemaking authority “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”  Executive Order, Section 5(g).  While the language in the Executive Order refers to the “unfair” use of non-compete clauses, the Administration’s explanatory statement makes clear that “the President encourages the FTC to ban or ...

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On February 25, 2021, the Workforce Mobility Act, a bipartisan bill to limit the use of non-compete agreements, was introduced in the U.S. Senate by Senators Chris Murphy (D-Conn.), Todd Young (R-Ind.), Kevin Cramer (R-N.D.) and Tim Kaine (D-Va.), and in the U.S. House of Representatives by Scott Peters (D-Cal.).

This year’s Workforce Mobility Act is the latest of several attempts in recent years at the federal level to restrict non-compete agreements through legislation.  Despite bipartisan support at times, none has passed either the Senate or the House.  Will there be a ...

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A recent report issued by the Trade Secrets Committee of the New York City Bar recommends that New York State’s legislature adopt statutory guidelines governing the use of non-compete agreements for lower-salary employees.

As explained in the report, statutory limitations on the use of non-compete agreements have been a hot issue in many states and even at the federal level in recent years.  New York currently has no statutory law generally concerning trade secrets or non-compete agreements.  The report advocates a limited change to New York’s unique status as a common law ...

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In the past month, the U.S. Department of Justice (DOJ) has made good on its 2016 threat, contained in its Antitrust Guidance for Human Resource Professionals (“Antitrust Guidance”) to bring criminal charges against people or corporations who enter into naked wage-fixing agreements or naked no-poach agreements.   First, as reported here, on December 9, 2020, DOJ obtained an indictment against the president of a staffing company who allegedly violated Section 1 of the Sherman Act by conspiring with competitors to “fix wages” paid to physical therapists (PT) and physical ...

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Earlier this month, the U.S. Department of Justice (“DOJ”) announced that a federal grand jury in Texas indicted Neeraj Jindal, the former owner of a physical therapist staffing company, in connection with an illegal wage-fixing conspiracy to depress pay rates for physical therapists (“PTs”) and physical therapist assistants (“PTAs”) who travel to patients’ homes or assisted living facilities in the greater Dallas-Fort Worth area.  The indictment was something of a landmark for the U.S. Department of Justice (“DOJ”), which for years had promised that such ...

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Louisiana has long had in its statutes one of the nation’s most distinctive non-compete laws, and that statute has just been amended in a subtle but important way.  LA. R.S. 23:921 essentially provides that every agreement that restrains someone from engaging in any profession, trade or business is null and void, unless the prohibition against competing meets one of the specific exceptions provided in the statute.

Within the context of employer-employee relationships, Louisiana law permits non-compete agreements where the agreement restricts the employee “from carrying on ...

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Joining many other states that in recent years have enacted laws regarding physician non-competition agreements, Indiana recently enacted a statute that will place restrictions on such agreements which are originally entered into on or after July 1, 2020.

Under Pub. L. No. 93-2020 (to be codified in part as Ind. Code § 25-22.5-5.5) (2020), which will take effect on July 1, 2020, for a non-compete to be enforceable against a physician licensed in Indiana, the agreement must contain the following provisions:

  1. A provision that requires the employer of the physician to provide the ...
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A recent decision issued by the U.S. District Court for the Northern District of California, San Jose Division, presents a stark example of what can result when a defendant accused of trade secret misappropriation is careless in preserving electronically stored information (“ESI”) relevant to the lawsuit.

Silicon Valley-based autonomous car startup WeRide Corp. and WeRide Inc. (collectively, “WeRide”) sued rival self-driving car company AllRide.AI Inc. (“AllRide”), along with two of its former executives and AllRide’s related companies, asserting claims ...

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For any attorney about to rush into New York State court to seek an injunction or temporary relief with regard to a violation of a non-compete or other restrictive covenant, or with regard to misappropriation of trade secrets, think again about venue.

By Administrative Order, dated March 22, 2020, Chief Administrative Judge Lawrence Marks has decreed that until further notice, New York State courts are accepting no filings unless the filings concern an emergency matter (as defined in the Order’s Exhibit A).  Neither restrictive covenant nor trade secret matters count as ...

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On January 9, 2020, the Federal Trade Commission (“FTC”) held a public workshop in Washington, DC to examine whether there is a sufficient legal basis and empirical economic support to promulgate a Commission rule that would restrict the use of non-compete clauses in employment contracts.  At the conclusion of the workshop, the FTC solicited public comments from interested parties on various issues, including business justifications for non-competes, effect of non-competes on labor-market participants and efficacy of state law for addressing harms arising from ...

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Non-competes are going to be harder to enforce in Washington State.  On May 8, 2019, Governor Jay Inslee signed the “Act Relating to Restraints, Including Noncompetition Covenants, on Persons Engaging in Lawful Professions, Trades or Businesses,” which was passed by both houses of the state legislature in April.

The new law will become effective January 1, 2020, and will render unenforceable non-competition provisions signed by employees earning less than $100,000 and independent contractors earning less than $250,000 annually.  Other important provisions of the law are as ...

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On March 7, 2019, a bipartisan group of U.S. Senators sent a letter to the Government Accountability Office ("GAO"), requesting that the agency perform a review of the effect of non-competition agreements “on workers and on the economy as a whole.” The six signatories to the letter were Chris Murphy (D-CT), Todd Young (R-IN), Elizabeth Warren (D-MA), Marco Rubio (R-FL), Tim Kaine (D-VA), and Ron Wyden (D-OR). In particular, they asked the GAO to assess:

  1. What is known about the prevalence of non-compete agreements in particular fields, including low-wage occupations?
  2. What is ...
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In the last couple of years, there have been a number legislative efforts, at both the state and federal level, to limit the use of non-competes in the U.S. economy, particularly with respect to low wage and entry level workers.  Recent bills introduced in the Senate indicate there is a strong opportunity for a bipartisan path to enactment of such a law by the U.S. Congress.

Last month, Marco Rubio, one of Florida’s U.S. Senators and a previous Republican candidate for President, introduced legislation in the Senate – the “Freedom to Compete Act” – which would set limits on ...

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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 ...

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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 ...

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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 ...

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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 ...

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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.

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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 ...

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Financial analytics firm Novantas, Inc. and two individual defendants closed out 2017 with a victory, securing the dismissal of claims by rival First Manhattan Consulting Group LLC (“First Manhattan Consulting Group”) [1], which accused them of competing unfairly by poaching First Manhattan Consulting Group’s employees in order to steal its trade secrets.  The result demonstrates the need for plaintiffs in such cases to be able to prove with specificity which trade secrets were taken or threatened by the defendants’ conduct.

The Complaint alleged that Novantas engaged ...

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In an order dated April 20, 2017, New York’s Court of Appeals agreed to hear Sergey Aleynikov’s appeal of his conviction under an arcane New York criminal statute.

Aleynikov is a former Goldman Sachs computer programmer, arrested in July 2009 and accused of stealing computer source code from the bank.  Originally, a federal jury found him guilty of violating both the National Stolen Property Act and the Economic Espionage Act, but that verdict was overturned by the Second Circuit in April 2012 (after Aleynikov had been incarcerated for over a year).

More recently, Aleynikov also ...

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It is rare that a trade secret / restrictive covenant lawsuit makes it all the way to trial, much less a jury verdict. The passage of time, accumulating legal expenses, bad facts, and/or the risk of losing at trial all can conspire to sap litigants of the desire to take their cases to the finish line.  Settlements and withdrawals of claims abound.  Sometimes, however, the parties dig in and roll the dice in court, as recently occurred in a case in the Southern District of New York.

On November 29, 2016, after more than 10 days of trial, a jury delivered a verdict in favor of the plaintiff Tesla ...

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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 ...

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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 ...

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[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 ...

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[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 ...

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On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act (“DTSA”), which became effective immediately. The DTSA provides the first private federal cause of action for trade secret misappropriation, and it allows parties to sue in federal court for trade secret misappropriation—regardless of the dollar value of the trade secrets at issue.

Although the DTSA’s remedies largely overlap with those in the 48 states that have adopted some version of the Uniform Trade Secrets Act, the DTSA will nevertheless significantly alter how trade secret ...

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After years of stops and starts in Congressional efforts to pass a law creating a federal claim for misappropriation of trade secrets that can be pursued by private citizens and companies (as opposed to federal prosecutors), the last few weeks have produced an astonishing acceleration of those efforts.  This month, the Defend Trade Secrets Act has been approved by both houses of Congress in resounding fashion.  It is on the brink of being enacted into law.

On April 27, 2016, the House of Representatives voted 410-2 to pass the Defend Trade Secrets Act.  That vote came quickly on the heels of ...

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Last week, the Senate version of the Defend Trade Secrets Act (S. 1890) was passed with bipartisan support by the Senate Judiciary Committee.  As we have previously discussed on this blog, the bill is aimed at addressing alleged inadequacies in U.S. law through the creation of a federal private right of action for trade secret misappropriation.  The legislation would also provide injunctions to preserve evidence and prevent disclosure, and damages to account for economic harm to plaintiffs whose trade secrets are stolen.

Having cleared the Judiciary Committee -- a step that eluded ...

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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 ...

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About four months ago, to some fanfare, a handful of legislators in Congress introduced a bill called the Defend Trade Secrets Act of 2015.  The bill seeks to create a private right of action allowing companies to assert civil trade secret misappropriation claims under federal law (which would supplement the existing patchwork of state law remedies).  What has happened to the bill since then?  Is there still a chance that it could be signed into law?

Upon introduction, the respective versions of the bill, H.R. 3326 and S. 1890, were referred to the Judiciary Committees of the House and ...

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In what has become an annual rite, legislators from both sides of the aisle in the U.S. Congress again have proposed a bill seeking to create a private right of action allowing companies to assert civil trade secret misappropriation claims under federal law (which would supplement the existing patchwork of state law remedies).  As we have blogged previously, similar bills were introduced in 2013 and 2014, but despite some progress they were not enacted into law.

Like past legislative efforts, the Defend Trade Secrets Act of 2015 would amend the Economic Espionage Act of 1996 (which ...

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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 ...

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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 ...

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On March 20, 2015, a California federal court rejected an expansive reading of the Computer Fraud and Abuse Act (“CFAA”) urged by two plaintiff corporations that sought to hold a competitor and two of its directors liable under the CFAA, under an agency theory, for the actions of a former employee who allegedly downloaded and stole the corporations’ confidential trade secrets.

The plaintiffs, Koninklijke Philips N.V. and Philips Lumileds Lighting Company (“Lumileds”) are engaged in the business of Light Emitting Diode (“LED”) technology.  They alleged that Dr ...

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A recent Opinion issued by the Arizona Supreme Court highlights a noteworthy dichotomy in the way various states interpret the pre-emptive effect of their respective Uniform Trade Secrets Acts (“UTSA”). Forty-eight states have enacted some form of the UTSA, which aims to codify and harmonize standards and remedies regarding misappropriation of trade secrets that had emerged in common law and which differed from state to state. Only New York and Massachusetts have not enacted some form of the UTSA.

One important feature of the UTSA is its pre-emptive effect upon state common law ...

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As we have previously noted, Congress this year is actively considering two bills that would create a federal private right of action for trade secret theft: The Trade Secrets Protection Act (H.R. 5233) and the Defend Trade Secrets Act (S. 2267). These bills have been spurred in large part by increased foreign cyber-espionage affecting American companies.

Although the bills have enjoyed bipartisan support in Congress and in the business community, including from the National Association of Manufacturers, last month a group of dozens of law professors in the intellectual property ...

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On July 29, 2014, a bipartisan group of members of the U.S. House of Representatives introduced a bill that would create a federal private right of action for trade secret theft. The Trade Secrets Protection Act (H.R. 5233) is a House version of the Senate's Defend Trade Secrets Act (S. 2267), a bill introduced earlier this year.

As we discussed in a previous blog post, in the last couple of years, numerous legislators in Washington have made efforts to amend the Economic Espionage Act, 18 U.S.C. §1831 et seq. (which currently allows only prosecutors to pursue trade secret thieves), to ...

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On April 29, 2014, Senators Chris Coons (D-Del.) and Orrin Hatch (R-Utah) introduced a bill which seeks to create a private right of action under federal law for theft of trade secrets. As noted in the press release accompanying the bill, the so-called "Defend Trade Secrets Act would empower companies to protect their trade secrets in federal court."
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In a March 5, 2014 verdict, the U.S. Attorney's Office in San Francisco secured the first-ever federal jury conviction on charges brought under the Economic Espionage Act of 1996.
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A recent federal court decision concerning a company sending a cease and desist letter to a competitor (who had hired an individual formerly employed by the company, but then fired the individual as a result of the letter) underscores the difficulty the individual will face in pursuing a claim against the company of tortious interference with business relationship.
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Summary: On September 26, 2013, the Seventh Circuit Court of Appeals affirmed the conviction and four-year prison sentence of a former Motorola engineer for theft of trade secrets under the Economic Espionage Act.
Blogs
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A California legislator recently introduced two bills in Congress which, if passed, could have profound effects for companies seeking to pursue claims relating to trade secrets and confidential information - one bill would create a new private right of action under federal law for trade secret theft, while the other bill would appear to limit plaintiffs' abilities to pursue existing remedies for computer fraud and abuse.
Blogs
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On May 2, 2013, the Texas Uniform Trade Secrets Act (UTSA) was signed into law by Governor Rick Perry. The new law becomes effective on September 1, 2013. Nearly every state in the United States now has adopted some variation of the model Uniform Trade Secrets Act; only New York, Massachusetts and North Carolina have not.
Blogs
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The Obama Administration's "Strategy on Mitigating the Theft of U.S. Trade Secrets," announced on February 20, 2013, encourages companies and industry associations to participate in efforts to develop and adopt voluntary best practices to protect trade secrets.
Blogs
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In the latest salvo in a long-running legal dispute stemming from a classic raid by a competitor upon a commercial insurance broker's business and employees, a New York appellate court has refused to dismiss a New York lawsuit in favor of a prior-filed California lawsuit which has already addressed many of the same issues.
Blogs
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In an important recent decision, the Supreme Court of the State of New York, New York County, required plaintiffs asserting a cause of action for misappropriation of trade secrets to identify the trade secrets with particularity before being able to proceed with discovery.
Blogs
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An increasingly common type of provision found in employment agreements, allowing for extension of an employee's post-employment non-compete restrictions by a period of time that the employee violates the restrictions, was upheld in a recent decision by New York's Appellate Division, First Department.
Blogs
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Over a dozen years after the New York Court of Appeals specifically recognized, in BDO Seidman v. Hirshberg, that an employer may have a legitimate and protectable business interest in preventing former employees from exploiting or appropriating the relationships and goodwill of its customers which had been created and maintained at the employer's expense, some New York courts still appear to be reluctant to uphold contractual provisions in employment agreements that are designed simply to protect customer goodwill.
Blogs
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In a recent New York case, a commercial insurance broker whose business and employees had been raided on a substantial scale by a former employee and competitor was awarded a preliminary injunction barring the former employee, the competing company, and certain other former employees from soliciting business from the broker's clients, and from soliciting other employees of the broker to join the competitor. The Court's finding of irreparable harm was premised on reputational harm and loss of confidence in the marketplace suffered by the broker due to the perception that the broker was badly "wounded" by the extent of the raid.
Blogs
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The national law firm of EpsteinBeckerGreen, in conjunction with the Practical Law Company, recently wrote and published a statewide guide on the trade secrets laws of Connecticut. The guide is now available for downloading.
Blogs
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The national law firm of EpsteinBeckerGreen, in conjunction with the Practical Law Company, recently wrote and published statewide guides on the trade secret laws of Illinois, Massachusetts, and New Jersey.
Blogs
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In a recent decision in the matter Alliance Bernstein, L.P. v. William Clements, the Supreme Court of the State of New York, New York County (Justice Louis B. York), enjoined a former employee of AllianceBernstein, L.P. ("AllianceBernstein") from working for a competitor for 60 days, pursuant to a provision in an agreement requiring the individual to provide 60 days notice of his intention to resign. Although the original 60 days extending from the date of his resignation had already elapsed, the Court in effect granted a new 60 day period of non-competition, because the individual had started working for the competitor immediately upon his resignation from AllianceBernstein.
Blogs
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Peter Steinmeyer and I are pleased to announce that our guide, "Non-Compete Laws: Illinois," written with Christie Tate, is now available in PDF format. This guide is part of a series of guides written and published by our firm, EpsteinBeckerGreen, and the Practical Law Company.
Blogs
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In an interesting recent decision, the Supreme Court of Arkansas refused to enforce a non-compete in a lease agreement -- which clearly had been violated -- because it did not arise out of a contract of employment or contract for the transfer of goodwill or property.
Blogs
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A New York appellate court recently affirmed a lower court's judgment that the statute of frauds precluded enforcement, by a plaintiff ophthalmology practice against a defendant former employee, of a two-year non-compete clause contained in a 1996 written agreement which was allegedly incorporated into a 1998 oral employment agreement.
Blogs
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In an article published in the December 22, 2010 New York Law Journal (entitled "Nonhire Agreements as Antitrust Violations"), we discuss a complaint and proposed settlement filed in September 2010 by the Department of Justice against several well-known technology companies, which alleges that those companies entered into various bilateral agreements in which they agreed not to actively solicit each other's highly skilled technical employees, and that those agreements violated Section 1 of the Sherman Act, 15 U.S.C. § 1. The DOJ filed a similar suit on December 21, 2010 against another well-known company. Accordingly, companies who have entered or are considering entering into such agreements should review their practices to avoid unwanted attention from governmental authorities.
Blogs
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A July 27, 2010 decision by the United States Court of Appeals for the Third Circuit, in Bimbo Bakeries USA, Inc. v. Botticella, No. 10-1510, upheld an injunction preventing a senior executive from commencing employment at Hostess Brands, Inc., a bakery rival to the plaintiff Bimbo. The decision is notable in that the Court enjoined Mr. Botticella's employment, in the absence of any non-competition agreement, on the basis that there was a "substantial likelihood," but not an "inevitability," that Mr. Botticella would disclose or use Bimbo's trade secrets in the course of his planned employment at Hostess.
Blogs
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In a recent decision issued by the Supreme Court of the State of New York, New York County, a lawsuit brought by Marsh USA Inc. against two former employees and a competitor was sustained in the face of the defendants' challenge to the complaint on grounds of forum non conveniens and failure to state a cause of action. The decision is notable for its application of New York non-competition law to California residents, and Marsh's inclusion of forum selection clauses and choice of law provisions in its agreements with the individual defendants appears to have enabled it to avoid the draconian effect of California law upon those individual's non-compete agreements.
Blogs
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An action pending in federal court in New York demonstrates that the Computer Fraud and Abuse Act ("CFAA") should not simply be added to an employer's complaint against its former employees and a competitor, primarily alleging common law claims sounding in misappropriation of trade secrets and unfair competition, in connection with the alleged poaching of the employer's clients. In a recent decision, the Court dismissed the state law claims, finding that they formed the real body of the case, and retained jurisdiction over the CFAA claim. The CFAA claim is now the subject of defendants' motion to dismiss, on the grounds that the former employees had authorized access to the computer systems of the employer, and therefore the statutory prerequisites to state a claim were not met.
Blogs
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An article recently published in the New York Law Journal explores an employee's duty of loyalty and the permissible steps that employee may take, prior to termination of employment, in preparing to compete with the employer.
Blogs
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The importance of corporate security and vigilance with regard to trade secrets was demonstrated by recent events in Syracuse, New York. On February 3, 2010, the FBI and the U.S. Attorney's Office in Syracuse announced the arrest of 29 year-old Shalin Jhaveri, who is charged with stealing trade secrets from his employer.
Blogs
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The Second Circuit Court of Appeals has rejected applications by IBM to prevent a former employee, David L. Johnson, from continuing to work at rival Dell Inc. IBM sought to enforce a non-compete agreement which Johnson intentionally signed in the wrong place.
Blogs
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EpsteinBeckerGreen's 28th Annual Labor and Employment Law Client Briefing Conference, entitled "Employers Under Siege: Managing Your Workforce in Unprecedented Times," will be held this year on Thursday, September 24th at the Millennium Broadway Hotel in New York City.
Blogs
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We previously wrote concerning a May 22, 2009 temporary restraining order granted by the U.S. District Court for the Southern District of Ohio against three former employees of UBS Financial Services Inc. ("UBS"), in effect pending an arbitration hearing before the Financial Industry Regulatory Authority ("FINRA"). On June 3, 2009, UBS successfully moved the District Court to expand the TRO and for a preliminary injunction on the basis of additional evidence. The expanded TRO shows that even a plaintiff who has secured temporary injunctive relief from a court need not wait for a scheduled FINRA injunctive hearing if its business interests continue to be threatened in the interim.
Blogs
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A recent decision of the United States District Court, Southern District of New York, illustrates the importance for employers of making sure non-competition agreements are correctly executed by employees.
Blogs
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A recent article in Lawyer USA discusses how litigation over noncompetition and nonsolicitation agreements has been on the rise in recent years.
Blogs
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A dispute between UBS Financial Services Inc. ("UBS") and three of its former brokers highlights various issues involving trade secrets and non-solicitation covenants in the financial services industry. On May 22, 2009, on UBS's motion in UBS Financial Services Inc. v. Lofton, Case No. 1:09 CV 367, the U.S. District Court for the Southern District of Ohio entered a preliminary injunction prohibiting the three individuals from soliciting any securities investment business from UBS customers pending an arbitration hearing before the Financial Industry Regulatory Authority ("FINRA").
Blogs
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An executive's resignation and intention to begin work for a competitor of his former employer has resulted in a bicoastal battle of lawsuits over the terms of a noncompete clause in his employment agreement.
Blogs
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A recent decision from the United States Court for the District of New Jersey demonstrates how a corporation's tenacity in seeking electronically stored information despite the intransigence and apparent spoliation of evidence by a former employee and his new company led to positive results for the corporation.
Blogs
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Many New York attorneys, when seeking a preliminary injunction against a party that has misappropriated their clients' trade secrets, will argue that a presumption of irreparable harm to their clients automatically arises upon the determination that a trade secret has been misappropriated. A recent decision of the U.S. Court of Appeals for the Second Circuit, however, holds that misappropriation of trade secrets does not automatically lead to irreparable harm. The aggrieved party only faces irreparable harm if the misappropriator will disseminate the secrets to a wider audience or otherwise irreparably impair the value of the secrets.
Blogs
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In a decision, dated January 26, 2009, in the matter Epiq Systems, Inc. v. Hartie, Index No. 111950/08, the Supreme Court of the State of New York, New York County, by Judicial Hearing Officer (and retired Justice) Ira Gammerman, denied a preliminary injunction in aid of arbitration sought by plaintiffs Epiq Systems, Inc. and related companies (collectively, "Epiq"). Epiq claimed that it faced inevitable disclosure of its trade secrets by three individual defendants formerly employed at Epiq and their new employer Kurtzman Carson Consultants LLC ("KCC") with respect to three computer programs, including one web-based system, developed and used by Epiq to solicit ballots and tabulate ballot results in Chapter 11 bankruptcy proceedings, and in analogous foreign proceedings, involving widely-held public securities.
Blogs
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A recent decision of the United States District Court, Southern District of New York, entitled International Business Machines Corporation v. Papermaster, No. 08-CV-9078 (KMK), 2008 WL 4974508, 2008 U.S. Dist. LEXIS 95516 (S.D.N.Y. Nov. 21, 2008), appears to have breathed new life into the "inevitable disclosure" doctrine, apparently easing the burden of proof that an employer must satisfy in order to show the irreparable harm necessary for a court to grant an injunction preventing the former employee from working for a competitor.

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