Trade Secrets & Employee Mobility

The New York Knicks made headlines last week when they sued the Toronto Raptors for theft of confidential and proprietary information, including scouting reports, play frequency reports, and other confidential information compiled by the Knicks coaching staff. According to the Complaint, which was filed in the Southern District of New York, former Knicks employee Ikechukwu Azotam illegally procured and disclosed confidential information to employees of the Raptors, including Raptors head coach Darko Rajaković and player development coach Noah Lewis (Azotam, Rajaković ...

Now on Spilling Secrets, our podcast series on the future of non-compete and trade secrets law:

Most restrictive covenant disputes are resolved out of court. However, what about the restrictive covenant disputes that lead not only to litigation but also to litigation beyond the injunction phase?

Our all-star panel of attorneys—Peter A. Steinmeyer, Katherine G. Rigby, A. Millie Warner, and Erik W. Weibust—discuss more.

Now on Spilling Secrets, our podcast series on the future of non-compete and trade secrets law:

On May 31, 2023, National Labor Relations Board (NLRB) General Counsel Jennifer Abruzzo issued a memo stating her position that non-compete agreements violate the National Labor Relations Act. So, what does this mean for employers?

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.

As we wrote almost exactly a year ago – months before the Federal Trade Commission (FTC) issued its proposed noncompete rule – the Supreme Court’s decision in West Virginia v. EPA made it clear that the FTC does not have the authority to use its rulemaking powers to ban (or otherwise regulate) noncompetition agreements because it does not have “clear congressional authorization” to do so. The Supreme Court’s decision last week striking down the current Administration’s student loan forgiveness plan further confirms that the Supreme Court would likely strike down any noncompete rule promulgated by the FTC under the Major Questions Doctrine. See Biden v. Nebraska, 600 U.S. __ (June 30, 2023).

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. 

As featured in #WorkforceWednesday:  New York State’s noncompete ban has passed both houses of the state legislature and now awaits Governor Kathy Hochul’s signature.

Epstein Becker Green attorney David J. Clark details how this proposed ban would affect employers and reveals how noncompete bans have become a growing trend throughout the country.

On June 21, 2023, the Federal Reserve Bank of Minneapolis issued a report entitled “New data on non-compete contracts and what they mean for workers” that calls into question the assumptions made by the Federal Trade Commission (FTC) in its recent rulemaking efforts.[1]

The report begins by stating what we have been saying for a long time: that “relatively little survey evidence [is] available” about the actual effect of noncompetes on workers. In other words, it is not that there is substantial evidence that noncompetes help workers (although there are studies showing that they can in certain circumstances), but rather that the data is slim and, contrary to what the FTC and the media might lead the public to believe, there is likewise not settled evidence that noncompetes harm workers. As the Minnesota Fed points out, “[t]he recent explosion of public discussion about non-competes has made clear the need for better and more systematic data collection.”

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…

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.