Posts tagged Non-Compete Agreements.
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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 ...

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Thomson Reuters Practical Law has released the 2024 update to “Preparing for Non-Compete Litigation,” co-authored by Peter A. Steinmeyer.

The Note describes the steps an employer can take to prepare to successfully litigate a non-compete action, the primary options for enforcing a non-compete agreement, and the strategic decisions involved with each option. It discusses gathering evidence, assessing the enforceability of a non-compete, considerations before initiating legal action, cease and desist letters, seeking declaratory judgments, damages, and ...

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Just over a year into the implementation of the Washington, D.C. Ban on Non-Compete Agreements, as amended by the Non-Compete Clarification Amendment Act of 2022 (together, the “D.C. Non-Compete Ban”), the District of Columbia has begun enforcement of the law, which prohibits non-compete agreements for most D.C. employees earning less than $150,000 annually.* For further analysis of the law as amended, please see our prior blog post here.

On November 17, 2023, D.C. Attorney General Brian L. Schwalb announced that the Office of the Attorney General (“OAG”) settled three ...

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As federal administrative agencies wade further into rulemaking and adjudicative efforts to outlaw noncompetes and restrictive covenants, defendants are beginning to raise preemption arguments in response to state court breach of contract claims on the topic.

A recent case shows defendants are taking things into their own hands and not waiting for the Federal Trade Commission (“FTC”) to conclude its announced rulemaking on the subject or for the National Labor Relations Board (“NLRB”) to rule on the NLRB General Counsel’s stated position that nearly all noncompetes ...

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Thomson Reuters Practical Law has released the 2023 update to “Non-Compete Laws: Illinois,” a Q&A guide to non-compete agreements between employers and employees for private employers in Illinois, co-authored by our colleagues Peter A. Steinmeyer and David J. Clark 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 additional or ...

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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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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 ...

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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. SteinmeyerKatherine G. RigbyA. Millie Warner, and Erik W. Weibust—discuss more.

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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?

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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 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).

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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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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.

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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.”

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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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New York State may soon join the growing list of jurisdictions restricting or banning noncompete agreements. On June 7, 2023 the New York State Senate passed S 3100A (the “Bill”), which would prohibit employers from seeking, requiring, demanding, or accepting certain noncompete agreements.

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The National Labor Relations Board (NLRB) has found its first target under recent guidance issued in a memo from its General Counsel claiming that noncompete agreements may violate the National Labor Relations Act (NLRA). According to Bloomberg Law, “[t]he NLRB’s first enforcement action against an employer’s noncompete agreement targeted a Michigan cannabis processor and ended with a recent private settlement resolving the alleged labor law violations.” (The enforcement action predates the guidance memo). Bloomberg obtained redacted documents from the case via a Freedom of Information Act request.

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On June 2, 2023, the Federal Trade Commission (FTC) announced that it finalized a consent order with Anchor Glass Container Corp. (“Anchor Glass”).

This consent order follows the FTC’s administrative complaint, filed in March 2023, against Anchor Glass and its controlling owners (the “Respondents”). The FTC’s complaint alleged that Anchor had entered into non-compete agreements with more than 300 employees and that these non-compete agreements were unfair and had the “tendency or likely effect of harming competition, consumers, and workers . . . .” 

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On May 17, 2023, U.S. Senator Rob Wyden (D-OR) announced the release of a long-awaited report on the U.S. Government Accountability Office’s multi-year investigation into the use of noncompete agreements across the U.S. labor market. In announcing the release, Senator Wyden said that the GAO report “highlights the problems of noncompete agreements – particularly their impact on limiting workers’ fundamental freedom to change jobs,” and pledged to “fight tooth and nail for fair labor laws that protect workers and promote the creation of new businesses in Oregon and nationwide.”

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The National Labor Relations Board’s top lawyer, Jennifer Abruzzo, issued  a General Counsel memo today instructing the Labor Board’s Regional Directors of her position  that noncompete clauses for employees protected by the National Labor Relations Act (NLRA) (i.e., nonmanagerial and nonsupervisory employees) in employment contracts and severance agreements violate federal labor law except in limited circumstances. The memo, while not law, outlines her legal theory which she will present to the National Labor Relations Board, which makes law primarily through adjudication of unfair labor practice cases.  The memo instructs the agency’s field offices of the position that the General Counsel is instructing them to take when investigating unfair labor practice charges claiming that such clauses interfere with employees’ rights under the NLRA.

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For the last decade, one of the biggest issues in Illinois noncompete law has been what constitutes adequate consideration for a post-employment restrictive covenant, apart from employment lasting at least two years after the agreement was signed.  The “24 month rule” set forth in Fifield v. Premier Dealer Services, Inc., 2013 IL App (1st) 120327 has caused much head-scratching, and the Illinois legislature essentially punted on the issue in the recent amendments to the Illinois Freedom to Work Act, 820 ILCS 90/1, et seq. (effective as of January 1, 2022).  (Full disclosure: One of the authors of this post advised the Illinois Chamber of Commerce in its negotiations with the State legislature over this law and, hence, can speak from personal experience on the legislative history of this “punt.”)

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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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The day after obtaining federal brokerage authority for the logistics company he formed a month earlier, Christopher Johnson, a North Carolina resident, resigned from his employment with Cincinnati-based Total Quality Logistics, LLC (“TQL”). TQL then sued Johnson and his company Patriot Logistics (“Patriot”) in the Clermont County Court of Common Pleas, alleging Johnson breached his employment agreement and misappropriated trade secrets in forming Patriot while still employed by TQL.

Johnson and Patriot removed the case to federal district court based on diversity jurisdiction. TQL moved to remand the case back to state court, arguing the $75,000 amount in controversy requirement was not met. After the federal court denied TQL’s remand motion, TQL voluntarily dismissed the case and refiled in state court. Johnson and Patriot removed the case yet again.

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According to Bloomberg, The Federal Trade Commission (“FTC”) is not expected to vote on the final version of a new rule that would ban noncompete clauses in employment contracts until April 2024. The rule defines a “non-compete clause” as “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.”

As we previously reported, the proposed rule would ban employers from imposing noncompete agreements on their employees. The rule would also require employers to rescind all preexisting noncompete agreements and to notify all employees who had been subject to a noncompete agreement of the recission. Although the proposed rule would not prohibit other kinds of employment restrictions, such as nondisclosure agreements, certain restrictions that are overbroad could be subject to the new rule. For example, a non-disclosure agreement between an employer and an employee that is written so broadly that it effectively precludes the employee from working in the same field would be considered a “de facto” noncompete clause.

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

Human capital often drives the value of merger and acquisition (M&A) deals in the health care industry. Buyers involved in these deals must retain key employees to secure that value.

Epstein Becker Green’s Spilling Secrets hosts Erik W. Weibust and Katherine G. Rigby join forces with the Diagnosing Health Care podcast hosts Daniel L. Fahey and Timothy J. Murphy to talk about strategies to retain these employees.

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

On January 5, 2023, the Federal Trade Commission (FTC) announced a proposed rule that would ban employers from using non-compete clauses.

Panelists Peter A. Steinmeyer and Erik W. Weibust and featured guest attorney Stuart M. Gerson discuss the proposed rule and next steps for employers.

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FTC Commissioner Christine Wilson, published an Op-Ed in the Wall Street Journal today in which she announced her resignation from the FTC and explained her reasoning. Readers may recall that Commissioner Wilson was the lone dissenting voice on the FTC’s proposed rule banning noncompetes nationwide.

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Thomson Reuters Practical Law has released the 2023 update to “Preparing for Non-Compete Litigation,” co-authored by our colleague Peter A. Steinmeyer.

Following is an excerpt (see below to download the full version in PDF format):

Non-compete litigation is typically fast-paced and expensive. An employer must act quickly when it suspects that an employee or former employee is violating a noncompete agreement (also referred to as a non-competition agreement or non-compete). It is critical to confirm that there is sufficient factual and legal support before initiating ...

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The Federal Trade Commission (FTC) has announced that it will be hosting a public forum on February 16, 2022, from 12:00-3:00 p.m. ET, to discuss its proposed nationwide noncompete ban. The forum is intended to supplement the FTC’s request for written comments, which as of today have exceeded 10,000. According to the FTC, “[t]he commission will hear from a series of speakers who have been subjected to noncompete restrictions, as well as business owners who have experience with noncompetes.” It is unclear whether any of the “business owners who have experience with ...

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Senators Chris Murphy (D-CT) and Todd Young (R-IN) introduced legislation on February 1, 2023 entitled the Workforce Mobility Act (the “Act”). This bill has been introduced previously, but never made it out of committee.

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Our colleagues Peter A. Steinmeyer, Erik W. Weibust, and Angel A. Perez co-authored an article in Thomson Reuters Practical Law's The Journal, titled "Restrictive Covenants: Ethical Issues for Attorneys."

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

The holidays are over, and year-end bonuses are being paid, making January and the first quarter a common time for employees to jump ship to work for a competitor.

Our all-star panel of attorneys – Pete SteinmeyerKate RigbyMillie Warner, and Erik Weibust – discuss what an employer should do in this situation.

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Our colleagues Erik W. Weibust, Peter A. Steinmeyerand Stuart M. Gerson co-authored an article in the Legal Backgrounder, published by the Washington Legal Foundation, titled “After 200+ Years Under State Law, FTC Proposes to Sweep Away All Noncompetes in Unauthorized Federal Power Grab.”

Following is an excerpt:

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“Practices that three unelected bureaucrats find distasteful will be labeled with nefarious adjectives and summarily condemned, with little to no evidence of harm to competition. I fear the consequences for our economy, and for the FTC as an institution”

 – FTC Commissioner Christine S. Wilson

The Federal Trade Commission (“FTC”) started 2023 with a bang. In addition to issuing a proposed Rule that would ban post-employment noncompetes nationwide, the FTC announced that it had settled two previously undisclosed enforcement actions and entered into proposed consent orders with three employers based on a novel legal theory.  According to the Complaints filed in each action, the FTC contends that the defendant employers’ use of broad post-employment non-compete agreements constituted “unfair methods of competition” in violation of Section 5 of the FTC Act. Unfortunately, the timing of the announcement of these enforcement actions—one day before announcing the proposed rule—seems intended to discourage employers from challenging the FTC’s authority to issue rules banning, or otherwise regulating, noncompetes, and to intimidate the business community.

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On Thursday, January 5, 2023, the Federal Trade Commission (FTC) made headlines with its announcement that it is proposing a new rule that would ban employers from using noncompete clauses (the “rule”).

The rule, as drafted, would prohibit employers throughout the United States from relying on or enforcing covenants to not compete. It is retroactive, further requiring the rescission of any such restrictive covenants currently in existence by an undetermined compliance date (which will be at least 240 days from now, at the earliest). The rule also specifies that the federal regulations would supersede any contradictory state law.

The announcement, while stunning to many, is a development that we anticipated and questioned halfway through 2022 and saw coming by the end of the year.

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Thomson Reuters Practical Law has released the 2022 update to “Non-Compete Laws: Connecticut,” a Q&A guide to non-compete agreements between employers and employees for private employers in Connecticut, co-authored by our colleagues David S. Poppick and Elizabeth S. Torkelsen, attorneys at Epstein Becker Green.

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

The year is coming to a close, and it was a big one in the world of trade secrets and non-competes. In this episode, we’re running down the key trends of 2022.

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Thomson Reuters Practical Law has released the 2022 update to “Non-Compete Laws: Illinois,” a Q&A guide to non-compete agreements between employers and employees for private employers in Illinois, co-authored by our colleagues Peter Steinmeyer and David Clark, Members of the Firm in the Employment, Labor & Workforce Management practice.

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Perhaps we were wrong. Or perhaps we were just not thinking creatively enough. After President Biden issued his “Executive Order on Promoting Competition in the American Economy,” in which he “encourage[d]” the Federal Trade Commission (FTC) to “consider” exercising its statutory rulemaking authority “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility,” we assumed that Lina Khan, the 33-year-old Biden-appointed Chair of the FTC (and a vocal opponent of noncompetes), would take the torch and propose a Rule prohibiting, or at the very least severely limiting, the use of noncompetes. And she may still do so.

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Employers with employees in the District of Columbia have until Monday, October 31, 2022, to comply with a specific notice provision contained in the D.C. Non-Compete Clarification Amendment Act of 2022 (B24-0256) (the “Amendment”).

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

Non-compete agreements are generally unenforceable against lawyers, but there are some exceptions. In this episode, hear about employer options for restrictive covenants, including non-competes, non-solicits, and confidentiality agreements, for both in-house and outside lawyers.

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

An employer often overlooks training employees on what their restrictive covenant means and how to honor their confidentiality, non-competition, and non-solicitation obligations. But this type of training can be critical for employers in protecting trade secrets and avoiding litigation in the future.

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

Two and a half years into the pandemic, it appears that remote work is here to stay, to varying degrees, in virtually all industries. How do restrictive covenants work in this remote work era? In this Spilling Secrets episode, hear how employers are addressing restrictive covenant concerns now that employees may be located anywhere.

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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.

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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.

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As we previously reported, the Colorado General Assembly passed a bill in May making substantial amendments to Colorado’s noncompete statute, C.R.S. § 8-2-113. Governor Jared Polis signed the bill on June 8, 2022, meaning the amendments will go into effect at 12:01 a.m. on August 10, 2022, which is only four weeks away. That may sound like a long time, but it will go by quickly.

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We wrote in January about a small change in Colorado law that could have large effects because it criminalized the enforcement of noncompete agreements that violate its general noncompete statute, C.R.S. § 8-2-113. Well, the Colorado General Assembly is at it again. Passed by the Colorado Senate on May 3, 2022, and now awaiting Governor Jared Polis’s signature, HB 22-1317 would further amend C.R.S. § 8-2-113 to substantially limit the enforceability of noncompetes and other restrictive covenants for any workers other than those who are “highly compensated,” as well as ...

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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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As featured in #WorkforceWednesdayThere has been a wave of legislation restricting non-compete agreements in the states, as well as a focus on such agreements at the federal level.

The continued shift towards remote work has also complicated non-competes.

How do employers maintain compliance? Attorney Erik Weibust tells us more.

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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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Many employers have granted their white collar workers increased flexibility to work remotely in response to the pandemic. As a result, some employees have moved away from the areas surrounding their offices and into places with lower costs or higher quality of living. In cases where an employee with a non-compete moves to a state such as California, which has a prohibition against any “contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind,” that can present potential problems for a Company. Cal. Bus. & Prof. Code. § 16600.

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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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Thomson Reuters Practical Law has released the 2022 update to “Preparing for Non-Compete Litigation,” co-authored by our colleague Peter A. Steinmeyer.

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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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Thomson Reuters Practical Law has released the 2021 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 colleague David J. Clark.

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 additional or different requirements.

Download the full Q&A in PDF ...
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Thomson Reuters Practical Law has released the 2021 update to “Non-Compete Laws: Illinois,” a Q&A guide to non-compete agreements between employers and employees, co-authored by our colleagues Peter A. Steinmeyer and David J. Clark.

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 additional or different requirements.

Download the full Q&A in PDF format.
Blogs
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As featured in #WorkforceWednesday:  This week, we look at the restriction and legislation of non-compete agreements.

The Future of Non-Compete Agreements

The restriction and legislation of non-compete agreements is gaining traction around the country, with states and the federal government passing or proposing new restrictions on the clauses. In July, President Biden signed an executive order that discussed the regulation of non-compete agreements, which in the past has only been the province of the states. Attorneys Pete Steinmeyer and Brian Spang discuss how the ...

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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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Oregon’s Senate Bill 169, signed May 21, 2021 strengthens Oregon’s existing restrictions on noncompete agreements.  Unlike Oregon’s 2019 law which imposed new notice requirements on employers seeking to enter into enforceable noncompetes, Senate Bill 169’s changes are more subtle though just as impactful.

Previously, noncompete agreements which failed to comply with Oregon’s statutory requirements were “voidable.”  Senate Bill 169 declares noncompliant noncompetes entered into after January 1, 2022 “void” ab initio.  This seemingly minor change may ...

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We’re pleased to present the 2021 update to “Hiring from a Competitor: Practical Tips to Minimize Litigation Risk,” published by Thomson Reuters Practical Law.

Following is an excerpt – see below to download the full version:

A Practice Note describing the steps an employer can take to minimize litigation risk when hiring from a competitor. This 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 ...

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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 ...

Blogs
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The District of Columbia is bracing for a transition.  But while employers across the country wait to see what changes the Biden Administration may bring, Washington, D.C. employers should prepare for a drastic and imminent change in their own backyard.

As we previously reported, last month the District of Columbia Council passed the Ban on Non-Compete Agreements Amendment Act of 2020 (D.C. Act 23-563) (the “Act”).  On January 11, 2021, Mayor Bowser signed the legislation. It will now be sent to Congress for the congressional review period set forth by the Home Rule Act.  Absent ...

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We're pleased to share the 2021 update of “Non-Compete Laws: Connecticut,” a Q&A guide published by Thomson Reuters Practical Law.

Following is an excerpt (see below to download the full version in PDF format):

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 additional or different requirements. …

In particular, this Q&A addresses:

    • Overview of State Non-Compete Law
    • Enforcement ...
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Thomson Reuters Practical Law has released the 2021 update to “Preparing for Non-Compete Litigation,” a Practice Note I co-authored with Zachary Jackson.

See below to download the full Note – following is an excerpt:

Non-compete litigation is typically fast-paced and expensive. An employer must act quickly when it suspects that an employee or former employee is violating a noncompete agreement (also referred to as a non-competition agreement or non-compete). It is critical to confirm that there is sufficient factual and legal support before initiating legal action ...

Blogs
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Non-compete agreements may all but disappear from the Washington, D.C. employment landscape in 2021.  On December 15, 2020, the District of Columbia Council voted 12-0 to approve the Ban on Non-Compete Agreements Amendment Act of 2020 (B23-0494) (the “Bill”), which would prohibit the use and enforcement of non-compete agreements for all employees except certain highly paid physicians.  If enacted into law, Washington, D.C. will have adopted a much stricter policy than several other states  that have recently restricted the use of non-compete agreements—including its ...

Blogs
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Thomson Reuters Practical Law has released the 2020 update to “Non-Compete Laws: Illinois,” a Q&A guide to non-compete agreements between employers and employees for private employers in Illinois, co-authored by our colleagues Peter A. Steinmeyer and David J. Clark at Epstein Becker Green.

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 additional or different requirements.

Click ...

Blogs
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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 ...

Blogs
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Virginia may be for lovers, but it no longer loves non-compete agreements.  Starting on July 1, 2020, employers may not “enter into, enforce, or threaten to enforce” a non-compete agreement with any “low-wage employee.”  As previously reported, this law is just one of the many new employment laws enacted during the 2020 legislative session.

Who Qualifies as a “Low-Wage” Employee?

Senate Bill 480 defines “low-wage employee” as a worker whose average weekly earnings during the previous 52 weeks “are less than the average weekly wage of the Commonwealth” as ...

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We’re pleased to present the 2020 update to “Hiring from a Competitor: Practical Tips to Minimize Litigation Risk,” published by Thomson Reuters Practical Law.

Following is an excerpt - see below to download the full version:

In most industries, competition is not limited to battles over customers and clients, but also includes efforts to recruit, employ, and retain the most productive and talented workforce. In fact, many employers consider their employees to be their most valuable assets and vigorously work to prevent competitors from taking those assets. For that ...

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On April 27, 2020, the U.S. Court of Appeals for the Fifth Circuit affirmed a lower court’s decision to grant a preliminary injunction preventing a real estate agent from working for a competitor, because her non-compete, attached to a grant of restrictive stock units, was likely enforceable despite the agent’s forfeiture of the company stock.

The employee in this case worked for Martha Turner Sotheby’s International Realty (“Martha Turner”) in Houston, Texas for over four years. Approximately nine months before her resignation, Martha Turner’s parent company ...

Blogs
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Citing Nebraska’s fundamental public policy, the U.S. Court of Appeals for the Third Circuit recently affirmed a District Court’s refusal to enforce a Delaware choice of law clause in a non-compete agreement signed by a Nebraska employee.

Delaware law is generally favorable to enforcing non-compete restrictions.  Hundreds of thousands of new corporate entities (corporations, LLCs, LPs, LLCs, etc.) are created in Delaware every year, and the First State is home to more than two-thirds of the Fortune 500 and 80 percent of all firms that go public.[1] Many of these Delaware ...

Blogs
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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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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 ...

Blogs
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The Illinois legislature is once again setting its sights on covenants not to compete.  In 2016, Illinois enacted the “Illinois Freedom to Work Act,” prohibiting employers from entering into covenants not to compete with “low wage” employees.  In February 2020, Illinois legislators filed four bills targeting covenants not to compete for all Illinois employees.

SB 3021 and HB 4699 are identical in substance, and the most drastic.  These bills seek to prohibit all covenants not to compete in Illinois:  “… no employer shall enter into a covenant not to compete with any ...

Blogs
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A New London Connecticut Superior Court jury awarded an $839,423 verdict in November 2019, involving theft of trade secrets for a $70 million U.S. Navy underwater drone project. This case, LBI, Inc. v. Sparks, et al., KNL-cv12-6018984-S, is a classic example of the blatant theft of an employer’s confidential and proprietary information that is so easily traceable to electronic files – and the costly consequences for the defendant employer’s complicity in that trade secret misappropriation.

Plaintiff LBI, Inc., a small Groton-based research and design development ...

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Thomson Reuters Practical Law has released the 2019 update to “Non-Compete Laws: Connecticut,” a Practice Note co-authored with David S. Poppick and Carol J. Faherty.

See below to download it in PDF format—following is an excerpt:

OVERVIEW OF STATE NON-COMPETE LAW

1. If non-competes in your jurisdiction are governed by statute(s) or regulation(s), identify the state statute(s) or regulation(s) governing:

  • Non-competes in employment generally.
  • Non-competes in employment in specific industries or professions.

GENERAL STATUTE AND REGULATION

Connecticut has no ...

Blogs
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Thomson Reuters Practical Law has released the 2019 update to "Preparing for Non-Compete Litigation," a Practice Note I co-authored with Zachary Jackson.

See below to download the full Note - following is an excerpt:

Non-compete litigation is typically fast-paced and expensive. An employer must act quickly when it suspects that an employee or former employee is violating a non-compete agreement (also referred to as a non-competition agreement or non-compete). It is critical to confirm that there is sufficient factual and legal support before initiating legal action. Filing a ...

Blogs
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Rhode Island is the latest state to jump on the bandwagon of limiting the application of non-compete agreements, with its Rhode Island Noncompetition Agreement Act (the “Act”).  See these links for our prior posts explaining the previous six non-compete statues enacted in 2019:  Maine; Maryland; New Hampshire; Oregon; Utah; and Washington.  Rhode Island’s Act becomes effective on January 15, 2020.

Ban on Non-Competes For “Low-Wage Earners”; “Nonexempt” Employees; Minors; and “Undergraduate or Graduate” Student Workers

The Act follows the trend of banning ...

Blogs
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A recently passed Florida law, Florida Statutes 542.336 seeks to prevent medical providers from using restrictive covenants to monopolize medical specialties in rural counties.  The law bars the enforcement of “restrictive covenants” against physicians who practice “a medical specialty in a county wherein one entity employs or contracts with, either directly or through related or affiliated entities, all physicians who practice such specialty in that county.”  Once a second provider enters the market for a particular specialty in a county, restrictive covenants ...

Blogs
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Peter A. Steinmeyer and David J. Clark, Members of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s Chicago and New York offices, respectively, authored a Thomson Reuters Practical Law Q&A guide, "Non-Compete Laws: Illinois."

Following is an excerpt:

A Q&A guide to non-compete agreements between employers and employees for private employers in Illinois. 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 ...

Blogs
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Maryland recently joined the ranks of states with laws limiting the enforcement of non-compete agreements against low wage workers.  Maryland’s recently enacted law (SB 328) bars employers from enforcing non-compete agreements against workers earning less than or equal to $15 per hour or $31,200 per annum.

In a nod to employers, the statute is carefully worded to protect low wage workers exclusively and “may not be construed to affect a determination by a court in an action involving” an employee whose earnings exceed both $15 per hour and $31,200 per annum.  The statute only ...

Blogs
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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 ...

Blogs
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Tuesday, January 29, 2019
12:30 p.m. - 1:45 p.m. ET 

Issues arising from employees and information moving from one employer to another continue to proliferate and provide fertile ground for legislative action and judicial decisions. Many businesses increasingly feel that their trade secrets or client relationships are under attack by competitors—and even, potentially, by their own employees. Individual workers changing jobs may try to leverage their former employer’s proprietary information or relationships to improve their new employment prospects, or may simply be ...

Blogs
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Thomson Reuters Practical Law has released a new edition of "Preparing for Non-Compete Litigation," a Practice Note co-authored by our colleague Peter A. Steinmeyer of Epstein Becker Green.

Following is an excerpt:

Non-compete litigation is typically fast-paced and expensive. An employer must act quickly when it suspects that an employee or former employee is violating a non-compete agreement (also referred to as a non-competition agreement or non-compete). It is critical to confirm that there is sufficient factual and legal support before initiating legal action. Filing a ...

Blogs
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On September 19, 2018, the New York Attorney General (“NYAG”) released a Frequently Asked Questions document (“FAQ”) regarding non-compete agreements in New York. The FAQ posits and answers the following basic questions about non-competes:

  • What is a non-compete agreement?
  • Are non-competes legal?
  • Do I have to sign a non-compete?
  • How could a non-compete affect me?
  • How do employers enforce non-competes?

In addition, the FAQ advises employees on specific steps to take before signing a non-compete, as well as actions employees can take if they signed a non-compete and are ...

Blogs
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We just published an article with Thomson Reuters Practical Law discussing garden leave provisions in employment agreements as an alternative or a companion to traditional employee non-compete agreements. With Thomson Reuters Practical Law’s permission, we have attached it here.

Blogs
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On Monday, attorneys general in eleven states, including New York, New Jersey, Massachusetts, California, and Illinois, revealed that they are investigating several prominent fast food franchisors for their potential use of no-poaching or non-compete agreements restricting the ability of low wage workers to obtain a better-paying job with another franchise. To that end, these attorneys general have propounded document and information requests to these restaurants, returnable August 6, 2018.

In the Illinois AG’s press release, Attorney General Madigan stated that ...

Blogs
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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 ...

Blogs
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Two western states, Utah and Idaho, have recently passed or amended their statutes dealing with post-employment restrictions on competition.  This continues a national trend in which new state law in this area is increasingly the product of legislative action rather than judicial interpretation.  Thus, even if an employer has no current presence in these states, it is worth one’s time to understand these changes because they could soon be coming your way.

In Utah, the legislature amended the two-year old Post-Employment Restrictions Act (which we had written about before) to ...

Blogs
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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.

Blogs
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In managing workforces, particularly when addressing employee turnover, employers often find themselves facing issues regarding how best to safeguard their confidential business information and how to protect their relationships with clients and employees. In recent years, the legal landscape underlying these issues has been evolving, as lawmakers and judges grapple with the tension in these matters between protection and free competition.

In this Take 5, we examine recent developments, both in the courts and legislative bodies, concerning trade secrets and employee ...

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Epstein Becker Green attorneys Peter A. Steinmeyer, Robert D. Goldstein, and Brian E. Spang are pleased to be presenting 2017 Year in Review: Trade Secrets and Non-Compete Developments webinar on Wednesday, December 6, 2017 from 1:00 p.m. — 2:15 p.m. with Practical Law.

This webinar will provide insights into recent developments and expected trends in the evolving legal landscape of trade secrets and non-competition agreements. This webinar will focus on how to navigate this continually developing area and effectively protect client relationships and proprietary ...

Blogs
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In this age of social media, a frequently asked question is whether social media activity can violate a non-compete or non-solicit.   Although the case law is evolving, courts which have addressed the issue have focused on the content of the communication, rather than the medium used to convey it.  In so doing, they have distinguished between mere passive social media activity (e.g., posting an update about a new job) as opposed to more targeted, active actions (e.g., not merely posting about a new job, but also actively recruiting former co-workers or clients).

A “LinkedIn” case ...

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Peter A. Steinmeyer and Lauri F. Rasnick, Members of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s Chicago and New York offices, respectively, co-authored an article in Thomson Reuters Practical Law, titled “Garden Leave Provisions in Employment Agreements.”

Following is an excerpt (see below to download the full article in PDF format):

In recent years, traditional non-compete agreements have come under increasing judicial scrutiny, with courts focusing on issues such as the adequacy of consideration, the propriety of ...

Blogs
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The year-end episode of Employment Law This Week  looks back at the biggest employment, workforce, and management issues in 2016.

Our colleague Jonathan Shapiro discusses the impact of the Defend Trade Secrets Act (DTSA)—which opened federal courts to trade secrets claims, regardless of the dollar value—and the White House's call to action encouraging states to ban non-compete agreements in some circumstances.

Watch the segment below and read Epstein Becker Green's recent Take 5 newsletter, "Top Five Employment, Labor & Workforce Management Issues of 2016."

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