Trade Secrets & Employee Mobility

Now on Spilling Secrets, our podcast series on the future of non-compete and trade secrets law: On April 23, 2024, the FTC announced its final rule banning virtually all non-compete agreements nationwide. Employers across the nation are looking for answers.

In this episode of Spilling Secrets, Epstein Becker Green attorneys Peter A. Steinmeyer and Erik W. Weibust lay out the details of the ban, the legal challenges already underway,* and the actions employers should be taking.

*EBG is representing amici in one legal challenge: the U.S. Chamber of Commerce litigation.

Now on Spilling Secrets, our podcast series on the future of non-compete and trade secrets law: Health care employers face unique challenges and considerations when deciding whether to litigate non-compete agreements with physicians. However, in such a quickly evolving legal landscape, the decision to take the matter to court is not always clear.

In this episode of Spilling Secrets, Epstein Becker Green attorneys Katherine G. Rigby, Erik W. Weibust, Daniel L. Fahey, and Jill K. Bigler discuss the unique challenges involved in litigating physician non-competes.

Now on Spilling Secrets, our podcast series on the future of non-compete and trade secrets law: Restrictive covenants are evolving at a record pace right now at both the federal and state levels. Employers are struggling to keep up, and that’s especially true in the health care industry.

In this episode of Spilling Secrets, Epstein Becker Green attorneys Katherine G. Rigby, Erik W. Weibust, Glenn P. Prives, and Denise Merna Dadika discuss restrictive covenants in relation to physician groups and other health care organizations employing direct care providers.

Explore Epstein Becker Green's 50-State Noncompete Survey, now featuring a 50-state health care supplement.

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 ...

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

The year 2023 was significant for trade secret and non-compete law, full of enforcement actions and rulemaking on the federal level and legislation in the states.

In this episode of Spilling Secrets, Epstein Becker Green attorneys Peter A. Steinmeyer, Katherine Rigby, A. Millie Warner, and Erik W. Weibust present their lineup for the “top 10” trade secret and non-compete developments of 2023.

Podcast: Amazon Music / Audible, Apple Podcasts, Audacy, Deezer, Google Podcasts, iHeartRadio, Overcast, Pandora, Player FM, Spotify.

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Tune in to Spilling Secrets, a podcast series on the ...

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

Restrictive covenants, such as non-compete and non-solicitation agreements, are regulated differently worldwide. In this episode of Spilling Secrets, Epstein Becker Green attorneys Peter A. Steinmeyer, A. Millie Warner, and Susan Gross Sholinsky take a trip around the world with Andrew Lilley, Head of Employment Law at Deloitte Legal, to highlight some of these unique distinctions and discuss how global employers can navigate these differences.

Podcast: Amazon Music / Audible, Apple Podcasts, Audacy, Deezer, Google Podcasts, iHeartRadio, Overcast, Pandora, Player FM, Spotify.

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In this special live episode of our Spilling Secrets podcast series, Epstein Becker Green attorneys Peter A. Steinmeyer and Erik W. Weibust sat down with guests Gina Sarracino, Chief Counsel of Employment and Labor at Thomson Reuters, and Evan Michael, Executive Vice President and General Counsel at NFP, to discuss the hectic state of non-competes in 2023.

Podcast: Amazon Music / Audible, Apple Podcasts, Audacy, Deezer, Google Podcasts, iHeartRadio, Overcast, Pandora, Player FM, Spotify.

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Tune in to Spilling Secrets, a podcast series on the future of trade secrets and non-compete law.

Each episode features an all-star panel of attorneys talking about real life problems ...

Our colleagues Erik W. Weibust, Peter A. Steinmeyer, and 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:

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.

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.

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.

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.

We wrote recently about a proposed bill that was introduced in the New Jersey State Assembly on May 2, 2022, which would limit certain provisions in restrictive covenants, and a bill that was passed the following day by the Colorado Senate and is expected to go into effect in August that would likewise limit the enforceability of noncompetes and other post-employment restrictive covenants. Not to be left out, members of the Connecticut General Assembly recently introduced House Bill 5249, which would limit the applicability of noncompete agreements in that state as well. The bill is very similar in many respects to the noncompete law passed in 2018 in Massachusetts, and likely borrowed heavily from that law. Here are the details:

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 ...

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 ...

New Jersey may be poised to become the latest state to adopt strict procedural and substantive requirements on post-employment non-compete agreements. Assembly Bill No. 1650, if passed, would substantially overhaul New Jersey’s laws regarding post-employment non-compete agreements by, among other things, limiting the types of employees against whom a non-compete agreement is enforceable, as well as limiting the time, scope and geographic region of a non-compete agreement. Assembly Bill No. 1650 still permits post-employment non-compete agreements so long as the ...

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 ...

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 ...

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 ...

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 ...

The 2019 legal landscape of employee mobility continues to evolve, at times drastically. Courts and legislatures are giving increased scrutiny to employers’ claims to protect the confidentiality of their trade secrets and attempts to enforce their employees’ restrictive covenants, including non-competition and non-solicitation agreements. It can be hard for employers to prevent their confidential information and client goodwill from following certain departing employees.

With greater knowledge of the latest legal theories, decisions, statutes, and other ...

Employers sometimes ask whether it matters if they are inconsistent in their enforcement of non-competes.  Typically, the issue is analyzed in terms of whether inconsistent enforcement undercuts the legitimate business interest justifying the restriction.  However, in a pending lawsuit, Miller v. Canadian National Railway Co., the issue is being raised in a different context: whether alleged inconsistent enforcement was racially motivated.  Specifically, the plaintiff in that case alleges that “[b]y enforcing the non-compete against Miller and not against similarly ...

The State of Utah on March 22, 2019 returned to the topic of non-competes for the third time in three years. It had passed that statute in 2016 (as we noted), and then amended in 2018 (as we also discussed here earlier), and now is at it again, by amending it once more. Maybe they are hoping that the third time’s a charm, as they say.

It seems that, like Goldilocks, the broadcasting industry found the original 2016 statutory bed to be a little too hard for it to sleep in. As we discussed at the time:

The State of Utah recently enacted Utah Code Annotated 34-51-101 et seq., the so-called ...

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 ...

As we've discussed, the California Court of Appeal in AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., recently ruled that a broadly worded contractual clause that prohibited solicitation of employees for one year after employment was an illegal restraint on trade under California law.

Now, a second court has joined in.

 In Barker v. Insight Global LLC, Case No. 16-cv-07186 (N.D. Cal., Jan. 11, 2019), Judge Freeman, sitting in the Northern District of California, adopted AMN's reasoning and reversed a prior order that dismissed claims that asserted a contractual employee ...

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

In Pam’s Acad. of Dance/Forte Arts Ctr. v. Marik, 2018 IL App (3d) 170803, the plaintiff dance company sued a former employee for breaching a non-disclosure agreement and restrictive covenant by allegedly opening a dance studio within 25 miles of plaintiff and soliciting students and teachers by means of ...

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 ...

In its 2008 landmark decision Edwards v. Arthur Andersen LLP (2008) 44 Cal. 4th 937, the California Supreme Court set forth a broad prohibition against non-compete provisions, but it left open whether or to what extent employee non-solicit provisions were enforceable. Since Edwards, no California appellate court has addressed that issue in a published opinion – until recently. On November 1, the California Court of Appeal in AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., ruled that a broadly worded contractual clause that prohibited solicitation of employees for one ...

On May 10, 2018, the New Jersey Assembly Labor Committee advanced Assembly Bill A1769, a bill that seeks to provide stricter requirements for the enforcement of restrictive covenants.

If enacted, the legislation would permit employers to enter into non-competes with employees as a condition of employment or within a severance agreement, but such non-competes would only be enforceable if they meet all of the requirements set forth in the legislation. Thus, if enacted, employers will have to comply with the following requirements in order for a New Jersey non-competition agreement ...

Nevada employers be advised: on June 3, 2017, Governor Brian Sandoval signed into law Assembly Bill 276, which amends Chapter 613 of the Nevada Revised Statutes and sets forth a new framework in which noncompetes are evaluated. The amended law includes the following four changes:

1. A noncompete is void and unenforceable unless the noncompete:
   1. Is supported by valuable consideration;
   2. Does not impose any restraint that is greater than is required for the protection of the employer for whose benefit the restraint is imposed;
   3. Does not impose any undue hardship on the employee; and
   4. Imposes ...

In 2016, several states enacted laws that were designed, in varying degrees, to limit non-competes, including Illinois, Utah, Connecticut and Rhode Island. Which states are most likely to do the same in 2017?

Idaho:  A bill proposed in January, House Bill 61, would amend an existing Idaho law that has made it easier for employers to enforce non-competes against the highest paid 5% of their employees and independent contractors.  The bill would alleviate the burden placed on such “key” personnel by the existing law by, among other things, eliminating the rebuttable presumption of ...

In non-compete matters, it is often said that trial judges dislike enjoining individuals and will go out of their way to avoid doing so. A recent decision by the Florida Court of Appeals, Allied Universal Corporation v. Jeffrey B. Given, may be a good example of such a situation – as well as an example of an employer that took an immediate appeal and got the relief it wanted.

In Allied Universal, the trial court denied a motion for a preliminary injunction to enforce the terms of a non-compete with a former employee, even though the employee failed to rebut evidence that his non-compete was ...

The top story on Employment Law This Week:  The White House is calling on states to combat what it describes as the “gross overuse of non-compete clauses today.”

The call to action recommends legislation banning non-competes for certain categories of workers and prohibiting courts from narrowing overly broad agreements. New York Attorney General Eric Schneiderman answered the call immediately, announcing that he would introduce relevant legislation in 2017. Our colleague Zachary Jackson, from Epstein Becker Green, comments.

Watch the segment below and see our blog post ...

[caption id="attachment_2106" align="alignright" width="90"] Matthew Aibel[/caption]

[caption id="attachment_2105" align="alignright" width="90"] Anthony Laura[/caption]

With remote access technology becoming standard across industries, companies readily engage a multi-state workforce, with many employees residing outside of the employer’s home state.  While an expanded access to talent may be beneficial, one drawback is the ability to enforce restrictive covenants with out of state employees in a consistent manner and in the employer’s home state.  The case ...

Our colleagues Lauri F. Rasnick and Adriana S. Kosovych, attorneys in the Employment, Labor & Workforce Management practice at Epstein Becker Green, have a post on the Financial Services Employment Law blog that will be of interest to many of our readers: "Implementing and Applying the Employee Choice Doctrine: Employers Focus on Forfeiture to Protect Their Company’s Assets."

Following is an excerpt:

Employers seeking to protect their competitive advantage and find an alternative method of influencing employees to not compete are increasingly relying on ...