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 carry significant legal consequence if it ends up reducing the circumstances in which a former employer can sue for tortious interference.

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Continue Reading Oregon Law Refines Restrictions on Noncompete Agreements

As reported here and here, in December 2019 and January 2020, the United States Department of Justice brought its first criminal charges against employers who entered into “naked” wage fixing agreements and no-poach (e.g., non-solicitation and/or non-hire)  agreements with competitors. According to DOJ’s 2016 Antitrust Guidance for HR Professionals, such agreements are “naked,” and, therefore, illegal per se, because they are “separate from or not reasonably related to a larger legitimate collaboration between competitors.”  Although DOJ recognized that such agreements may not be illegal per se when made in furtherance of legitimate joint
Continue Reading The Pennsylvania Supreme Court Nixes a No-Poach Agreement Between Business Partners as Overbroad

The recently passed Act to Promote Keeping Workers in Maine is poised to dramatically alter the status of restrictive covenants in Maine.  The Act accomplishes this by: (1) prohibiting employers from entering into no-poach agreements with one another; (2) barring employers from entering into noncompetes with lower wage employees; (3) limiting employers’ ability to enforce noncompetes; (4) mandating advanced disclosure of noncompete obligations; and (5) imposing a time delay between when an employee agrees to the terms of a noncompete and when the noncompete obligations actually go into effect.  In addition to barring the enforcement of noncompliant noncompetes, the Act
Continue Reading New Maine Law Bans No-Poach Agreements and Dramatically Limits Noncompetes

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 developments in this area, employers can better protect and defend their interests—even preemptively—including in the ways they draft their employee agreements, design their compensation structures,
Continue Reading Take Five Newsletter – Managing Employee Mobility Today: Are You Succeeding or Scrambling?

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 bars the enforcement of
Continue Reading Maryland Law Bars Enforcement of Non-Compete Agreements Against Low Wage Workers

Pursuant to a recently passed Oregon state law (HB 2992), noncompete agreements entered into on or after January 1, 2020 will only be enforceable against Oregon employees if the employer provides the departing employee with a signed copy of the agreement within 30 days after the employee’s date of termination.  Though at first blush, this law merely codifies the best practice of reminding departing employees of their continuing obligations to their former employer, it contains a few nuances Oregon employers should keep in mind.

The law requires employers to provide departing employees with a signed copy of their
Continue Reading New Oregon Law Requires Employers to Remind Departing Employees of Their Noncompete Obligations

On March 12, 2019, Dunkin’ Donuts, Arby’s, Five Guys Burgers and Fries, and Little Caesars agreed to stop including “no-poach” clauses in their franchise agreements and no longer to enforce such clauses in existing agreements. A no-poach clause is an agreement between employers not to hire each other’s employees. The franchisors agreed to end this practice following an investigation by a coalition of attorneys general from 14 states into the use of no-poach clauses in fast food franchise agreements.[1] In a press release announcing the settlement, Maryland Attorney General Brian Frosh explained his concern “that no-poach provisions make it
Continue Reading No-Poach Clauses in Franchise Agreements: Four More Franchisors Agree to Drop Them and the DOJ Weighs In on Class Actions Alleging Antitrust Violations

States across the country have been using enforcement actions, legislation, and interpretive guidance to limit employers’ ability to enforce restrictive covenants against low wage workers. The recent decision in Butler v. Jimmy John’s Franchise, LLC et. al., 18-cv-0133 (S.D. Ill. 2018) suggests this trend may extend to federal antitrust law.

The Butler case relates to the legality of certain restrictive covenants in Jimmy John’s franchise agreements.[1] The Complaint alleges that Jimmy John’s required franchisees to agree not to hire any job applicants who worked for a different Jimmy John’s franchise in the previous year. Franchisees
Continue Reading Recent Decision Questions Use of No-Poach Clauses in Franchise Agreements

In E.J. Brooks Company v. Cambridge Security Seals, the Court of Appeals of New York narrowed the scope of permissible damage claims plaintiffs can assert in trade secret actions under New York law. The ruling denies plaintiffs the ability to recover costs that defendants avoided through misappropriating trade secrets (known as “avoided costs” theory), making New York law less attractive to certain types of trade secret actions due to the state’s conservative approach in calculating damages.

E.J. Brooks Company d/b/a TydenBrooks (“TydenBrooks”), the largest manufacturer of plastic indicative security seals in the United States, brought an action in federal
Continue Reading New York Court Limits Scope of Damage Awards in Trade Secret Actions

Whenever possible, restrictive covenants should be carefully worded to track the language of applicable law in the jurisdiction where they will be enforced. The South Dakota Supreme Court’s recent decision in Farm Bureau Life Insurance Co. v. Dolly provides a strong reminder of this lesson.  The case concerned an action by Farm Bureau to enforce a restrictive covenant against Ryan Dolly who had worked for Farm Bureau as a captive life insurance agent. Dolly’s contract with Farm Bureau contained a restrictive covenant providing that Dolly would “neither sell nor solicit, directly or indirectly…any insurance or annuity product, with respect to
Continue Reading South Dakota Supreme Court Limits Enforceability of Non-Solicitation Clause in Non-Compete Agreement