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.
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 mobility:
- Antitrust Action Against No-Poaching Agreements: The Trump Administration Continues Obama Policy
- Drafting “Garden Leave” Clauses in Employment Agreements
- Will Insurance Cover a Company Sued in a Trade Secrets Lawsuit?
- Defend Trade Secrets Act Developments in 2017
- New and Proposed State Statutes and Federal Legislation Limiting Non-Compete Agreements
We just published an article with the Practical Law Company discussing garden leave provisions in employment agreements. With PLC’s permission, we have attached it here.
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 non-competes for lower level employees, and whether the restrictions of a noncompete are justified by a legitimate business interest or are merely a tool used to suppress competition.
Although the Trump Administration’s attitude toward non-compete agreements is unknown, the Obama Administration was disapproving of them. Both the US Department of Treasury and the White House issued reports in 2016 that questioned the widespread use of non-competes and suggested that they hampered labor mobility and ultimately restrained economic growth (see US Department of the Treasury: Non-Compete Contracts: Economic Effects and Policy Considerations (Mar. 2016) and White House Report: Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses (May 2016)). Some states have passed legislation essentially banning non-competes for certain categories of workers, such as low-wage workers in Illinois (820 ILCS 90/1) and technology sector workers in Hawaii (Haw. Rev. Stat. § 480-4(d)). In other states, such as California, almost all post-employment non-competes are unenforceable (Cal. Bus. & Prof. Code § 16600-16602.5).
With this background, employers are seeking alternatives to traditional non-compete agreements to protect their proprietary information and customer relationships. …
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 so-called “forfeiture for competition” agreements in place of traditional non-competes. This trend is driven, in large part, by the “employee choice” doctrine. In states that have adopted the employee choice doctrine, such as New York, a post-employment non-compete will not be subject to the usual reasonableness standard when it is contingent upon an employee’s choice between receiving and retaining a benefit (e.g., restricted stock, stock options, or some other deferred compensation) and competing.