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.
Continue Reading Only One Month Until Dramatic Changes in Colorado’s Restrictive Covenants Law
Exchange Act Rule 21F-17, adopted in 2011 under the auspices of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, prohibits any person from taking any action to impede an individual from communicating directly with the SEC, including by “enforcing, or threatening to enforce, a confidentiality agreement . . . .” The SEC has prioritized enforcing this rule expansively, by requiring employers to provide SEC-specific carveouts to policies and agreements governing confidentiality. According to an Order issued last week against The Brink’s Company ( “Brink’s” or “Brinks”), the SEC seems to suggest that employers must provide a specific carveout in restrictive covenant agreements permitting employees and former employees to report information to the SEC in addition to the statutory disclosure provided for in the federal Defend Trade Secrets Act (DTSA).
Continue Reading DTSA Whistleblower Language May Be Required, but Is It Sufficient? Not According to the SEC.
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.
Continue Reading Non-Competes: No More Blue Penciling in Wyoming
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.
Continue Reading Small Change in Colorado Law Could Have Large Effect: Criminalizing Restrictive Covenants
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 agreements are “not broader than necessary to protect the legitimate business interests of the employer.” The bill suggests that
Continue Reading New Jersey Legislature Considering Strict Procedural and Substantive Requirements for Post-Employment Non-Compete Agreements
In Ixchel Pharma, LLC v. Biogen, Inc., 20 Cal. Daily Op. Serv. 7729, __ P.3d __(August 3, 2020), the California Supreme Court made it easier for businesses to enforce restrictive covenants against other businesses. This holding is a directional shift for the Court which had previously narrowly construed the applicable statute (California Business & Professions Code § 16600) when addressing employee mobility issues.
Ixchel sued Biogen in federal court and alleged Ixchel entered into a Collaboration Agreement with Forward to develop a new drug that contained dimethyl fumarate (DEF), which authorized Forward to terminate the agreement at any
Continue Reading California Supreme Court Applies Rule of Reason Test for “Business Only” Restrictive Covenants
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 Realogy Holdings Corporation (“Realogy”) notified the employee that she was selected to participate in
Continue Reading 5th Circuit Upholds Non-Compete Provision Despite Former Employee’s Forfeiture of Stock Options, Which Constituted Express Consideration for Restrictive Covenant Agreement
When Massachusetts enacted the Massachusetts Noncompetition Agreement Act (“MNCA”) in mid-2018, some commentators suggested that the statute reflected an anti-employer tilt in public policy. But, we advised that sophisticated employers advised by knowledgeable counsel could navigate the restrictions set forth in the MNCA. As reported here, the May 2019 decision from the District of Massachusetts in Nuvasive Inc. v. Day and Richard, 19-cv-10800 (D. Mass. May 29, 2019) (Nuvasive I) supported our initial reading of the MNCA. The First Circuit’s April 8, 2020 decision in Nuvasive, Inc. v. Day, No. 19-1611 (1st Cir. April 8,
Continue Reading First Circuit: Massachusetts Employee Must Abide by a Restrictive Covenant Governed by a Delaware Choice of Law Clause – the More Things Change, the More They Stay the Same, Part II
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 remain unenforceable in that county for a period of three years.
Although the purpose of the law is
Continue Reading Florida Law Limits Physician Restrictive Covenants in Rural Counties
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 situated white employees, Defendants are interfering with Miller’s future employment relationships because of his race.”
Enforcement of non-competes rarely comes
Continue Reading Alleged Inconsistent Enforcement of Non-Compete Agreements Raised in Discrimination Case