Colorado Poised to Dramatically Limit the Enforceability of Non-Competes and Other Restrictive Covenants for Low-Wage Workers

Earlier this week, the Colorado state legislature voted to pass HB22-1317, which if signed into law by Democratic Governor Jared Polis, would place Colorado among several other states with the strictest bans on restrictive covenant agreements for low-wage workers. A spokesperson for Governor Polis has already indicated that the governor plans to sign the bill. If executed, the bill would become effective 90 days after the legislature adjourns (early August 2022), so immediate and very substantial changes appear to be right around the Rocky Mountain road. Continue Reading Danger: Rocky Road Ahead!

In the third installment of our 2022 Trade Secrets Webinar Series, Seyfarth attorneys Justin Beyer and Ian Long discussed employee mobility and its impact on trade secrets and non-compete agreements, and shared practical steps that companies can take to protect intellectual capital in today’s market.

As a follow up to this webinar, our team wanted to highlight:

• Protecting trade secrets when dealing with a more remote workforce requires employers to develop policies and practices throughout the lifecycle of onboarding, employment, and off-boarding. It is not enough to simply assume that the new hire will know and abide by his or her obligations, and requires a proactive approach, which may require the company to consider its hiring paperwork (are your current contracts sufficient to protect your interests?), its training procedures, and its off-boarding policies.
• Employers should consider developing policies that include: (a) asking questions during the onboarding process to best understand what obligations and role the candidate played in their prior employment and whether employing them will place your organization at risk; (b) developing regular training for employees to understand what the company considers its confidential information and what should be done to protect that information, as well as providing guidance to managers on understanding how to monitor their employees to ensure they are protecting the company’s confidential information; and (c) developing off-boarding policies to remind outgoing employees of their obligations and ensuring that information is being returned in an orderly fashion.
• Because of the ever evolving law on this area, especially as it relates to a host of new state statutes that have been passed over the past several years relating to the enforceability of post-employment restrictive covenants, it is important for your company to frequently assess the employment contracts it is utilizing, especially if members of its remote workforce live and work in some of the states that are passing new legislation.

In September 2019, the Ninth Circuit held that hiQ Labs, Inc.’s (“hiQ”) collection and use of information that LinkedIn users shared on their public profiles did not violate the Computer Fraud and Abuse Act (“CFAA”) because the data was publicly available and therefore did not fall within the scope of the CFAA. Following the Ninth Circuit’s order, the Supreme Court issued a decision in Van Buren v. United States, wherein the Supreme Court held, in a 6-3 ruling, that a former Georgia police officer did not “exceed authorized access” within the meaning of the CFAA by accessing a state law enforcement computer database containing license plate information to determine whether an individual was an undercover officer. The Supreme Court concluded that an individual “exceeds authorized access” when he accesses a computer with authorization but then obtains information located in particular areas of that computer—such as files, folders, or databases—that are off-limits to him. Continue Reading Ninth Circuit Reaffirms that Data Scraping from Public Websites Does Not Violate the Computer Fraud and Abuse Act

Members of Seyfarth’s Trade Secrets team recently worked on Trade Secret Litigation and Protection: A Practical Guide to the DTSA and CUTSA, a new 26-chapter treatise that explains the fundamentals and intricacies of trade secret law under the federal Defend Trade Secrets Act (DTSA) and the California Uniform Trade Secret Act (CUTSA).

Robert Milligan—Seyfarth partner and co-chair of the firm’s Trade Secret, Computer Fraud & Non-Compete practice—authored chapters and served as the Co-Editor for the treatise. Seyfarth partner Puya Partow-Navid and associate Joshua Salinas also authored chapters in the treatise. Additionally, Seyfarth associate Ashley Smith assisted with editing.

For more information and to purchase an electronic or hard copy of the Trade Secret Litigation and Protection treatise, click here.

Last week, the United States Department of Justice (“DOJ”) Antitrust Division suffered back-to-back trial defeats in its recent enforcement initiative to use the Sherman Act to stop employers from using allegedly anticompetitive tactics to suppress wages and employee mobility. In the first case, the DOJ’s first ever criminal wage-fixing prosecution ended with not guilty verdicts. In the second case, a national healthcare provider and its former CEO were acquitted on charges involving allegedly illegal “no-poach” agreements. Continue Reading DOJ Antitrust Division Suffers Back-to-Back Trial Defeats in Wage Fixing and “No Poach” Cases

Nowadays, it seems like non-compete legislation is being passed at a breakneck speed. We saw numerous new laws on the books in the last year, and dozens more are being considered in various states. Many citizens are in favor of tamping down on non-competes, and a fair number of practitioners (including many on the Seyfarth team!) agree that certain rules regarding restrictive covenants are reasonable and appropriate, including limitations on non-competes for low-wage workers and rules requiring some advance notice to incoming employees being asked to sign restrictive covenants. But some in the business community seem to be saying: not so fast.

Most recently, the New Hampshire legislature is debating a new bill introduced in January that, as originally drafted, would have invalidated non-competes if an employer required vaccination as a condition of employment and an employee refused to comply with the vaccine mandate. Introduced by a number of Republican representatives, this proposed law was an unsurprising reaction to the Biden administration’s vaccination push. While some in the business community weren’t happy with that proposed new law, they were willing to accept it—but are extremely unhappy with an amended and substantially broadened version of the bill that passed the House of Representatives just a few weeks ago. The amended bill would invalidate non-competes if an employer “makes any material change in the terms of employment,” perhaps a surprising move for Republican legislators, who are often pro-enforcement of restrictive covenants. This appears to be a clear nod to Massachusetts’ common law “material change” jurisprudence, a one-of-its-kind doctrine (at least for now) that requires employers to issue new agreements upon a material change in an individual’s employment—whether that be a promotion, demotion, change in compensation, change in responsibilities, or any other material change in the employee’s working conditions. Continue Reading New Hampshire Looks to Jump on the “Material Change” Bandwagon—and Employers Are Pushing Back

Company Alleges Waffles Featured on Oprah’s Annual “Favorite Things” List Were Made From Stolen Recipe

A Massachusetts waffle manufacturer, The Burgundian, recently filed a lawsuit alleging that a potential co-venturer, Eastern Standard Provisions, submitted its Liege waffles for inclusion on Oprah Winfrey’s annual “Favorite Things” list without giving credit to Burgundian. Then, after Burgundian refused to sell its secret waffle recipe, Eastern Standard employed a “bait and switch” by selling Liege waffles from a different company while touting Oprah’s endorsement of the Liege waffles made by Burgundian and enjoying the spoils of landing a spot on the coveted list. Continue Reading One of Our “Favorite Things” Are Lawsuits About Stolen Secret Recipes

On Wednesday, June 29, Robert Milligan—Seyfarth partner and co-chair of the firm’s Trade Secrets, Computer Fraud & Non-Competes group—is presenting the “Noncompetes Under New State Law Restrictions” webinar for Strafford.

The panel will discuss the latest state legislative changes and case law trends regarding non-compete agreements and other restrictive covenants in New York, California, Illinois, Washington, and other states and the current status of proposed changes to federal labor law. The panel will also offer best practices for structuring trade secret protection plans and addressing employee mobility issues.

For more information and to register for the program, visit the Strafford website.

A federal court in Texas recently provided useful insights on what constitutes “solicitation” by a former employee under that employee’s restrictive covenant with his former employer, and the court provided further insights on what inferences courts will, and will not, draw in favor of a plaintiff seeking a preliminary injunction based on alleged misappropriation of trade secrets.[1]

The defendant worked for the plaintiff, Sunbelt, for over twenty years, primarily as a salesperson covering institutional customers.[2] As part of his employment, the defendant signed an employment agreement that, among other things, prohibited him from “solicit[ing]” Sunbelt’s customers or competing with Sunbelt within a certain geographic area.[3] He later left to join one of Sunbelt’s competitors. Sunbelt filed suit and sought a preliminary injunction, asserting that the employed had, among other things, solicited Sunbelt’s former customers, worked for Sunbelt’s competitor within the area prohibited by the non-competition agreement, and misappropriated Sunbelt’s trade secrets.[4] Continue Reading Federal Court Provides Insight on Meaning of “Solicitation” and Plaintiff’s Burden on Motion for Preliminary Injunction

Wednesday, April 20, 2022
12:00 p.m. to 1:00 p.m. Eastern
11:00 a.m. to 12:00 p.m. Central
10:00 a.m. to 11:00 a.m. Mountain
9:00 a.m. to 10:00 a.m. Pacific

REGISTER HERE

In the third installment of our 2022 Trade Secrets Webinar Series, Seyfarth attorneys will discuss employee mobility and its impact on trade secrets and non-competes. Learn best practices and practical steps companies can take to continue to protect intellectual capital in today’s market.

Seyfarth attorneys Justin Beyer and Ian Long will discuss:

  • Understanding how the law considers trade secrets and restrictive covenants;
  • Best practices for protecting trade secrets and issue-spotting restrictive covenants when onboarding and off-boarding employees;
  • Practical considerations if the employer believes its trade secrets have been misappropriated, if they have improperly received another company’s trade secrets, or if they have concerns regarding a departing or arriving employee’s restrictive covenants.

Speakers
Justin Beyer, Partner, Seyfarth Shaw LLP
Ian Long, Associate, Seyfarth Shaw LLP

REGISTER HERE

If you have any questions, please contact Sadie Jay at sjay@seyfarth.com and reference this event.

This webinar is accredited for CLE in CA, IL, NJ, and NY. Credit will be applied for as requested for TX, GA, WA, NC and VA. The following jurisdictions accept reciprocal credit with these accredited states, and individuals can use the certificate they receive to gain CLE credit therein: AZ, CT, NH. The following jurisdictions do not require CLE, but attendees will receive general certificates of attendance: DC, MA, MD, MI, SD. For all other jurisdictions, a general certificate of attendance and the necessary materials will be issued that can be used in other jurisdictions for self-application. If you have questions about jurisdictions, please email CLE@seyfarth.com.