In Seyfarth’s fourth installment in its 2019 Trade Secrets Webinar Series, Seyfarth attorneys Kristine Argentine, Eric Barton, and Katelyn Miller focused on the enforcement of non-competes and how the difficulty of enforcement of these restrictive covenants vary by state, especially based on recent legislation in various states.

As a conclusion to this webinar, we compiled a summary of takeaways:

  • While restrictive covenants are an important piece of many employment agreements in order to protect the company’s relationships and proprietary information, the restrictions should be narrowly constructed in time, geography, and activity or customers limitations to the extent possible. Requirements for the enforceability of restrictive covenants varies greatly by state and sometimes industry, so be sure to carefully consider the laws of any states where employees work when crafting restrictive covenants or looking into whether to enforce restrictive covenants against a particular employee.
  • Effective January 1, 2020, in order for a non-compete to be valid in Oregon, an employer must provide a terminated employee with a signed, written copy of their non-compete agreement within 30-days of their termination.
  • Extensive revisions to Washington’s non-compete law will be going into effect January 1, 2020, including, but not limited to, penalties for overbroad restrictions, income thresholds, and mandatory “garden leave” payments. While non-competes will still be allowed in Washington, these substantial changes will greatly curtail how and when they can be used.
  • North Dakota, which generally prohibits non-competes, recently modified its law to expand situations in which a non-compete can be used in the sale (or partial sale) of limited liability companies, corporations, and partnerships.
  • Effective January 15, 2020, non-compete provisions in Rhode Island will no longer be effective against low-wage earners, undergraduate or graduate students in an internship or short-term employment relationship, non-exempt employees, or employees 18 years old or younger.
  • Massachusetts recently passed legislation regulating non-compete agreements by limiting enforceability and codifying express requirements that must be met, including but not limited to, time, geography and activity restrictions, notice requirements, and either “garden leave” or other mutually-agreed upon consideration provisions. Further, non-compete agreements are not enforceable against certain types of employees. While non-competes are still allowed in Massachusetts, this new law curtails how and when such agreements may be used.
  • Maine recently passed legislation barring employers from entering into non-compete agreements with lower wage employees, limiting an employer’s ability to enforce non-compete agreements, mandating advanced disclosure obligations, and imposing a time delay between when an employee agrees to the terms of a non-compete agreement and when the non-compete goes into effect.
  • Maryland and New Hampshire recently joined a growing number of states by restricting enforceability of non-compete agreements against lower wage employees.
  • Minor changes to non-compete laws have also been made in Utah, Idaho, and Colorado. Utah has placed specific limitations on non-compete provisions in the broadcasting industry and imposes a one-year limit on all non-compete provisions except in limited circumstances. Idaho repealed its rebuttable presumption of irreparable harm, placing the burden back on the employer to establish irreparable harm in order to obtain an injunction. Colorado law provides that irrespective of a non-compete provision, physicians may continue to treat patients with rare disorders without liability.

Seyfarth Partner Jesse Coleman is presenting the “Recent Trends in Protecting and Exploiting Trade Secrets” program at an LES Houston event on August 28 at The Briar Club in Houston.

Trade secrets may variously include technologies, processes, formulas, and sensitive customer information. Accordingly, trade secrets often confer significant profit and competitive advantage to their owner. For this reason, companies are increasingly enforcing their legal rights related to unauthorized usage of their trade secrets under state and/or federal laws. At the same time, it is of strategic interest to consider how best to protect and commercially exploit trade secrets; in particular in the era of cybersecurity threats.

This panel discussion will provide viewpoints and guidance from the perspective of outside legal counsel, internal legal counsel, and damages/valuation expertise as to best practices in protecting, enforcing, and exploiting trade secrets.

For more information or to register for this in-person program, click here.

 

On June 28, 2019, Governor Mills signed LD 733, An Act To Promote Keeping Workers in Maine, into law.  The Act places limits on non-compete agreements and bans restrictive employment agreements.

Non-Compete Agreements

The Act defines a non-compete agreement as one restricting the employee “from working in the same or similar profession or in a specified geographic area for a certain period of time following termination of employment.” Continue Reading Maine Governor Restricts Restrictive Covenants

A group of 18 state attorneys general (the “AGs”) recently filed comments with the Federal Trade Commission (“FTC”) in advance of a series of hearings centered on changes to antitrust and consumer protection enforcement in the 21st century. The letter identifies four major areas where recent antitrust activity involving labor issues have occurred: (1) horizontal no-poach agreements between employers; (2) vertical no-poach agreements, particularly franchise agreements; (3) non-compete agreements between employers and employees; and (4) mergers impacting labor markets. Although it may reveal the enforcement priorities of its signatories, the letter’s arguments are mostly unsupported by any case law and in some respects are contrary to the Department of Justice’s positions on the matters. Continue Reading State Attorneys General Urge FTC to Consider Labor Issues in Antitrust Enforcement

On Tuesday, August 20, 2019, at 12:00 p.m. Central Time, in Seyfarth’s fourth installment of its 2019 Trade Secrets Webinar Series, Seyfarth attorneys will focus on the enforcement of non-competes and how the difficulty of enforcement of these restrictive covenants vary by state. Any company that seeks to use non-compete and non-solicitation agreements to protect its trade secrets, confidential information, client relationships, goodwill, or work forces needs to stay informed of the varied and ever-evolving standards in each state.

Seyfarth attorneys Kristine Argentine, Eric Barton, and Kate Miller will address the following topics:

  • Recent state law changes related to restrictive covenants and non-competes and potential impact of these changes
  • Proposed restrictive covenant and non-compete legislation in various states

As a special feature of our blog—guest postings by experts, clients, and other professionals—please enjoy this blog entry from Donal O’Connell, Managing Director of Chawton Innovation Services Ltd.

The Neglected Step-Child of IP

Trade secrets have, up until recently, been somewhat ignored. When I started to pay attention to trade secrets, some of my colleagues and contacts probably thought that I was mad.

After all, trade secrets were not included in many IP educational sessions. The subject rarely came up at IP conferences and seminars. This form of IP was not addressed by most IP Law Firms, even so called full service IP Law Firms. It clearly was not in the ‘job spec’ of many in-house IP Managers or Chief IP Officers. Continue Reading The Increasing Importance of Trade Secrets and Trade Secret Asset Management Explained

The Supreme Court in the UK, the highest court in the country, last week ruled on a restrictive covenant case for the first time in 100 years [Tillman v Egon Zehnder Ltd [2019] UKSC 32 (3 July 2019)].  It has clarified important points on interpretation, the key takeaway being it will now be easier for employers to enforce covenants against departing employees.

Covenants Must Be Necessary to Protect Employer’s Interests

It has long been established in the UK, that restrictive covenants are an unlawful restraint of trade unless they go no further than is necessary to protect the employer’s legitimate proprietary interests. The Supreme Court recognized as such in quoting the colorful language of a court decision from the 15th century criticizing a plaintiff employer looking to enforce a covenant:    Continue Reading First UK Supreme Court Decision on Restrictive Covenants for 100 years

On July 11, 2019, Governor Sununu signed S.B. 197 into law. S.B. 197 prohibits an employer from requiring an employee who makes 200% of the federal minimum wage ($14.50) to sign a non-compete agreement restricting the employee from working for another employer for a specified period of time or within a specific geographic area. Any “noncompete agreement entered into between an employer and a low-wage employee shall be void and unenforceable.” The new law will take effect in September. S.B. 197 had bipartisan sponsorship.

New Hampshire joins states like Massachusetts, Maryland, Illinois, and Washington, all of which have passed legislation limiting restraints placed on lower wage employees. For example, in Washington, non-competes are only enforceable for employees earning over $100,000 per year. Unlike in New Hampshire, Washington’s bill specifically notes that it does not “prohibit an agreement that prohibits the disclosure of trade secrets . . . .” In 2015, a similar piece of federal legislation failed to garner the necessary support.

We will continue to closely monitor proposed non-compete legislation across the nation and report back with any updates.

In May, Seyfarth attorneys Katherine Perrelli, Robert Milligan, and Dawn Mertineit participated in the ITechLaw 2019 World Technology Conference in Boston.

Seyfarth Partner Katherine Perrelli moderated the “Tech Transformation of Legal Services Delivery: Opportunities, Barriers, and Potential Solutions” session. The seesion focused on the current state of legal tech tools, as well as the opportunities and challenges presented by the use of tech tools in delivering legal services.

As a conclusion to the conference, we compiled a summary of takeaways:

  • Tech transformation is impacting both the business of law and the practice of law. Robotic process automation (RPA), machine learning and natural language processing, knowledge management, legal project management, data analytics, and technology-enabled delivery channels appear to be the areas of focus.
  • Clients are increasingly demanding to know what legal tech their outside counsel is using—no longer sufficient to do legal work the “old” way if you want to retain clients
  • Increased efficiency through the use of technology is good for clients, and despite the perception to the contrary, should positively impact firms’ bottom lines. Attorneys should work at the “top of their license” and deliver real value to clients. While not all legal work can or should be replaced by technology solutions, many tasks that lawyers perform can be either replaced or positively impacted through use of technology. (see e.g., contract management solutions, computer assisted document review with predictive coding and other analytical software automated learning) and allow them to work on other projects more suitable for their experience.

On June 24, 2019, the Supreme Court issued its decision in Food Marketing Institute v. Argus Leader Media and resolved fractured circuit splits about the parameters for when the government may withhold information from a Freedom of Information Act (“FOIA”) request based on responsive information being confidential or a trade secret. Earlier this year, we reported on this case when the Supreme Court granted certiorari and predicted that the case would have significant ramifications for the protections given to sensitive information submitted by companies to the government. Continue Reading Supreme Court Issues Decision Significantly Expanding the Scope of FOIA’s Confidentiality Exemption