Non-Compete Enforceability

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What Businesses Need to Know About Non-Compete and Trade Secrets Law

Seyfarth’s Trade Secrets, Computer Fraud, and Non-Competes Practice Group is pleased to provide the 2018-2019 edition of our one-stop 50 State Desktop Reference, which surveys the most-asked questions related to the use of restrictive covenants and intellectual capital protection in all 50 states, including the recent non-compete legislation passed in Massachusetts this August. For the company executive, in-house counsel, or HR professional, we hope this guide will provide a starting point to answer your questions about protecting your company’s most valuable and confidential assets.

To request a hard copy or a pdf of the 2018-2019 edition of the 50 State Desktop Reference, click the button below.

In Seyfarth’s fifth installment in its 2018 Trade Secrets Webinar Series, Seyfarth attorneys Kate Perrelli, Erik Weibust, and Dawn Mertineit focused on Massachusetts non-compete and trade secrets reform. At long last, Massachusetts Governor Charlie Baker signed a Non-Compete Reform Bill into law on August 10. The presenters focused on what businesses should understand about the impacts of the changes, what to expect next, and how to safeguard assets and maintain an advantage over competitors.

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

  • Non-competes must be limited to one year, but can be extended to two if the employee breaches his or her fiduciary duty or steals company property.
  • Must be in writing and signed by both parties; at least 10 days’ notice must be provided to employees/candidates; and the right to counsel must be explicit in the agreement.
  • Garden leave is not required.  “Other mutually agreed-upon consideration” is adequate.  But what that means, and whether the court will even assess the adequacy of consideration, is left to the courts to determine.
  • Continued employment is no longer sufficient consideration.  Something more, that is “fair and reasonable” must be provided.  Again, what that means is left to the courts to determine.
  • Choice of law and venue requirements are likely unenforceable in other states and in federal court.  Nevertheless, comply with the law in case an employee files a declaratory judgment action in Massachusetts.
  • Bottom line:  Be clear in your agreements.  All the law really does is establish what must, may, and may not be included in private agreements.

Please join us for a one-hour CLE webinar on Thursday, August 16, 2018, at 1:00 p.m. Eastern / 12:00 p.m. Central / 10:00 a.m. Pacific.

On August 10, Governor Charlie Baker signed a Non-Compete Reform Bill into law. Although the bill largely codifies existing common law, there are some significant changes that companies with employees is Massachusetts should be aware of. Among other things, non-competes may not be enforced against certain types of employees; continued employment will no longer be sufficient consideration for existing employees; any employees subject to non-compete restrictions must be provided with “garden leave” (i.e., 50% of their base pay) during the restricted period, or “other mutually agreed upon consideration” (which is not defined); there are new notification requirements, and agreements with Massachusetts employees purportedly may not apply the laws of other states or mandate venue for lawsuits outside of Massachusetts.

As part of the same overarching economic development bill, Massachusetts has also now joined 48 other states in adopting the Uniform Trade Secrets Act, which will also changes existing law (although without creating nearly as much confusion and uncertainty as the non-compete law).

Understanding the impact of these changes, and what to expect, will help your company safeguard its most valuable assets and maintain its advantage over competitors.  Please join Seyfarth Shaw’s Boston team for an informative webinar on what to expect when this law goes into effect on October 1, 2018.

Democratic U.S. Senators Elizabeth Warren (D-MA), Chris Murphy (D-Conn.), and Ron Wyden (D-Ore.) introduced legislation on April 26, 2018, entitled the Workforce Mobility Act (“WMA”). Although the text of the WMA is not yet available, according to various press releases, it would prohibit the use of covenants not to compete nationwide. In Senator Warren’s press release announcing her co-sponsorship of the bill, Senator Warren stated that “[t]hese clauses reduce worker bargaining power, stifle competition and innovation, and hurt Americans striving for better opportunities. I’m glad to join Senator Murphy to put an end to these anti-worker, anti-market agreements.”  Continue Reading Democratic U.S. Senators Seek to Abolish Non-Compete Agreements

This post originally appeared on the Workplace Class Action blog. 

Seyfarth Synopsis: True to his word, the Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice has announced the first of a number of anticipated no-poach enforcement actions. While this was a civil proceeding, the Department of Justice has said that in some cases it may treat the conduct as criminal. Many executives and HR professionals are unaware that the antitrust laws apply to the employment marketplace. Thus, if they have not done so already, employers should consider the implementation of compliance programs to make sure that appropriate employees are aware of these developments and risks. Continue Reading DOJ Announces First of a Number of Anticipated No-Poach Enforcement Actions – What Should Employers Do Now?

For the third year in a row, the Washington state legislature failed to pass non-compete legislation, declining to take action on two separate bills that would have severely restricted employers’ ability to enforce former employees’ non-competition agreements. Continue Reading Washington State’s Legislature Rains on Non-Compete Critics’ Parade Yet Again

Continuing our annual tradition, we present the top developments/headlines for 2017/2018 in trade secret, computer fraud, and non-compete law.

1. Notable Defend Trade Secrets Act Developments

Just two years after its enactment, the Defend Trade Secrets Act (“DTSA”) continues to be one of the most significant and closely followed developments in trade secret law. The statute provides for a federal civil cause of action for trade secret theft, protections for whistleblowers, and new remedies (e.g., ex parte seizure of property), that were not previously available under state trade secret laws. Continue Reading Top Developments/Headlines in Trade Secret, Computer Fraud, and Non-Compete Law in 2017/2018

This post originally appeared on the Workplace Class Action blog. 

Seyfarth Synopsis: On February 1, 2018, the U.S. District Court for the Middle District of North Carolina entered an order granting in part, and denying in part, the plaintiff’s motion for class certification in a no-hire antitrust case entitled Seaman v. Duke University, 1:15-CV-462, at 1-2 (M.D.N.C. Feb. 1, 2018) (A copy of the decision can be found here.) The case was brought against Duke University, Duke University Health System (collectively “Duke”), and various University of North Carolina entities and one of its executives (collectively “UNC”). The complaint alleged that the defendants had entered into an agreement not to hire each other’s medical faculty employees in violation of federal antitrust laws. With some notable exceptions it has been difficult for plaintiffs to achieve class certification in wage suppression cases such as Seaman. The ruling is a “must read” for employers, as the Court’s reasoning and conclusions make it difficult to predict whether this case will be helpful to the plaintiffs’ bar in other cases.

Background To The Case

Seaman, an Assistant Professor of Radiology at Duke, contended that she applied for a position at UNC in 2015. She alleged that she was denied consideration due to an agreement among the Duke and UNC defendants that they would not hire each another’s medical faculty employees unless the hire involved a promotion. Seaman alleged that this agreement not only suppressed the compensation of defendants’ medical faculty members, but also their other skilled medical employees. Thus, Seaman sought to certify a class consisting not only of defendants’ medical faculty members, but also their physicians, nurses, and skilled medical staff. Id. at 1-2. Continue Reading Court Certifies Class In Duke-UNC No-Hire Workplace Antitrust Lawsuit

In Seyfarth’s first webinar in its 2018 Trade Secrets Webinar Series, Seyfarth attorneys Michael Wexler, Robert Milligan, and Joshua Salinas presented 2017 National Year In Review: What You Need to Know About the Recent Cases/Developments in Trade Secrets, Non-Compete, and Computer Fraud Law. The panel reviewed noteworthy cases and other legal developments from across the nation over the last year in the areas of trade secrets and data theft, non-competes and other restrictive covenants, and computer fraud. Plus, they provided their predictions for what to watch for in 2018.

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

  • While the Defend Trade Secrets Act provides for an ex parte seizure order, courts have been very unwilling to provide such relief except in extraordinary circumstances.
  • In light of recent state laws and appellate court decisions at both the federal and state level in 2017, choice of venue and choice of law provisions must be carefully considered and strategically implemented.
  • The ABA’s May 4, 2017, Ethics Opinion encourages lawyers to have an open exchange of communication with their clients about the securities measures their firms are taking to safeguard the clients’ confidential information.

The Massachusetts legislature is back at it again. Under new leadership, the Joint Committee on Labor & Workforce Development recently scheduled a hearing for October 31, 2017 on the non-compete reform bills proposed in January of this year. While we know little about the hearing, the bills to be discussed are presumably Senate Bill S.988 and companion House Bill H.2366. These identical bills were filed in January 2017 by the same legislators who began this process back in 2009, Senator William Brownsberger and Representative Lori Ehrlich.

As we previously reported, the proposed law brings many past proposals to the table with some new additions as well. We also reported in July and November of 2016 that the House and the Senate were unable to bridge their differences and agree on a compromise bill that year. For a detailed overview of the bills likely to be discussed in the upcoming hearing, please see our prior report.

We will continue to monitor these developments and report back with any updates. Perhaps 2017 is finally the year for non-compete and trade secret reform in Massachusetts after all. Readers of this blog know all too well, however, that this may just be another of the many attempts that the Massachusetts Legislature is unable to see through to its fruition.