Non-Compete Enforceability

The Federal Trade Commission (FTC) recently set its sights squarely on non-compete agreements in merger transactions, making them ripe for further scrutiny. In a Consent Order issued June 14, 2022, the FTC ordered GPM Investments LLC and its parent company ARKO Corp. to roll back provisions it deemed “anticompetitive” in GPM’s May 2021 acquisition of 60 Express Stop retail fuel stations from Corrigan Oil Company. Under the FTC’s order, ARKO and GPM agreed to limit the non-compete agreement that it imposed on Corrigan, and return five retail fuel stations in several local Michigan markets. This decision comes on the heels of a June 10th statement by the FTC’s Chair Lina M. Khan, joined by Commissioners Rebecca Kelly Slaughter and Alvaro M. Bedoya, warning businesses that contract terms in merger agreements that potentially impede fair competition would be highly scrutinized.
Continue Reading FTC Further Scrutinizes Use of Non-Competes in Merger Transactions

Nearly five years ago, the Massachusetts Noncompetition Agreement Act (“MNAA”, also sometimes abbreviated as the “MNCA”) went into effect. That statute ushered in new requirements for non-competes in the Bay State (including not only residents of Massachusetts, but also those who are merely employed in Massachusetts). Among the MNAA’s requirements is a forum selection provision that purports to require civil suits related to non-competes to be brought exclusively in the county in which the employee resides, or if both parties agree, in Suffolk county in Massachusetts.

Despite being in effect for nearly a half-decade, there have been relatively few published cases interpreting the MNAA (see here and here for a synopsis of a couple of those cases). Recently, however, a federal judge in Virginia weighed in on the statute’s forum requirement, determining that a suit against a Massachusetts employee could proceed in federal court in the Eastern District of Virginia, rather than be dismissed and re-filed in Massachusetts.
Continue Reading Massachusetts’ “Provincial” Forum Selection Requirement May Not Trump Reasonable Foreign Forum Selection Clause

On March 8, 2022, Excel Sports Management, LLC commenced an action in the Supreme Court of New York, Commercial Division, alleging that its former Vice President of Basketball Partnerships, Eric Eways, resigned his employment in favor of employment with Klutch Sports Group, LLC, in violation of a restrictive covenant in his employment agreement. The non-compete, governed by New York law, prohibited Eways from working for Klutch and other specifically-named competitors for eight months post-separation.   
Continue Reading New York Appellate Court Reverses Lower Court’s Denial of Preliminary Injunction and Enjoins Former Employee from Working with Rival Sports Management Agency

federal restrictive covenant legislationLast week, in connection with a House Oversight hearing, Representative Carolyn Maloney (D-N.Y.) introduced legislation to restrict confidentiality provisions from covering claims of discrimination, harassment, and retaliation. The “Accountability for Workplace Misconduct Act,” H.R. 8146, appears to be a federal effort to expedite the state-level trend to exempt discrimination, harassment, and retaliation information from confidentiality restrictions.

Over the last decade, lawmakers at the state and federal level have introduced and passed legislation designed to limit the reach of confidentiality provisions in certain circumstances. Those modifications include:
Continue Reading House Introduces Legislation Restricting Confidentiality Provisions in Settlement Agreements

In the fourth installment of our 2022 Trade Secrets Webinar Series, Seyfarth attorneys Kate Perrelli, Matt Simmons, and Robyn Marsh discussed restrictive covenant agreements (“RCAs”), including non-competes, non-solicitations, and NDAs. Plus they discussed best practices and practical tips companies can implement regarding restrictive covenant agreements. View a recording of this webinar here.

As a follow up to this webinar, our team wanted to highlight:
Continue Reading Webinar Recap! Anatomy of a Restrictive Covenant

There are limited exceptions to California’s general prohibition of post-termination non-competition agreements. One such exception is the sale of business exception found in California Business & Professions Code § 16601. This exception allows a buyer to enforce non-compete agreements against a seller if the seller is an “owner of a business entity selling or otherwise disposing of all of his or her ownership interests in the business entity.”

In Blue Mountain Enterprises, LLC v. Owen, 74 Cal. App. 5th 537 (2022), the Court of Appeal found that section 16601 applied to a three year post-termination non-solicitation of customer provision in an employment agreement and upheld the trial court’s decision to enforce the provision against the executive/seller who entered into a joint venture. The court found that section 16601 applied as a matter of law because the defendant “dispos[ed] of all of his … ownership interest” in one transaction agreement while concurrently agreeing under an employment agreement and that both contracts, along with other contracts the parties executed, were drafted to accomplish the parties’ joint venture.  Id. at 553. The court also found that the trial court correctly found that the defendant’s letter for his new business constituted a solicitation as a matter of law because the letter went well beyond an announcement by actively encouraging customers to leave and do business with his new company. Id. at 556.
Continue Reading California Court of Appeal Enforces Non-Solicitation of Customers Provision in Joint Venture Transaction Involving Key Employee

On March 7, 2022, the US Department of the Treasury issued a report entitled “The State of Labor Competition,” (the “Report”)[1] making clear once again that the regulation of anti-competitive practices, including curtailing the use of non-competition covenants, continues to be a core component of President Biden’s agenda. The Report states that its purpose “is to summarize the prevalence and impact of uncompetitive firm behavior in labor markets,” focusing predominantly on practices that firms use to restrain competition for workers in order to lower compensation, including in particular no-poach agreements and non-compete agreements. Citing various research studies and data points, the Report asserts in particular that the lack of labor market competition decreases wages “at roughly 20 percent relative to the level in a fully competitive market,” noting in particular the impact of these practices on low-income workers, workers of color, women, and immigrants, and their contribution generally to income inequality and economic stagnation.
Continue Reading US Department of Treasury Takes Aim at Non-Compete Agreements

Enforceability, Issue Spotting Tools, and Best Practices to Protect Intellectual Capital

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In the fourth installment of the 2022 Trade Secrets Webinar Series, Seyfarth attorneys will discuss restrictive covenants, including non-competes, non-solicitations,
Continue Reading Upcoming Webinar! Anatomy of a Restrictive Covenant

Recently, we wrote about New Hampshire’s attempts to piggyback on Massachusetts’ material change doctrine. In this post, we’re taking a look at Connecticut’s latest legislative effort to limit non-competes—House Bill 5249.

In many ways, HB 5249 borrows from Massachusetts’ 2018 bill (although unlike the New Hampshire bill, it doesn’t tackle the material change doctrine). For example, like the Massachusetts Noncompetition Agreement Act, the law would limit non-competes to a geographic area commensurate with where the employee works during the last 2 years of their employment, and to the kinds of work the employee performs during those 2 years. The duration of a non-compete would typically be limited to no longer than one year like under Massachusetts law, except that the Connecticut bill would permit a covenant of up to two years where the employer pays the employee’s base salary and benefits.
Continue Reading It’s Déjà Vu All Over Again—Connecticut Borrows Heavily from Massachusetts Law in Proposed Non-Compete Legislation

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!