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:   
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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

On May 14, 2019, Oregon Governor Kate Brown signed into law HB 2992, which, as of January 1, 2020, requires an employer to provide a terminated employee with a signed, written copy of his or her non-competition agreement within 30 days of his or her termination date.  Failure to do so will render the agreement voidable and unenforceable in the state of Oregon.

Backdrop for HB 2992

Under current Oregon law (ORS 653.295), a non-competition agreement is not enforceable unless the following four requirements are met: (1) the employer informs the employee of the non-competition agreement in a written employment offer received at least two weeks before the employee’s first day, or the agreement is entered into upon promotion; (2) the employee is engaged in administrative, executive, or professional level work; (3) the employer has a protectable interest in requiring the non-competition agreement; and (4) the employee’s gross annual salary and commissions at the time of termination exceeds the median family income for a four-person family.  Furthermore, the term of a non-competition agreement may not exceed 18 months from the date of the employee’s termination.  Any time remaining on a non-competition agreement beyond 18 months is voidable and precluded from enforcement by any Oregon court.
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While it is well-settled law that an attorney cannot be bound by an agreement restricting the right to practice law, that does not insulate attorneys from all restrictive covenants. As we have previously discussed, there are exceptions to this rule, as a Massachusetts attorney recently learned the hard way. 
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Even before the California Supreme Court decided Edwards in 2008, employers knew all too well the woes of attempting to enforce non-competes against California employees.  Edwards simply reaffirmed California’s long-standing policy in favor of employee mobility, finding that employee non-competition agreements are typically void in California unless they fall within one of the exceptions to Business and Professions Code section 16600.  But this need not become the fate of every non-compete; notwithstanding Edwards and recent California decisions applying the state’s notorious statute, section 16600, it may be possible for employers to enforce non-competition forfeiture provisions by including them in deferred compensation top hat plans subject to the Employee Retirement Income Security Act of 1974 (ERISA).
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As we’ve previously written about on this blog, last summer the Massachusetts legislature passed a non-compete reform bill which went into effect on October 1, 2018. Readers of this blog will recall our concerns that the new law is in many ways confusing and may lead to unpredictable results. Now, more than six months after its effective date, we have a second published decision out of the United States District Court for the District of Massachusetts citing the new Massachusetts Noncompetition Agreement Act (“MNCA”), Mass. Gen. Laws ch. 149, § 24L. Like the first published decision, this decision does not directly analyze an agreement that is subject to the Act, but it is still instructive for employers with personnel who may be subject to the MNCA. 
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Washington state has joined the ranks of an ever-growing number of states that impose significant restrictions on employee non-compete agreements. On May 9, 2019, Governor Jay Inslee signed House Bill 1450, titled “An Act Relating to restraints, including noncompetition covenants, on persons engaging in lawful professions, trades, or businesses,” into law. The Act will go into effect on January 1, 2020. We reported on the bill in detail in March.

This change to Washington law is significant. Businesses with employees or independent contractors in the state should revisit their non-compete agreements and take the necessary steps to ensure compliance with the Act by the end of this year. Among other things:
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Caramel Crisp LLC, the owner of Garrett Popcorn Shops (“Garrett”), the renowned Chicago-based purveyor of deliciously flavored popcorn, recently filed suit in federal court in Chicago against its former director of research and development, Aisha Putnam, alleging that she misappropriated the company’s trade secrets, including its recipes for Garret’s famous popcorn, after she was fired. Putnam was hired in 2014 and was eventually promoted to the role of Director of Research and Development, where she had access to some of Garrett’s most confidential information and trade secrets. In that role, she was required to sign a confidentiality and non-compete agreement, which, among other things, required her to return all of Garrett’s confidential information upon the termination of her employment.
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A California federal district court recently granted a temporary restraining order (“TRO”) against a former employee for misappropriating proprietary and confidential information in violation of the Defend Trade Secrets Act (“DTSA”), the California Uniform Trade Secrets Act (“CUTSA”), and company confidentiality and non-disclosure agreements. Bemis Co., Inc. v. Summers, No. 219CV00344TLNKJN, 2019 WL 1004853, at *1 (E.D. Cal. Feb. 28, 2019).

Background

Plaintiff Bemis Company, Inc. (“Bemis”) sued a former employee for trade secret misappropriation and breach of contract. Bemis is one of the largest global suppliers of flexible and rigid packaging products, including snack food bags, candy wrappers, cheese packaging, hot dog packaging, medicine packaging, and much more.
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Last week, the Ninth Circuit finally ruled that a former Anheuser-Busch employee cannot avoid claims filed by the brewer alleging misappropriation of trade secrets and breach of a nondisclosure agreement, the latest in a long running saga that started when Anheuser-Busch filed suit 6 years ago. Former Anheuser-Busch employee James Clark (“Clark”) had filed a motion to strike the company’s trade secrets claims accusing him of stealing proprietary information under the California Anti-SLAPP statute (“strategic lawsuits against public participation”). 
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