This is the third blog by our Trade Secrets , Computer Fraud & Non-Competes team dealing with Washington state’s House Bill 1450, which dramatically alters non-compete agreements within the state. This blog discusses retroactive application of the statute and potential challenges the statute may face as it rolls out in January 2020.

What’s The Law?

As our team previously detailed, Washington state’s new House Bill 1450, which goes into effect January 1, 2020, will eliminate non-compete agreements for employees earning less than $100,000 a year and independent contractors earning less than $250,000 a year. The law requires advance notice of non-competes “no later than the time of acceptance of the offer of employment” and “independent consideration” for non-competes entered into after employment.

In addition, among other changes, the new law:
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Senators Chris Murphy (D-Conn.) and Todd Young (R-Ind.) have introduced legislation entitled the Workforce Mobility Act (“WMA”). The WMA, like its prior incarnation from last year, seeks to ban non-compete agreements outside of the sale of a business or dissolution of a partnership. The WMA also follows a similar, unsuccessful, attempt by the federal government to limit non-compete agreements on a national scale earlier this year.
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The Council of the District of Columbia is considering a new bill that would ban the use of non-compete restrictions for workers below certain income thresholds—and impose stiff penalties upon employers who include such restrictions in their agreements. Introduced on October 8, 2019, the Ban on Non-Compete Agreements Amendment Act of 2019 (“the Bill”) places D.C. in line to join a growing number of states where non-compete restrictions upon low-income—and, in some cases, relatively high-income—employees are unenforceable.

The Bill would ban the use of non-compete agreements for employees who work in D.C. and who earn up to three times the D.C. minimum wage: $87,654 annually under current law. The Bill would ban such restrictions not just in written agreements, but also in an employer’s “workplace policy” whether in writing (i.e., through an employee handbook) or as a matter of the employer’s practice. Not only would such restrictions be void as a matter of law, but any employer who had such restrictions in place, regardless of whether or not the employer enforced them, would be separately liable to each affected employee in an amount “not less than $500 and not greater than $1,000.” Employers who attempt to enforce non-compete restrictions that fall below the Bill’s income threshold would be liable to affected employees in an amount “not less than $1,500.” Finally, employers who retaliate against employees for either (1) alleged violations of non-compete restrictions that would be unenforceable under the Bill or (2) inquiring about or informing an employer that the employer’s non-compete restrictions may be unenforceable under the Bill, would be liable to each such employee in an amount “not less than $1,000 and not more than $2,000.” Beyond liability to affected employees, the Bill would also empower the Mayor of the District of Columbia to impose fines for violations of the Bill in an amount up to $500, except for retaliatory conduct for which the fine would be at least $1,000.
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Over the course of the past several years, several states have banned or severely restricted the ability of businesses to bind low-wage workers to post-employment restrictive covenants. Since 2007, Oregon has banned non-compete agreements for all employees except those who are exempt (as defined by the state’s overtime payment statute) and whose annualized compensation at the time of termination exceeds the median income of a four-person family, as determined by the United States Census Bureau for the most recent year available at the time of the employee’s termination ($56,119 per year based on most currently-available data). In 2016, Illinois passed a statute banning non-compete agreements with low-wage workers (defined in Illinois to be non-governmental workers making less than the greater of the prevailing federal, state, or local minimum wage or $13 per hour). In 2018, contained within a wider-ranging non-compete bill, Massachusetts also banned employers from entering into non-compete agreements with non-exempt employees, as those employees classification is defined by the Fair Labor Standards Act (“FLSA”), as well  as employees under age 18, paid or unpaid student interns, or other short-term student employees who are enrolled in school.

While such legislation trickled out over the last several years, 2019 has seen five additional states enact prohibitions on utilizing non-compete agreements for certain low-wage employees, with at least seven other states and the District of Columbia considering similar non-compete legislation.


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What You Need to Know about Protecting Company Assets in the Age of Employee Mobility and Digital Theft

Thursday, November 14, 2019
8:00 a.m. – 8:30 a.m. Central Time: Breakfast & Registration
8:30 a.m. – 10:00 a.m. Central Time: Program

Seyfarth Shaw LLP
233 South Wacker Drive, Suite 8000
Chicago, IL 60606

There is no

Seyfarth Partner Erik Weibust was recently named as a co-chair of the Restrictive Covenants/Tortious Interference Subcommittee of the American Bar Association Litigation Section.

The Restrictive Covenants/Tortious Interference Subcommittee is part of the Business Torts & Unfair Competition Committee. The Committee and Subcommittee focus on keeping business litigators fully informed on issues and trends regarding fiduciary

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

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.
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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

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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