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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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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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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Academics and advocacy groups—including nonprofit organizations and several major labor unions—have filed a petition with the Federal Trade Commission asking the agency to initiate the rulemaking process and ban non-compete agreements. The petitioners advocate regulations “to prohibit employers from presenting a non-compete clause to a worker (regardless of whether the worker is classified as an ‘employee’ or an ‘independent contractor’), conditioning employment or the purchase of a worker’s labor on the worker’s acceptance of a non-compete clause, or enforcing, or threatening to enforce, a non-compete clause against a worker.”
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