Tens of millions of employees have been laid off or furloughed as a result of the COVID-19 pandemic. Now that the reopening process has begun in most states, many of those employees are being rehired and reactivated. For the month of May 2020, the unemployment rate actually started to decline after the massive increase over the prior few months, as businesses began the return to normal and employers who obtained relief from the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) restored their workforces to pre-pandemic levels in order to secure loan forgiveness.

One thing that employers may not be considering when they rehire laid off or furloughed employees is what impact this has on prior restrictive covenant agreements with those employees. We previously discussed whether non-competes are enforceable against employees who are laid off. But what about employees who are laid off and then rehired, or furloughed and then reactivated? Are restrictive covenant agreements signed by employees prior to the layoffs or furloughs still enforceable if they ultimately leave and join a competitor down the road? The answer depends on whether the employee was technically, even if temporarily, laid off rather than furloughed, and what state’s law applies.
Continue Reading No Good Deed Goes Unpunished: Return to Work May Mean Reduced Protections for Trade Secrets and Customer Goodwill

As we previously covered, a group of 18 state attorneys general in July filed comments with the Federal Trade Commission (“FTC”), asking the FTC to incorporate labor concerns when reviewing corporate mergers and to use its enforcement powers under the Sherman Act to stop the use of non-compete, non-solicit, and no-poach agreements in many situations. Many of those same attorneys general recently sent another letter to the FTC, this time urging it to use its rulemaking authority “to bring an end to the abusive use of non-compete clauses in employment contracts.”

In the most recent letter, the attorneys general endorsed the arguments presented in a March 20, 2019, petition submitted to the FTC by various labor unions, public interest groups, and legal advocates, requesting that the FTC initiate rulemaking to classify abusive worker non-compete clauses as an unfair method of competition and per se illegal under the FTC Act for low wage workers or where the clause is not explicitly negotiated. As they did in their previous letter, the attorneys general contend that non-competes “deprive workers of the right to pursue their ambitions and can lock them into hostile or unsafe working environments.” The attorneys general also argue that the arguments in support of non-compete clauses are unpersuasive and that employers can use other “less draconian” ways to recoup their investment in job training, methods of business, and other intangibles. The attorneys general further argued that non-competes burden businesses seeking to hire new employees, which in turn inhibits innovation and drives up consumer costs by suppressing competition.
Continue Reading State Attorneys General Keep Pressure on FTC to Regulate Non-Competes

On November 1, 2018, the California Court of Appeal, Fourth Appellate District affirmed a trial court’s ruling in AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. et al., No. D071924, 2018 WL 5669154 (Cal. App. 2018), which (1) invalidated the plaintiff’s non-solicitation of employees provision in its Confidentiality and Non-Disclosure Agreements (CNDAs), (2) enjoined AMN from enforcing or attempting to enforce the employee non-solicitation provision in its CNDA with any of its former employees, and (3) awarded $169,000 in reasonable attorneys’ fees to defendants for plaintiff’s use of the provision.

The case is a significant decision which may impact some employers’ continued use of employee non-solicitation provisions with their California employees, at least in certain industries. There is now a split in California authorities and the issue is likely ripe for California Supreme Court guidance.

AMN and Aya are competitors in the business of staffing temporary healthcare professionals, namely providing “travel nurses” to medical care facilities across the country.  When former employees, named as individual defendants in the action and who worked as travel nurse recruiters in California, left AMN for Aya, AMN brought suit against Aya and the former employees, asserting 11 causes of action, including for breach of contract and trade secret misappropriation.
Continue Reading California Appellate Panel Affirms Injunction Blocking Use of Employee Non-Solicitation Provision in Dispute Between Travel Nurse Providers

By Bob Stevens and Dan Hart

For many in Alabama, the holiday season does not end until after the college football national championship game, which has featured one of the state’s two top college football programs (the Auburn University Tigers and the University of Alabama Crimson Tide) for each of the five past years. While

In Corporate Technologies, Inc. v. Harnett, et al., U.S. Court of Appeals for the First Circuit recently upheld the issuance of a preliminary injunction barring a former employee (Harnett) from doing business with his former employer’s (CTI) customers, even if the customers initiated the contact. 

CTI had employed Harnett as an account executive/salesman for

A recent Louisiana non-compete case involving two appellate decisions addresses three significant issues in non-compete litigation: 1) whether a former employee’s referral of customers to a new employer violated the employee’s non-solicitation of customer covenant; 2) the consequences of violating the covenant and court injunction; and 3) the appropriate standard of proof for contempt proceedings.

Garrod, a salesman for more than 25 years in the field of elastomeric precision products (EPP), was terminated in mid-2012 after spending an aggregate of a dozen of those years working for manufacturers of EPP parts Fenner and a company acquired by Fenner.

He had signed both employers’ agreements containing non-compete and customer non-solicitation clauses–which

MPI, a Texas company, went to Kentucky and allegedly attempted to hire two Luvata employees, Foster and Meredith. Foster joined MPI soon thereafter. Over the course of the next few months while Meredith remained a Luvata employee, he and Foster allegedly spoke by phone repeatedly. In addition, prior to leaving Luvata for MPI, Meredith

On March 21, 2012, in the case of Pyro Spectaculars, Inc. et al. v. Souza, Case No. 12-CV-00299-GGH, Magistrate Judge Gregory G. Hollows of the USDC for the Eastern District of California (Sacramento Division), issued an order preliminarily enjoining a former Account Executive for a pyrotechnics company from soliciting the customers of his former

In Finkel v. Cashman Professional, Inc., et al., Case Nos. 54520, 55377, 2012 WL 669897 (Nev. March 1, 2012), the Supreme Court of Nevada addressed the validity of non-solicitation, non-competition, and non-disclosure covenants and the proper duration of a preliminary injunction prohibiting disclosure or use of trade secrets. The Nevada Supreme Court received the case