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Non-Compete and Trade Secrets Blog

Posts in Unfair Competition/Employee Raiding.

A federal appeals court recently ruled that an overbroad “no-rehire” provision in a settlement agreement with a former employee can be an unlawful restraint of trade under California law.

It finally happened. After years of debate on Beacon Hill, Massachusetts law makers agreed to reform the Commonwealth’s treatment of noncompetition agreements. Among other things, the bill precludes enforcement of noncompetition agreements against non-exempt employees, limits their length to just 12 months, and precludes the use of “continued employment” as acceptable consideration. If signed by the Governor, the bill will apply to agreements entered into on or after October 1, 2018.

Since October 2016 and the Call to Action by the White House, eight (8) states have enacted some type of restrictive covenant reform. This post discusses those efforts and provides an analysis of each new state law that we have seen.

State legislatures across the country have been active in recent years proposing and enacting legislation that impacts employers’ use of restrictive covenants. In a series of three posts, we will examine how this movement started, where it has gone, and where it is going.

Nondisclosure agreements are not enough to fully protect the value of a company’s proprietary information. The $30 million dollar jury verdict in BladeRoom v. Facebook, et al. is not inconsequential, to be sure, but it represents only ten percent of the recovery that BladeRoom was seeking against Facebook and Emerson Electric.

The recently proposed federal Employee Mobility Act of 2018 would effectively create a nationwide ban on non-compete agreements. Introduced in both the Senate and the House of Representatives, Senate Bill 2782/House Bill 5631 is the next step in a multi-year effort by a group of Senators and Representatives, and previously White House personnel under President Obama, who argue that employee non-competes (a) unduly inhibit employees’ economic opportunities, and (b) harm the economy by limiting employee mobility. This proposal comes as multiple state legislatures likewise have been considering and, in some cases, enacting legislation relating to employee restrictive covenants. 

Corporate espionage is a real threat that could be perpetrated by any employee or other insider at any time. How do you spot the red flags in real time before the damage is done? It's not a perfect science, but here are some tips that can help prevent unethical employees from taking the fruits of your intellectual capital and unfairly diverting business away.

Notwithstanding California's strong public policy in favor of lawful competition, California employees' duty of loyalty to their current employer reigns supreme. A violation of that duty can lead to costly jury verdicts in favor of the employees' former employer. This was illustrated in the recent case, AeroVironment vs. Gabriel Torres, Justin McAllister and Jeff McBride.

The rules of professional conduct in the majority of jurisdictions make restrictive covenants between attorneys unenforceable. But what about in-house attorneys? At least one court in Colorado recently enforced a noncompete, enjoining an in-house attorney from accepting a new position with a competitor.

Last week, the Attorney General of Illinois filed suit against Check Into Cash, LLC, alleging that the payday lender required its low-wage customer service employees to agree to illegal non-compete agreements in violation of Illinois law.  The lawsuit is another example of the Attorney General’s fight against illegal non-competes and marks the first time the Attorney General has brought a claim under the Illinois Freedom to Work Act, 820 ILCS 90/1.

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