Long used in the U.K., garden leave is becoming increasingly popular with employers in the United States as an alternative to traditional non-compete agreements.
Garden leave provisions take several different forms, but the key feature is that the employee is paid to sit out before starting his or her new job. The payment of compensation mitigates the impact on the employee, especially as compared to a non-compete where no payment is required and the employee may suffer a significant loss of earnings. Garden leaves are also generally shorter than non-competes—30 to 90 days—rather than one or two years as with many non-competes. Continue reading
Can an attorney who allegedly counsels an employee to breach a non-compete be sued by the employer for tortious interference with contract? The answer may be yes, at least according to the U.S. District Court for the Western District of Kentucky, which recently refused to dismiss such claim against the attorney defendants in Pinnacle Surety Services, Inc. v. Mannion Stigger, LLP. Continue reading
Variations in non-compete law from state to state can be frustrating for employers with multi-state workforces. A restriction that works in one state might be invalid in another.
A common fix is to include a choice-of-law clause designating a state that favors enforcement of non-competes, but the enforceability of such clauses also varies widely in different jurisdictions. That’s why the Northern District of Illinois’ recent PCM Sales, Inc. v. Reed decision enforcing an Ohio choice-of-law clause against an Illinois employee is a big win for employers. Continue reading
Most severance agreements these days specify that nothing in the agreement prevents the employee from speaking with regulators about possible violations of the law. This is due to regulators’ concerns that the confidentiality clause that is standard in severance agreements may chill employee whistleblowing.
But what about other employment agreements that have confidentiality clauses?
Employees sign all sorts of agreements with confidentiality restrictions, ranging from offer letters to deferred compensation award agreements. Must these agreements also exempt whistleblowing from their confidentiality obligations?
Illinois employers have a new law to be mindful of beginning this new year. That’s when the Illinois Freedom to Work Act (the “Act”) goes into effect banning the use of non-compete agreements with low-wage employees.
The Act prohibits employers from entering into “covenants not to compete” with “low-wage employees” after January 1, 2017, and declares void any covenant entered into in violation of the Act. The new law does not apply to covenants not to compete entered into before January 1st. Continue reading
The Illinois Attorney General filed suit in June 2016 against Jimmy John’s for its use of non-competes with low-wage workers. This suit – which appears to be the first of its kind – alleges Jimmy John’s use of non-competes violates Illinois law and hurts Illinois residents and businesses by limiting the pool of available workers and artificially suppressing wages.
What is up with the federal government’s new-found interest in non-competes and other legal issues that arise when employees move between competitors?
First the Treasury Department issued a report on the impact of non-compete agreements on the economy. Then Congress passed the Defense of Trade Secrets Act. And then, in May of this year, the White House issued its own report on non-compete agreements.
What do these federal initiatives mean? And how do these changes effect employers and employees? Continue reading