A recent federal decision from the Northern District of Illinois again illustrates the perils of drafting and attempting to enforce overbroad restrictive covenants. In the case of Medix Staffing Solutions, Inc. v. Dumrauf, 17-cv-6648, 2018 WL 1859039 (N.D.Ill. Apr. 17, 2018)(Ellis, J.), Medix, a pharmaceutical, biotech and medical device company, attempted to enforce a non-compete agreement against its former Director, Dumrauf, who had been responsible for its medical sales and recruiting strategies and who had left to work for a direct competitor, ProLink. Continue reading
by Mark C. Vanneste
What if an employee agrees to a non-compete clause but the employer did not realize it would be presented to the employee? It sounds unlikely, but would the employer be bound by those terms? Maybe. These were the circumstances in the United States District Court for the Eastern District of Michigan’s recent Eric Grant v Johnson Electric decision. Continue reading
Tip 1: Choose your choice of law wisely and FIRST.
- The law you choose to apply to a restrictive covenant is regularly outcome determinative in enforcement proceedings (e.g. Illinois’ rule on at-will employment as consideration, North Carolina’s rule on blue-penciling, Louisiana’s law on geographic scope, Florida’s statute on presumptive validity, etc.)
- And there are sometimes three or four states from which to pick:
- where the employer or seller is located (state of incorporation or principal place of business)
- where the employee or purchaser is located
- where the place of performance is located.
- So take the opportunity to pick the law that is most likely to do what your client already presumes will be done: your restrictive covenants will be enforced.
- Relatively speaking, Delaware –often the default state of incorporation– is a solid and defensible choice.
Sometimes a party to a contract gets greedy. As an example, sometimes a party seeks an onerous non-competition provision in a contract. Will a court enforce it? Will the court modify the agreement if it is too broad in some respect? Let’s see how this played out in a real case. Continue reading
In The Manitowoc Company, Inc. v. Lanning, the Supreme Court of Wisconsin ruled that a non-solicitation of employees provision contained within an employment agreement was unreasonable and unenforceable under Wisconsin statute as overly broad. Continue reading
Although many restrictive covenants prohibit solicitation, there is comparatively little case law discussing in detail what “solicitation” means. A new Illinois Appellate Court decision sheds some light on the meaning of this key term.
Quality Transportation Services, Inc. v. Thompson Trucking, Inc., 2017 IL App (3d) 160761 involved a contract dispute arising from the language of a transportation brokerage agreement. Continue reading
On June 3, 2017, Nevada Governor Brian Sandoval recently signed Assembly Bill 276 (“AB 276”), which articulates new rules and requirements for non-compete agreements, some of which fundamentally alter the State’s prior practices. The following is a synopsis of the new law. Continue reading
Often, an employee will sign an employment contract that contains, among other things, a non-compete and a set term. Because the parties fail to renew the employment contract after it expires, the employee continues to work on an “at-will” basis.
Later, the employee resigns, joins a competitor and begins a solicitation campaign in violation of the expired employment contract’s non-compete. The former employer files a court action seeking to enforce the non-compete in the expired employment contract. Is the non-compete enforceable? Continue reading
The Defend Trade Secrets Act of 2016 (“DTSA”) provides a new tool in the form of an ex parte seizure for businesses and individuals to safeguard their trade secrets after misappropriation has occurred. Unfortunately, many trade secret owners have discovered that obtaining this form of relief is no easy task. Continue reading
On June 19, 2014, the Supreme Court for the Commonwealth of Kentucky held that for continued employment to be deemed sufficient consideration for the enforcement of a restrictive covenant agreement, there must be a change in the employment relationship between the parties.