The Federal Trade Commission made headlines earlier this month with its proposed rule banning non-competes. Other news announced by the FTC the prior day received less attention but has the potential to cause real headaches for employers – the settlement of three enforcement actions against companies for allegedly using non-competes in an unlawful manner.
These enforcement actions by the FTC are the first of their kind at the federal level and represent a significant expansion of the agency’s involvement in policing non-compete agreements.
While the proposed rule should be concerning to employers, it may never be adopted or could be invalidated by the U.S. Supreme Court. By contrast, the FTC’s enforcement actions on non-competes represent a new and non-theoretical compliance risk that employers must take into account immediately.
Bad facts make bad law, the saying goes. In the non-compete world, it might more aptly be said that filing a weak lawsuit against a sympathetic defendant makes bad law.
A recent decision by the Illinois Appellate Court is a good example. The court refused to enforce a non-solicitation agreement that many judges would have upheld under the right circumstances. The likely (if unspoken) reason? The defendant was a low-wage employee who fixed car dents for a living and who hadn’t done anything particularly wrong after quitting his job.
It is well-settled that a non-compete must include a reasonable time limitation in order to be enforceable. Most employers understand this requirement and limit the duration of the their non-competes (and non-solicits) to 2 years or less.
But what about confidentiality/non-disclosure provisions in employment agreements? Must they also contain time limitations?
In a decision that may contain some useful reminders as businesses rehire employees who were let go during the coronavirus pandemic and economic downturn, the U.S. Court of Appeals for the First Circuit recently handed down a decision affirming the denial of a former employer’s request to enforce a non-competition agreement against an employee it had terminated and then rehired. Russomano v. Novo Nordisk Inc., No. 20-1173 (Ist. Cir. June 2, 2020).
The employer did not have the employee sign a new agreement upon rehire, but instead tried to rely on the his original agreement. The First Circuit held that the non-compete ran from the date of the employee’s original termination and expired one year into his rehire, leaving him free to compete after its expiration. Continue reading →
A common issue when advising an employee changing jobs is how to deal with company information on the employee’s phone or personal laptop. Should the employee simply delete it? Or should a forensic copy be made before deletion to preserve evidence in anticipation of litigation?
A recent decision by U.S. District Court for the Northern District of Illinois gives comfort to those who opt for the more pragmatic approach of simply deleting the data. Even so, the case suggests steps that could have been taken to avoid litigation and a claim of destruction of evidence. Continue reading →
In Abrasic 90 Inc. v. Weldcote Metals, Inc., 364 F. Supp.3d 888 (N.D. Ill., 2019), U.S. District Court Judge Tharp of the Northern District of Illinois provides a virtual checklist of the steps a company should consider if it wants its important information to be treated as a trade secret. Alternatively, the decision serves as a valuable reminder of what happens if an employer fails to implement appropriate protective measures. Continue reading →
The Nevada Supreme Court reversed an injunction entered by a district court, when it found the employer failed to put on sufficient evidence to justify an injunction enforcing a 50-state non-compete against a former employee. Here’s what happened.Continue reading →
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 →
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?