The Indiana Supreme Court[1] has reaffirmed its narrow interpretation of the “blue pencil” doctrine, holding that courts may not add terms to an overbroad non-solicitation or non-competition provision to make it reasonable even if the contract has a reformation clause.
As the court puts it: “This doctrine … is really just an eraser.” Continue reading
Non-compete agreements are in the cross-hairs of both federal and state officials, who are looking to ban non-competes in many instances. Senate Bill 2614, introduced on October 16, 2019, if enacted, would outlaw most non-compete agreements as a matter of federal law. There would be a few limited exceptions. In addition, the Attorneys General of nearly twenty states and the District of Columbia have urged the Federal Trade Commission to use its rulemaking authority to end the use of non-compete clauses in employment contracts. Continue reading
A recent decision by the U.S. Court of Appeals for the Second Circuit serves as a timely reminder of the importance of complying with Rule 65’s requirement that injunctions describe the prohibited conduct “in reasonable detail.” Fail to comply and you could find yourself with an invalid injunction. Continue reading
In reversing the trial court’s grant of a preliminary injunction, the Illinois Appellate Court in Archer Daniels Midland Company v. Sinele et al., (2019 IL App 4th 180714, decided February 1, 2019) reminds employers that the doctrine of inevitable discovery is not a foolproof substitute for enforceable post-employment restrictions on competition. Continue reading
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
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
In the recent case of Capistrant v. Lifetouch National School Studios, Inc., No. A16-1829, 2018 BL 263415 (July 25, 2018), the Minnesota Supreme Court had occasion to consider whether a 25+ year employee’s failure to return all of his employer’s property immediately upon termination justified the forfeiture of $2.6MM in compensation. The case reminds us once again that employment agreements will not always be enforced as drafted. Continue reading
A federal court, in a non-competition setting, had to untangle the relationship between three separate agreements. One contained an arbitration provision but the others did not. Ultimately, the court determined that some parties had to arbitrate some claims but that others did not have to arbitrate. Continue reading
by Ariane M. Janz
Liquidated damages provisions are supposed to simplify non-compete cases, but disputes over the enforceability of such provisions can have the opposite effect, complicating the matter and adding uncertainty. If a court determines that the liquidated damages are grossly disproportionate to the employer’s actual loss, the court may refuse to enforce the liquidated damages provision as an impermissible penalty. Continue reading
Can an attorney who allegedly counsels a client to breach a non-compete be sued by the client’s 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 in Pinnacle Surety Services, Inc. v. Mannion Stigger, LLP.[1] Continue reading
