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.
Remote work grew exponentially during the pandemic and seems to have become a permanent feature of working life in the U.S. According to a survey by Pew Research, 60% of employees whose jobs can be performed remotely are still working from home all or most of the time. Another 18% of such employees report working from home at least some of the time.
Along with the explosion of remote work came a massive increase in employees using their own computers, tablets and mobile phones for work. Allowing employees to use their own devices brings with it the risk that that company data will migrate to the devices.
Governor Pritzker has signed a bill creating Illinois’ first comprehensive statute regulating the use of non-compete and non-solicit covenants. The law establishes bright-line, compensation-based rules regarding which employees can be required to sign such covenants and creates a mandatory pre-signature process designed to protect employees. The statute also codifies existing Illinois case law without changing it substantially.
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.
When it comes to non-competes in the health care industry, the doctor/patient relationship has sometimes taken a back seat to business considerations. That is changing in Indiana, where a new law adds requirements for physician non-competes that will make it easier for patients to follow their doctor to a new practice group or medical center. Continue reading →
After working for nearly three decades at CVS Pharmacy, Inc., including in senior-level jobs, John Lavin accepted a new position at a company called PillPack LLC, a direct competitor of CVS. PillPack is an online retail pharmacy founded in 2013 and wholly owned by Amazon.
At four points during his employment as a senior vice president, CVS required Lavin to sign a restrictive covenant agreement (“RCA”). Each RCA contained non-competition, non-solicitation, and nondisclosure covenants. The RCAs defined competitors of CVS but contained no geographic limitations. Each time Lavin signed a RCA, he was awarded CVS stock.
CVS Obtains A Preliminary Injunction Enforcing The Non-Compete
CVS sued Lavin and moved for a preliminary injunction, which was granted.Continue reading →
The Indiana Supreme Court 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.
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 →
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 →