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.
by Chase M. Hundman
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
Under Minnesota law, an employer does not need to give an employee separate consideration for signing a non-compete agreement provided it is signed at the “inception” of the employment relationship. A non-compete signed by an employee on her first day of work would seem to satisfy this requirement.
The Minnesota Court of Appeals however, recently affirmed a district court’s invalidation of a one-year non-compete agreement signed on the first day of work for lack of independent consideration. According to the court, the inception of the employment relationship occurred when the employee accepted the job offer a week earlier during the job interview, thus requiring the employer to provide her independent consideration to sign the non-compete agreement on her first day in order to render it valid and enforceable. 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
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