Indiana Appellate Court Upholds Liquidated Damages in Non-Compete and Non-Recruitment Provisions

Employment Agreements, Liquidated Damages, Non-Solicit, Indiana, Non-Compete

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

Don’t Let the Janitor [Rule] Sweep Away Your Non-Compete

Non-Compete, Janitor Rule, Employment Agreements, Restrictive Covenants

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

Can an Employer Be Bound By a Non-Compete Agreement It Did Not Know Would Be Presented To Its Employees?

Non-Compete, Employment Agreement, Grant v Johnson, Michigan

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

Restrictive Covenant Drafting: Ten Tips to Avoid the Traps

Non-Compete, Non-Solicit, Restrictive Covenants

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.

Continue reading

Supreme Court of Wisconsin Finds Non-Solicitation of Employees Provision an Unenforceable Restraint on Trade

Supreme Court of Wisconsin, No-Solicit, Manitowoc Company, Lanning

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

Illinois Court Examines What Constitutes Improper “Solicitation” Of Customers

Non-solicit, Employment Agreement, Quality Transportation Services, Thompson Trucking, Illinois

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

Minnesota Court Of Appeals Voids Non-Compete Signed On The First Day Of Work For Lack Of New Consideration

Employment Agreements, Non-Compete, Minnesota

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[1] 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

Ohio Non-Compete Law Applied To An Illinois Employee Under Choice-of-Law Clause

Non-Compete, Ohio, Illinois, Choice-of-Law

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

New Nevada Law Imposes Significant Changes That Affect The Enforceability Of Non-Compete Agreements

Non-Compete, Employment Agreements, Nevada

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

Does A Non-Compete Expire When the Term of an Employment Contract Ends?

non-compete, employment agreements, Pennsylvania

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