Non-Compete Agreements

Restrictive covenants not to compete, or non-compete agreements, are one of a variety of tools companies use to protect their trade secrets and competitive advantage. However, whether a court will enforce a restrictive covenant varies widely across jurisdictions, including across states within the Fifth Circuit. For example, the Louisiana statute governing restrictive covenants applies a two-year durational limit, while Mississippi common law applies a more general ‘reasonable and specific’ standard to the duration and geographic scope of a restrictive covenant. In addition, Mississippi courts must balance the rights of the employer, the employee, and the public when enforcing restrictive covenants. Bus. Commc’ns, Inc. v. Banks, 91 So. 3d 1, 11 (Miss. Ct. App. 2011), aff’d, 90 So. 3d 1221 (Miss. 2012). 

Continue Reading Restrictive Covenants in the Fifth Circuit

New Jersey joins a growing list of states seeking to limit employers’ use of non-compete and non-solicitation agreements, adding to the patchwork of legislation in this area.

The New Jersey State Legislature proposed a bill on May 2, 2022 that would regulate and severely limit an employer’s use of non-compete agreements. Specifically, under A3715, all no-poach agreements would be void and non-compete agreements never enforceable against certain types of workers, including interns, apprentices, independent contractors, minors, low-wage employees, or employees who will be employed for less than one year. Outside of this population, restrictive covenants would only be enforced if the employer first discloses the terms of the agreement in writing 30 days before a prospective employee’s offer or, for current employees, 30 days before the agreement would be effective. Post-employment restrictions could only last for 12-months and employees must provide 10 days’ notice of their intent to enforce a post-employment agreement.

Continue Reading Non-Compete Agreements a Non-Starter? New Jersey Proposes Sweeping Non-Compete Legislation

As a part of our series on trade secret employee contract clauses, we have surveyed the Seventh Circuit for updates on  the law pertaining to Restrictive Covenants. Each state’s laws are set forth below. But generally in the Seventh Circuit, states focus on reasonableness, geographic, and income restraints in restrictive covenant agreements. Indiana applies a reasonableness-standard common law approach to enforcing covenants, strictly construed against the employer. Wisconsin’s restrictive covenant statute also focuses on reasonableness restraints, and will void all parts of the covenant even if remaining portions are reasonable. Illinois recently passed a restrictive covenant statute in 2021, the Illinois Freedom to Work Act, which codifies the state’s longstanding common law, adding provisions restricting covenants against certain incomes and professions.
Continue Reading Restrictive Covenants in the Seventh Circuit

Within the Tenth Circuit, states vary in their enforcement of restrictive covenants. Wyoming, Kansas, and New Mexico govern the use of restrictive covenants through common law while Utah, Colorado, and Oklahoma govern through statute. Oklahoma is unique in that it prohibits restrictive covenants through statute. In the other five states, despite the variations in governing authority, many of the factors used are similar given the widely accepted “reasonableness” standard many jurisdictions have adopted as a metric for adjudicating the propriety of such agreements.
Continue Reading Restrictive Covenants in the Tenth Circuit

The US Department of Justice (“DOJ”) recently filed a Statement of Interest in connection with a pending case in Nevada State Court, Samuel Beck, et al. v. Pickert Medical Group, P.C. et al., further highlighting the DOJ’s heightened scrutiny of post-employment restrictive covenants under the antitrust laws and their effects on competition. In this noteworthy Statement of Interest, the DOJ takes the position that post-employment restrictive covenants may constitute both horizontal and vertical restraints of trade that violate the Sherman Antitrust Act. The Statement of Interest follows the DOJ and FTC’s  2017 Antitrust Guidance for Human Resources Professionals which addressed how antitrust law can apply to employee hiring and compensation and a December 2021 DOJ and FTC workshop that addressed how contractual restraints on trade can harm labor markets, as well as recent executive orders and statements by the Biden administration limiting and criticizing the use of noncompetition agreements with employees. The DOJ’s Statement of Interest thus represents yet another step up in pressure by the federal government signaling it will continue taking more action to discourage the use of contractual restraints on trade in employment-related agreements.
Continue Reading Enforceability of Non-Compete Agreements; Recent Input from the DOJ

It’s the time of year again when we are taking a look at 2021’s top ten most read posts. This year, we witnessed an increased risk of trade secret theft due to the Great Resignation, proposed trade secret misappropriation penalties as a result of Chinese government trade secret espionage, and the expansion of ITC involvement in trade secret misappropriation. Take a look at our top ten posts that highlight these key developments.

Continue Reading The Year’s Most Popular Posts

On October 29, 2021, the District of Delaware allowed Park Lawn Corporation to continue with its trade secret claims against fellow cemetery management competitor, PlotBox, Inc., holding that the competitor only needed to have a “reason to know” improper means were used to access alleged trade secrets, based on the position of the individual feeding them the secrets.

Both Park Lawn and PlotBox develop technological solutions to manage cemetery plot placement methods, using software to facilitate mapping of gravestones electronically. This software helps automate cemetery design plans and expedites managerial tasks. The lawsuit also states that Park Lawn planned to license the trade secrets in the software to others in the industry. This plan was eventually disrupted by the Chief Executive Officer of Park Lawn, who was allegedly feeding the trade secret information to PlotBox, which also tried to hire on Park Lawn’s Chief Technology Officer. Park Lawn sued under the Defend Trade Secrets Act (“DTSA”).
Continue Reading Cemetery Company’s Trade Secret Claims Survive Motion to Dismiss by Reasonable Interference of Misappropriation after CEO Fed Competitor Information

On November 23rd, Pfizer filed a complaint against former employee Chun Xiao “Sherry” Li in a California federal court alleging that Li pilfered over 12,000 files worth of critical documents and trade secrets. U.S. District Judge Cathy Ann Bencivengo granted Pfizer’s motion for a temporary restraining order barring Li from using, disclosing or transmitting any confidential information or trade secrets owned by Pfizer, destroying or altering any of that information or destroying any devices storing the information. Li also must return any hard copy documents containing Pfizer’s confidential information or trade secrets, Judge Bencivengo said.

Hired as associate director of statistics in Pfizer’s global product development group at Pfizer’s facility in La Jolla, California in 2006, Li sought greener pastures at Xencor Inc. in 2021. Perhaps in the spirit of the upcoming holiday season, Li treated herself to a parting gift of what Pfizer calls its clinical “playbook.” Its complaint also cited misappropriation of documents containing operational goals, goals for various drugs including cancer drugs, clinical development plans and clinical trial techniques.
Continue Reading Bad Medicine: Pfizer Files Complaint to Halt Potential COVID-Related Trade Secret Misappropriation

Illinois employers planning to protect confidential and proprietary trade secret information through the use of non-compete agreements or non-solicitation agreements need to be aware of amendments to the Illinois Freedom to Work Act that will take effect on January 1, 2022.  These changes will institute a number of new requirements designed to restrict the use of non-compete and non-solicitation agreements.

Illinois law currently prohibits employers from requiring that workers earning less than $13 per hour sign non-compete agreements.  That threshold is about to change.  The law will instead prohibit the use of non-competes with workers earning less than $75,000 annually, and the minimum threshold will increase at various pre-determined dates.  The minimum amount will rise to $80,00 per year on January 1, 2027, $85,000 per year on January 1, 2032, and $90,000 per year on January 1, 2037.
Continue Reading Illinois Amends Requirements for Non-Compete Agreements

Following a national trend that we previously posted about, Illinois recently passed legislation to further restrict the use of non-compete agreements against low-wage workers.  Under the previous version of the Illinois Freedom to Work Act, employers were prohibited from entering into non-compete agreements with employees making less than $13 per hour.  The new version expands this restriction to include employees earning $75,000 or less and defines “earnings” to include salary, bonus, and other forms of taxable income.  In addition, the amendment prohibits employers from entering into non-solicitation agreements with employees making $45,000 or less annually.

Continue Reading Illinois Law Imposes New Restrictions on Non-Compete Agreements