Trade Secret | Noncompete – Issues and Cases in the News – April 2013 Update

April 22, 2013

Russell Beck Fair Competition News, Massachusetts Noncompete Bill, Noncompetes, Privacy, Privacy Law, Restrictive Covenants, Trade Secrets , , , , , , Leave a comment

extras_03True to the unfortunate limit of 24 hours in a day, my posts continue to written during my vacations. This time, given the extended delay between vacations, and therefore posts on issues and cases making trade secrets | noncompete news, I am posting just some highlights of the past few months. Here we go…

Obama Administration: In February 2013, the Obama Administration issued Administration Strategy on Mitigating the Theft of U.S. Trade Secrets. In furtherance of that strategy, on March 19, 2013, the Administration solicited public comment on possible trade secrets “for an Administration legislative review related to economic espionage and trade secret theft.” The notice is available here. Comments are due by April 22, 2013. Peter Toren has commented already; his comments are here: Read My Federal Register Comments on Existing Laws Related to the Enforcement of Trade Secrets.

Second Circuit (personal jurisdiction): The Second Circuit, in a trade secrets misappropriation case, found personal jurisdiction over a former employee of a Connecticut company, who was a citizen of Canada, residing and working in Canada. The former employee was accused of misappropriating the company’s confidential information by emailing it to herself between the time she found out that she had been terminated and her last day of work. The employee’s contacts with Connecticut (and the United States) were extremely limited. However, the Court found significant that the employee’s employment agreement contained notice to the employee that the company’s email servers were located in Connecticut and that the employee could not transfer the company’s information to her personal email. The Court concluded that this language in the employment agreement put the employee on notice that any misconduct using the company’s email would be directed into Connecticut (a factor in the analysis of whether to exercise personal jurisdiction). See MacDermid, Inc. v. Deiter.

Sixth Circuit (BYOD risks): Eric Osteroff wrote a nice post on the Sixth Circuit’s decision in Kendall Holdings, Ltd. v. Eden Cryogenics, LLC concerning the perils of BYOD (bring your own device) policies. BYOD practices can have significant ramifications for trade secrets risks and need to be carefully considered in light of an overall trade secrets policy and approach. See Ken Vanko‘s post, The BYOD Thicket: Some Basic Steps to Take for Businesses. See also My phone or yours? EEOC official provides best practices for “bring your own device” policies.

Ninth Circuit: The Mattel v. MGA saga continues, with the reversal of MGA’s $170,000,000 trade secret verdict. See Ninth Circuit Takes Away MGA’s $170 Million Trade Secret Award Against Mattel. 

District of Columbia: Most noncompete and trade secrets litigation starts with the sending of a “cease and desist” letter. One concern is that the sending of such a letter might, if the facts turn out to be wrong, give rise to a defamation counterclaim. However, on March 18, 2013, the United States District Court for the District of Washington rejected just such a claim. Specifically, the court held that the letter was protected by the litigation privilege, and therefore could not give rise to a defamation claim. For a discussion of the case, see Kara Maciel‘s (from my former firm, Epstein Becker & Green) post, Cease and Desist Letters Enjoy An Absolute Privilege From Libel Claims. As John Marsh of Hahn Loeser points out, however, the fact that a defamation claim doesn’t lie, does not equate to no risk of a tortious interference claim. Cease and Desist Letters: Defamation May Not Be An Issue But Watch Out for Tortious Interference.

Federal Circuit: The Federal Circuit in Phillip M. Adams & Assoc., LLC v. Dell Computer Corp applied the discovery rule to toll the statute of limitation in a trade secrets case. For more discussion, see Federal Circuit Addresses Uniform Trade Secrets Act Discovery Rule by Eric Ostroff.

Florida: Notwithstanding a confidentiality agreement and nonsolicitation agreement, the United States District Court for the Middle District of Florida (Tampa) permitted a former employee to use her former employer’s customer list to mass email an announcement (sometimes called a “wedding-style announcement”) to her former employer’s customers. See The Variable Annuity Life Insurance Company (VALIC) v. Laeng. For additional reading, see Mass-Mailing To Public Employees Did Not Violate Non-Solicitation Agreement by John Nefflen at Burr Forman.

In another interesting case, Florida’s Fifth District Court of Appeals affirmed an injunction where the employer offered testimony establishing that it secured the noncompete to protect its goodwill, that the defendant had been offering similar services for less money, and that the employer lost business. For more, see Fox Rothchild‘s Jason Cornell‘s post, United States: Enforcing a Non-Compete Agreement in Florida: What Evidence is Relevant?

New York (CFAA): The United State District Court for the Southern District of New York has opted for the more narrow interpretation of the Computer Fraud and Abuse Act in Advanced Aerofoil Technologies, AG v. Todaro. For more, see The Computer Fraud and Abuse Act, and Protecting Employer’s Electronic Data by Kristin Parsons of Burr & Forman and Another Court Construes the CFAA Narrowly and More of My Thoughts on the Statute by Ken Vanko.

New York (jurisdiction/venue): On January 10, 2013, the New York Appellate Division, First Department, in Aon Risk Services v. Cusack, rejected efforts to dismiss a noncompete case in favor of a prior filed action in California. For an in-depth discussion, see Battle Rages On In Epic Restrictive Covenant Dispute by David Clark of Epstein Becker & Green.

North Carolina: The North Carolina Court of Appeals held a noncompete in a staffing case – involving the sale of business – to be unenforceable. The agreement covers a number of legal points, any one of which would be sufficient to invalidate the agreement based on its language.  The court noted the plaintiff’s admission that there were no trade secrets or proprietary information at issue and that the employees were “general laborer[s].” The court then determined that the agreement was overly broad and really directed toward preventing ordinary competition, rather than the protection of goodwill. See Phelps Staffing, LLC v. C. T. Phelps, Inc. Most interesting about the case, however, is that the plaintiff purchased the staffing company from its then-owned, defendant Sheila Phelps. But, Ms. Phelps’s husband, who had been working with her, had started a competing venture shortly before the sale. He was present at the sale, presumably understood the terms, and received substantial benefit from it (the sale was $1.4 million). Oddly, he was not required to sign any documents – although one of the agreements required him not to interfere. Accordingly, even though he was a clear threat, neither the trial court nor the Court of Appeals was willing to restrain him even though he benefited substantially from the sale. Compare that with Zions First National Bank v. Macke, discussed by Amy Dehnel at Berman Fink Van Horn in Can an Employee Use a Spouse to Circumvent Restrictive Covenants? Georgia Court of Appeals Says “No.”

Wyoming: According to RT, “A district judge in Wyoming has shot down a group of environmentalists who tried to gather information about the long-term effects of fracking . . . .” See Fracking chemicals to stay ‘trade secrets.’

Legislation and Bills: A handful of states have recently proposed legislation relating to noncompetes and/or trade secrets. Ken Vanko, John Marsh, and I recorded a FairlyCompeting podcast discussing some of that proposed legislation.Here is some additional information:

Illinois: The Illinois House of Representatives has introduced a bill that, although saying it would allow “noncompetes,” would actually ban noncompetes, though allow  nonsolicitation agreements if they meet certain defined criteria. Although the bill is too long to post its contents, the full text can be found here. Ken Vanko has a nice discussion of the bill in A Brief Commentary on Illinois’ Proposed Noncompete Agreement Act.

Maryland: The Maryland Senate introduced a bill that would render noncompetes enforceable if the employee were terminated and therefore eligible for unemployment benefits. The operative text is as follows:

IF AN INDIVIDUAL WHO IS UNEMPLOYED HAS APPLIED FOR AND IS FOUND ELIGIBLE TO RECEIVE UNEMPLOYMENT INSURANCE BENEFITS AS PROVIDED IN TITLE 8 OF THIS ARTICLE, THE INDIVIDUAL MAY NOT BE BOUND BY A NONCOMPETITION COVENANT ENTERED INTO WITH THE INDIVIDUAL’S PRIOR EMPLOYER.

The bill would apply only prospectively to noncompetes entered into after October 1, 2013 (the putative effective date of the statute). The bill has, however, been reported unfavorably out of the Finance Committee.

Massachusetts: I previously discussed the proposed, scaled-down noncompete legislation in Massachusetts, limiting the duration of noncompetes, unless one of three exceptions exists. See New Massachusetts Noncompete Bill. The bill has been referred to the Committee on Labor and Workforce Development.

In addition, Massachusetts is again considering adopting the Uniform Trade Secrets Act (HB 27). This time, however, there is a competing UTSA bill (HB 1225) that combines the UTSA with an outright ban of employee noncompetes. The text relating to noncompetes provides:

Section 19 of Chapter 149 of the General Laws of Massachusetts is hereby amended by inserting at the end the following new paragraphs:

Any written or oral contract or agreement arising out of an employment relationship that prohibits, impairs, restrains, restricts, or places any condition on, a person’s ability to seek, engage in or accept any type of employment or independent contractor work, for any period of time after an employment relationship has ended, shall be void and unenforceable with respect to that restriction. This section shall not render void or unenforceable the remainder of the contract or agreement.

For the purposes of this section, chapter 149, section 148B shall control the definition of employment.

This section shall be construed liberally for the accomplishment of its purposes, and no other provision of the General Laws shall be construed in a manner that would limit its coverage. Nothing in this section shall preempt tort or contract claims, or other statutory claims, based upon an employer’s use, or attempted use of an unlawful contract or agreement to interfere with subsequent employment or contractor work.

This section shall apply to all contracts and agreements, including those executed before the effective date of this act.

Both UTSA bills were referred to the Judiciary Committee, and remain there.

Michigan: The Michigan Senate introduced SB 786, which, if passed would, like New Hampshire (see here), require advance notice of noncompetes. The text of the bill is as follows:

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 4a. (1) An employer may obtain from an employee an agreement or covenant which protects an employer’s reasonable competitive business interests and expressly prohibits an employee from engaging in employment or a line of business after termination of employment if the agreement or covenant is reasonable as to its duration, geographical area, and the type of employment or line of business. To the extent any such agreement or covenant is found to be unreasonable in any respect, a court may limit the agreement to render it reasonable in light of the circumstances in which it was made and specifically enforce the agreement as limited.
THIS SUBSECTION APPLIES to covenants and agreements entered into after March 29, 1985.
(2) AN EMPLOYER SHALL NOT REQUIRE AND A COURT SHALL NOT ENFORCE AN AGREEMENT OR COVENANT UNDER THIS SECTION AS A CONDITION OF EMPLOYMENT IF THE EMPLOYER DID NOT INFORM THE EMPLOYEE OF THE REQUIREMENT AT OR BEFORE THE TIME OF THE INITIAL OFFER OF EMPLOYMENT. THIS SUBSECTION APPLIES TO AN AGREEMENT OR COVENANT ENTERED INTO AFTER THE EFFECTIVE DATE OF THE AMENDATORY ACT THAT ADDED THIS SUBSECTION.
Ken Vanko has an interesting discussion of the bill here.

Minnesota: The Minnesota House of Representatives introduced H. F. No. 506, which contains the following text:

 A bill for an act relating to commerce; regulating employment agreements; voiding certain noncompete agreements; proposing coding for new law in Minnesota Statutes, chapter 325D.

 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

 Section 1. [325D.72] NONCOMPETE AGREEMENTS VOID.

 A contract that prohibits a party to that contract from exercising a lawful profession, trade, or business is void with the following exceptions:

(1) a seller of a business’ goodwill can agree to refrain from carrying on a similar business in a specified county, city, or part of one of them if the buyer carries on a like business in that area;

(2) partners dissolving a partnership can agree that one or more of them will not carry on a similar business in a specified county, city, or part of one of them where the partnership transacted business; and

(3) a member, when dissolving or terminating their interest in a limited liability company, can agree that the member will not carry on a similar business in a specified county, city, or part of one of them where the business has been transacted if another member or someone taking title to the business carries on a like business in that area.

 EFFECTIVE DATE. This section is effective the day following final enactment.

For additional reading, see Minnesota House Bill Threatens to Void Non-Compete Agreements by Faegre Baker Daniels.

New Jersey: The New Jersey Assembly introduced a bill A3970 much like the bill introduced by Maryland (see above). The text is as follows:

BE IT ENACTED by the Senate and General Assembly of the State of New Jersey:

      1.    An unemployed individual found to be eligible to receive benefits pursuant to the “unemployment compensation law,” R.S.43:21-1 et seq., shall not be bound by any covenant, contract, or agreement, entered into with the individual’s most recent employer, not to compete, not to disclose, or not to solicit. This section shall not be construed to apply to any covenant, contract, or agreement in effect on or before the date of enactment of P.L.   , c.  (C.   )(pending before the Legislature as this bill).

      2.    This act shall take effect immediately.

Thank you to both Douglas Neu and Janette Levey Frisch for bringing this to my attention. For some additional reading, see Heated discussion as attorneys debate merits of noncompete bill and New Jersey Joins Wave Of States Considering Limitations on Noncompete Agreements. Thanks to Sue Reisinger for her article, Looking at the Future of Cybersecurity.

Texas: The Texas legislature is considering SB 953, which would effectively adopt the Uniform Trade Secrets Act, making Texas the 48th state to adopt some version, leaving just Massachusetts and New York as the last-remaining holdouts.

Related Items of Interest:

New Massachusetts Noncompete Bill

January 28, 2013

Russell Beck Fair Competition News, Massachusetts Noncompete Bill, Noncompetes, Restrictive Covenants , , , , , 1 Comment

cropped-cimg27721.jpgThere is a new noncompete bill in Massachusetts. (Jump to the end for the details.) It is not yet docketed, however, so I do not have an official version to post at this time.

Those following the Massachusetts legislature’s efforts to improve Massachusetts noncompete law will recall that in 2008, then-Representative, now Senator, Will Brownsberger and Representative Lori Erhlich each separately introduced their own noncompete bills. Brownsberger’s bill took the approach in California, Oklahoma, and North Dakota, banning noncompetes in the employee context. Ehrlich’s bill took a moderated approach, focusing on procedural and other limits.

In the spring of 2009, Rep. Brownsberger and Rep. Ehrlich decided to work together toward modifications acceptable to both. After extensive input from many different interests, they arrived at a “compromise bill” designed to codify, clarify, and modernize Massachusetts noncompete law. The compromise bill was revised over time and developed quite a bit of steam during the 2008–2009 legislative session, but ultimately died. Then, a revised version of the bill was introduced in 2010, though it too ultimately died.

This session, Senator Brownsberger and Representative Erhlich have tried an entirely new, streamlined approach. (As readers of this blog will know, I was involved with the bills from the very beginning, including this new bill, and have been the principal draftsperson; I view my role, however, as purely advisory and that of scrivener. I give my opinions on the pros and cons of the various possible approaches and language, but take no position on the policy.)

The new bill – called the “Noncompete Agreement Duration Act” – leaves most noncompete law in tact, and, as its name suggests, focuses on the duration of noncompetes (in the employer/employee context). As before, the bill does not affect the law of trade secrets, nondisclosure agreements, nonsolicitation agreements, no raid/no hire agreements, noncompetes in connection with the sale of business (if the restricted person owns at least a 10 percent interest and received substantial consideration) or outside the employment context, forfeiture agreements, or agreements not to reapply for a job.

The bill starts with, and is premised on, the following two findings:

  • “[T]he Commonwealth of Massachusetts has a significant interest in its economic competitiveness and the protection of its employers, and a strong public policy favoring the mobility of its workforce” and
  • “[T]he Commonwealth of Massachusetts has determined that an employee noncompetition agreement restricting an employee’s mobility for longer than six months is a restraint on trade and harms the economy.”

The bill then creates a presumption that a noncompete that lasts up to six months is presumed reasonable in duration. The bill also creates the opposite presumption: a noncompete that lasts more than six months is presumed unreasonable in duration. The presumptions are not absolute; they can be overcome. If a court determines that the duration is unreasonable, however, the noncompete will be unenforceable in its entirety.

There are three instances in which a noncompete that is unreasonable in duration can still be enforced (though the court will shorten the duration to the length of time determined to be appropriate). Those three instances are as follows:

  1. “the employee has breached his or her fiduciary duty to the employer”; 
  2. “the employee unlawfully taken, physically or electronically, property belonging to the employer”; or
  3. “the employee has, at any time, received annualized taxable compensation from the employer of $250,000 or more.”
I expect that the bill – as well as another bill taking the California approach – will continue to be the subject of much discussion. If you have input, we would be extremely interested in hearing from you.

Trade Secret | Noncompete – Issues and Cases in the News – March 2012

March 18, 2012

Russell Beck Fair Competition News, Noncompetes, Restrictive Covenants, Trade Secrets , , , , , , , , , Leave a comment

It’s time for this month’s Trade Secret | Noncompete Issues and Cases in the News.

Trade Secrets on the Internet: In the most recent case to address the issue of the effect of trade secrets being available on the Internet, the United States District Court for the Western District of Ohio reasoned as follows:

Absent from the Complaint is any allegation that Plaintiff made efforts to guard the secrecy of the information about its products. Instead, it appears from the limited record before the Court that Plaintiff has published this information on the Internet. Under these circumstances, the Court finds that Plaintiff has little likelihood of success on the merits of its Ohio Trade Secrets Act claim.

Given the limitation inherent in the facts alleged in the complaint, the case, Allure Jewelers, Inc. v. Ulu, does not add much to the growing body of law on the issue. For others, see Trade Secrets on the Internet.

Connecticut: The Connecticut Supreme Court has determined that public entities can shield their confidential information from the reach of public records acts requests. See Conn. high court rules university can withhold trade secrets.

Idaho: A bill to amend the Idaho trade secrets act has been introduced before the Idaho state Senate. If adopted, the bill will clarify that physical retention of a trade secret can be misappropriation, while mere memorization cannot be. (Whether trade secrets can be misappropriated by memory is a thorny issue, about which there is much disagreement nationally – see It’s All in Your Head.) The bill also creates an entitlement to legal fees for the prevailing party, and makes persons acting in concert with a misappropriator  jointly and severally liable if they turn a blind eye to the misappropriation.

Massachusetts: Massachusetts Superior Court Judge Lauriat was the latest to find that a material change in the terms of employment (even changes that are beneficial for the employee) when “coupled with an employee’s refusal to sign a new covenant at employer’s request” will vitiate a preexisting noncompete agreement. The teaching of these cases? Noncompetes should be drafted to anticipate the possibility of change and expressly apply to any new position; and care should be taken when asking for a new agreement to make clear what is to happen with the old agreement if the new one is not accepted.

New Hampshire: The New Hampshire legislature is considering a bill (HB 1270) that would require employers to disclose the requirement of a noncompete or non-piracy agreement before hiring an employee or changing the employee’s job classification. See Seacoast Online’s, Bills ‘crossover’ in coming weeks. If passed, the bill would amend the law to provide as follows:

Prior to or concurrent with making an offer of change in job classification or an offer of employment, every employer shall provide a copy of any non-compete or non-piracy agreement that is part of the employment agreement to the employee or potential employee. Any contract that is not in compliance with this section shall be void and unenforceable.

Texas: A Texas Court of Appeals, in Drennen v. Exxon Mobil Corporation, invalidated a forfeiture for competition agreement.

Utah: The Utah Court of Appeals issued a lengthy decision (CDC Restoration & Construction LC v. Tradesmen Contractors, LLC) covering two issues that occasionally arise in trade secret cases: (1) the circumstances under which a compilation of publicly available information will be deemed a trade secret; and (2) whether and which common law causes of action are preempted by the Uniform Trade Secrets Act.

With regard to when a compilation may qualify as a trade secret, the Court (quoting the Utah Supreme Court) held, “A compilation may qualify as a trade secret ‘if extensive effort is required to pierce its veil by assembling the literature concerning it and thereby uncover its parts’; on the other hand, ‘[i]f this can be readily done by one who is normally skilled in the field and has a reasonable familiarity with its trade literature, the secret may no longer be entitled to protection.’” It’s analysis of the particular facts in the case is worth a read.

Of particular note about the preemption issue is the Court’s observation in its conclusion, as follows:

With respect to its claim for misappropriation of pricing information, CDC finds itself boxed in by the UTSA. CDC lacks evidence hat the pricing information it claims [defendants] misappropriated qualifies as a trade secret under the UTSA. Yet that information is enough like a trade secret that CDC’s non-UTSA claims are preempted by the UTSA. The UTSA does not displace civil remedies not based upon misappropriation of trade secrets, nor does it displace contractual remedies, whether or not based upon misappropriation of trade secrets. However, CDC’s non-UTSA causes of action fit nether category. The are, accordingly, preempted.

The Court’s preemption analysis leading to this conclusion and observation about the effect of preemption, is far more involved and definitely worth a read.

Criminal Cases:

Related Items of Interest:

Mass Lawyers Weekly Advisory Board Supports Noncompete Bill

November 28, 2011

Russell Beck Fair Competition News, Massachusetts Noncompete Bill, Restrictive Covenants , , , , , Leave a comment

Massachusetts Lawyers Weekly‘s Editorial Advisory Board calls the noncompete bill pending in the MA legislature “a step in the right direction.” (As the lead drafter and advisor on the bill, I have covered it extensively throughout this blog and elsewhere; for a summary of the bill, see Massachusetts Noncompete Bill Refiled; for the latest update, see Report on Massachusetts Legislature’s Hearing on Noncompete Bill.)

The editorial noted that “[i]t is notoriously hard to advise both businesses and employees as to the likely enforceability of a non-compete agreement. The same non-compete may be viewed very differently by different judges.” Accordingly, in noting their support for the bill, the Editorial Advisory Board observed that “[a] bill that provides greater specificity on what elements a non-compete should include in order to be enforced helps everyone and could reduce the amount of litigation resulting from the agreements.”

The Editorial Advisory Board did identify “[o]ne aspect of the bill [that they find] troubling . . . .” Specifically, the Board is concerned about mandatory attorneys’ fees for a victorious employee; the editors would prefer to see discretion left to the judge. That very issue is still being considered by Representative Ehrlich and Representative Brownsberger.

To stay up on the latest or to provide your thoughts, please feel free to do any or all of the following:

Report on Massachusetts Legislature’s Hearing on Noncompete Bill

September 15, 2011

Russell Beck Fair Competition News, Massachusetts Noncompete Bill, Noncompetes, Restrictive Covenants, Trade Secrets , , , , , , Leave a comment

Earlier today (September 15), the Massachusetts legislature’s Joint Committee on Labor and Workforce Development took testimony on the pending bills to reform Massachusetts noncompete law:  two to ban employee noncompete agreements (House Bill 2296 and Senate Bill 932) and the other (House Bill 2293) to codify, clarify, and improve the existing complicated and unpredictable common law in this area. (In the interest of full disclosure, I am the principal drafter of the latter bill and am working closely with the bill’s principal sponsors, Representative Lori Ehrlich and Representative Will Brownsberger.)

In total, about 13 people (including me) provided testimony to the Committee. People spoke on both sides, for and against, with the majority in favor of the H.B. 2293.

While some opposition to reform has used scare tactics – such as incorrectly suggesting that noncompete reform will somehow prevent companies from protecting their trade secrets or that companies will suddenly be exposed to all sorts of corporate espionage – the testimony today did not take approach. Rather, of the people voicing opposition, most seemed to acknowledge that reform would be positive, but took issue with only (a) specific aspects of the bill (H.B. 2293) or (b) its timing, suggesting that making changes in the current economic climate would not be desirable.

In contrast, Secretary of Housing and Economic Development Greg Bialecki made it clear both that reform is necessary and that the Patrick Administration believes that now is the time. Accordingly, Secretary Bialecki urged people to get around a table and resolve the outstanding issues (lest the result may be the elimination of noncompetes altogether).

Throughout the process, the sponsors of the bill, in particular, Representative Lori Ehrlich (who co-chairs the committee) and Representative Will Brownsberger, have been endeavoring to do just that. In furtherance of those efforts, countless hours have been spent working with myriad individuals, companies, and associations toward a bill that strikes an appropriate balance between the legitimate business interests of employers and fairness to employees. It is for that very reason that the outstanding issues are relatively few.

At the moment, the main outstanding issues appear to be: (1) the provisions regarding attorneys’ fees; (2) the ability of the courts to consider equitable factors in deciding whether to enforce a noncompete agreement; and (3) certain requirements concerning paying employees for noncompete agreements when the agreement is imposed after the employee has already been working for the employer. (For more details on the bill, see here.) While the attorneys’ fees provisions are not currently part of Massachusetts law, the courts’ ability to take equitable factors into account most certainly is, and the concept of payment for the agreement is the subject of much debate among lawyers who regularly practice in this area.

I expect that these issues will continue to be the subject of much discussion. If you have input, we would be extremely interested in hearing from you.

Hearing on MA Noncompete Bill

September 3, 2011

Russell Beck Fair Competition News, Massachusetts Noncompete Bill, Noncompetes, Restrictive Covenants , , , , , , Leave a comment

The Joint Committee on Labor & Workforce Development has officially announced that it will be conducting a hearing on, among other things, the Massachusetts noncompete bill on September 15. The hearing starts at 10:30 in Room A-1.

The bill (i.e., the bill that Representatives Lori Ehrlich, Will Brownsberger, and Alice Peisch have sponsored, and of which I am the lead drafter) is currently scheduled 5th on the agenda. Details about the bill can be found here.

The hearing will also cover the bill filed by Representative Sheila Harrington to ban noncompetes, which is currently scheduled 7th on the agenda. (That bill is similar to California’s approach and differs from the other bill, which takes a more balanced approach.)

Massachusetts Noncompete Bill Status Update

June 26, 2011

Russell Beck Fair Competition News, Massachusetts Noncompete Bill, Noncompetes, Restrictive Covenants, Trade Secrets , , , , , , Leave a comment

As those of you following the Massachusetts noncompete bill will recall, a modified version of the bill was refiled in January. (See Massachusetts Noncompete Bill Refiled.)

Although the refiled bill reflects significant changes based on input received previously, Representative Lori Ehrlich, Representative Will Brownsberger, and Representative Alice Peisch continue to solicit input on the bill. If you have any suggestions (or questions), you can reach out to any of them or to me (Russell Beck), or add your comments directly at a website set up to facilitate discussion about the bill: OpenMassHouse.com.

Please note that the bill has been assigned to the Joint Committee on Labor and Workforce Development, which will hold a hearing on the bill on September 15, 2011.

Georgia Noncompete Statute At Last

May 18, 2011

Russell Beck Fair Competition News, Noncompetes , , , , , Leave a comment

After months of confusion, it is now official: Georgia has a new – and valid – noncompete law. The law will apply only to noncompete agreements entered into on or after May 11, 2011, and will permit Georgia courts to reform overly broad noncompete agreements to make them more reasonable, and therefore enforceable. (Previously, the courts were constrained to tossing out the entire agreement if found to be unenforceable in any respect.)

So, what should you do? If you’re an employer, review your existing agreements and determine whether it is advisable to enter into a new one. (It likely is.) If you’re an employee, you should think long and hard about whether you want to sign on to a new noncompete. Either way – employer or employee – you should speak to counsel familiar with this specialized area of law.

Hairdresser Takes a Haircut

March 23, 2011

Russell Beck Fair Competition News, Massachusetts Noncompete Bill, Noncompetes, Restrictive Covenants , , , , , , Leave a comment

Hairdressers have been held out as a prime example why noncompete reform is required in Massachusetts. Whenever the hairdressers are rolled out, however, those opposed to reform contend that courts “never issue injunctions against hairdressers.” The inaccuracy of that contention is once again squarely demonstrated in a recent Massachusetts Superior Court decision: Zona Corp. v. McKinnon.

As stated in the Court’s decision:  Zona Corporation owns two salons. McKenna, straight out of cosmetology school, took a job with Zona as a hairdresser and was required to sign a noncompete. About four and a half years later, he was fired.

When the circumstances of the case are considered, the hairdresser has all the makings of a great defense:  (1) he was an inexperienced kid; (2) taking a low paying job; (3) who didn’t know what he was signing; (4) who “very much needed the job and was this in no position to negotiate terms” anyway; and (5) was later fired. What did he do? The obvious: he continued cutting hair and contacted one (yes, one) former customer – who he argues he was friends with – and who presumably liked the way he cut her hair.

The court, nevertheless, issued an injunction against McKenna preventing him from working as a hairdresser in the seven towns from which Zona allegedly draws its clients. The decision turned on the protection of the company’s goodwill. Putting aside that one might question how the salon, rather than the hairdresser, would own the goodwill in this case, the notion that these cases are not enforced against hairdressers is simply mistaken.

Massachusetts Noncompete Bill Now Available

January 25, 2011

Russell Beck Fair Competition News, Massachusetts Noncompete Bill, Noncompetes, Restrictive Covenants, Trade Secrets , , , , , , , , , , 1 Comment

For those of you interested in seeing a copy of the Massachusetts noncompete bill as it was filed, click here or on the image to the right.

Remember that the goal of the Representatives sponsoring the bill is to get as much input as possible, so that people’s concerns can be considered as part of the legislative process. Accordingly, please reach out to Representative Lori Ehrlich, Representative Will Brownsberger, or me (Russell Beck) to get your questions answered or to provide us with your input.

Also, as indicated in my prior post last week (Massachusetts Noncompete Bill Refiled), we will continue to provide close and timely coverage of the bill, so please feel free to do any or all of the following:

If you have any questions, please feel free to share them with us via email.  Also, you may wish to contact your local state senator or representative if you would like them to take a position.

 

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