Executive Summary: This month, the United States Court of Appeals for the Sixth Circuit affirmed a lower court’s award of attorneys’ fees to an employer after it had been granted a preliminary injunction against its former employees. See Kelly Servs. v. De Steno, 2019 U.S. App. LEXIS 875 (6th Cir. Jan. 10, 2019). The employer never received a final determination regarding the enforceability of the non-compete provisions in employment agreements. Nevertheless, because the underlying agreements contained provisions requiring the employees to cover Kelly’s attorneys’ fees in enforcing the agreements, a final determination was not necessary to award Kelly its fees. This decision demonstrates the importance of including attorneys’ fees provisions in employment agreements.
Articles Discussing Restrictive Covenants In The Workplace And Other Topics Relating To Unfair Competition.
In the midst of a federal effort to ramp up antitrust prosecutions of companies agreeing not to recruit or hire each other’s employees (see previous articles dated November 9, 2016, January 25, 2018, April 25, 2018 and July 17, 2018), special scrutiny – and criticism – has been directed toward the use of no-poach agreements in the franchise industry. State Attorneys General now lead the fight to limit the practice, and early indications suggest that their efforts are already producing results.
Because the laws surrounding post-employment restrictive covenants vary from state to state, FordHarrison attorneys are proud to present a 50-State Desk Reference which provides an overview of state laws addressing the enforceability of noncompetition and nonsolicitation agreements and associated issues. State laws on this issue are complex, and this manual is intended to highlight some of the significant provisions of each state law. For a copy of FordHarrison’s 50-State Restrictive Covenant Desk Reference, please contact firstname.lastname@example.org.
As we have reported in previous articles, the Department of Justice’s Antitrust Division has repeatedly reaffirmed its intent to criminally prosecute companies that restrict labor market competition through the use of unlawful no-poach and wage-fixing agreements.
On April 3, 2018, the Department of Justice’s Antitrust Division settled an antitrust action against the world’s two largest rail equipment suppliers, accusing them of maintaining “naked” no-poaching agreements in violation of the Sherman Act (see Complaint and Consent Decree).
On January 19, 2018, the Assistant Attorney General for Antitrust, Makan Delrahim, announced that in the coming months the Department of Justice (DOJ) expects to bring its first criminal antitrust charges involving agreements among competitors not to solicit each other’s employees – referred to as “no-poaching agreements.” Delrahim’s comments make it clear that going forward, the DOJ will treat wage-fixing and no-poaching agreements between competitors as per se criminal cartel activity; i.e., in the same way it traditionally treats price-fixing, bid-rigging and customer allocation agreements among competitor firms.
The chief prosecutor in the U.S. Department of Justice’s Antitrust Division signaled last week that his unit expects to initiate criminal actions against multiple companies accused of entering unlawful pacts not to hire each other’s employees.
In the fourth quarter of 2017, two major financial firms dropped out of an industry-wide Protocol for Broker Recruiting (the “Protocol”), an agreement designed to reduce litigation surrounding the movement of stockbrokers between competing firms. While those departures do not necessarily seal the fate of the Protocol, they do portend an increase in litigation to enforce customer non-solicitation covenants against departing brokers.
Proposals to restrict the use of non-compete agreements in employment have been introduced in New Hampshire, Pennsylvania, and Vermont.
In states that permit the enforcement of non-compete and other restrictive covenant agreements against former employees, companies must still demonstrate that the restrictions are designed to protect a legitimate business interest, and not to simply avoid ordinary competition.
A dental technology company has obtained a $6.8 million judgment against a former employee accused of stealing the company’s designs. The federal district court in Central California entered the judgment after finding the defendant, Jian Lu, liable for stealing trade secrets. Sirona Dental Systems Inc., et al. v. Jian Lu, No. 2:15-cv-08777 (C.D. Cal. Oct. 19, 2017). This case highlights the importance of non-disclosure agreements, paying close attention to developments in your industry, as well as vigorously protecting your rights in court.
In the midst of a heated litigation commenced by an employer against its former employee for alleged violations of a non-compete agreement, an employee returned the cell phone she used during her employment. Prior to returning the phone, she deleted all emails that were stored on the phone.
Executive Summary: An employer hiring an individual known to be subject to a non-compete contract can expect to be accused of tortiously interfering with that contract. On the other hand, the hiring employer should be innocent of wrongdoing if it has no idea the new hire is bound by a restrictive covenant. In Acclaim Sys. v. Infosys, Ltd., 2017 U.S. App. LEXIS 2325 (3d Cir. 2017), the Third Circuit recently affirmed this common-sense approach by holding an employer lacking actual knowledge of a restrictive covenant cannot be liable for tortious interference with that covenant.
former Lyft driver filed a class action lawsuit in the Northern District of California against Uber, alleging Uber violated the Electronic Communications Privacy Act (“ECPA”), the California Invasion of Privacy Act (“CIPA”), and other common law invasions of privacy and unfair competition.
Executive Summary: Having just celebrated its one-year anniversary, the Defend Trade Secrets Act (DTSA) triggered an uptick in federal litigation concerning the fight to protect corporate trade secrets. Though no court has issued the elusive ex parte civil seizure remedy which the Act allows, one recent decision came close. In OOO Brunswick Rail Mgt. v. Sultanov, 2017 WL 67119 (N.D. Cal. Jan. 6, 2017), the U.S. District Court for the Northern District of California used the DTSA to bar an individual defendant from accessing or modifying a laptop and cell phone received from his former employer, and to compel non-parties Google and Rackspace to preserve both individual defendants’ web-based email accounts.