We saw this over the weekend and thought you might like to know: more on last week’s revelation that Massachusetts Gov. Deval Patrick (D) favors the “California policy” of making employee covenants not to compete generally unenforceable under state law.
As we told you last week, the linchpin of the administration’s argument is that while noncompete clauses may be perceived as generally pro-business, in the technology sector – a huge market in California, obviously, but also a significant industry in Massachusetts – many believe that the enforcement of noncompetes may hinder employee mobility necessary for such startups to thrive. In this particular area, then, what's good for employees may also be good for employers.
This weekend, Gov. Patrick got an assist from a rather unlikely source – The Wall Street Journal. Greg Gretch, managing director of Sigma West, a venture capital firm targeting technology startups, argues that noncompete agreements are “innovation-killing” and credits California’s decision not to enforce noncompetes for turning San Francisco into a “hot-bed of new startup activity.” Mr. Gretch’s piece can be read in full here; it's worth checking out.
We thought about getting a Putin op-ed to cap off this week at Suits by Suits. But instead, we decided to stick with our tried-and-true formula of canvassing the week’s headlines in employer-executive disputes:
As part of our “State-by-State Smackdown” series on the evolution of state law with respect to the enforceability of covenants not to compete contained in employment agreements, we’ve flagged for you proposed legislation in Massachusetts, House Bill No. 1715, that would essentially prohibit the enforcement of covenants not to compete over six months in length (unless certain narrow statutory exceptions apply). Last week, we learned that the bill was headed to a hearing before the state legislature’s Joint Committee on Labor and Workforce Development on September 10.
Now, thanks to Boston Globe columnist Scott Kirsner, we’ve learned a little more about what happened at that hearing. And it’s big news.
When Yu-Hsing Tu worked at pharmaceutical company UCB Manufacturing, he signed a strict confidentiality agreement. In the agreement, Tu promised that he would never disclose any of UCB's “secret or confidential information,” including a laundry list of items such as “designs, formulas, processes, . . . techniques, know how, improvements, [and] inventions.” Tu's work was important to UCB: he helped formulate its cough syrup products, including Delsym, and had significant knowledge of its “Pennkinetic system” for controlled release of cough medication in liquid form.
In 2001, Tu left UCB and started working for his friend Ketan Mehta at Tris Pharma. Soon after, Tu and Tris Pharma began formulating generic versions of UCB’s cough syrups. Six years later, Tris's competitive products were on the market, and UCB lost a lot of market share.
UCB immediately went to court and sued Tu and Tris for misappropriation of trade secrets, breach of contract, and unfair competition. It asked for a preliminary injunction -- a court order early in the lawsuit that would require Tris to stop using its trade secrets until the merits were finally decided. After a five-day hearing focused on the misappropriation claim, the trial judge denied the injunction, maintaining the status quo for Tris.
Shortly after that win, Tu and Tris took the offensive in the litigation, moving for summary judgment. At that point, UCB made a decision that would end up costing it later on: it voluntarily gave up its claim for misappropriation of trade secrets. The trial court then granted Tu and Tris’s motion for summary judgment on the other claims, relying on its finding during the preliminary injunction phase that Tu and Mehta were credible when they testified that they didn’t misuse UCB’s confidential info. UCB appealed.
This week in Suits by Suits:
There’s been another important development in the legal landscape with respect to age discrimination cases, as last week a federal district court in Oklahoma ruled that the EEOC could proceed to trial on behalf of an employee who alleges that she was terminated by her employer for being “old and ugly.” Equal Employment Opportunity Commission v. Kanbar Property Mgmt., LLC, Case No. 12-CV-00422-JED-TLW (Aug. 23, 2013). (Although similar factually, this is a different lawsuit than the “you’re not that pretty” case discussed by our colleague Bill Schreiner last week, which survived a motion to dismiss.)
If you’re not an employment lawyer, this might strike you as the proverbial “dog bites man” headline. After all, if you can't be fired for being old, certainly you can't be fired for being old and ugly, right? Right?
Well, as it turns out, the law isn’t quite so straightforward. Read on….
If you've ever wondered how Labor Day came to be -- how it got its name, why Americans celebrate it (and what exactly we are supposed to celebrate, between the car sales, barbecues and end-of-summer beach getaways), we've got the answers for you right here, in a look at Labor Day we posted last summer. Enjoy it -- and then go enjoy the day! Our regular posts about disputes between executives and employers will resume once we get past this beach traffic.
Suits by Suits did not go into recess in August, but stayed on top of the latest developments in the courts affecting companies and high-level employees when their relationships sour, including in these posts:
Even in the pre-Labor Day lull, things still happen here at the Suits by Suits Global Operations Center in our Nation’s Capital. This week, we welcomed a new panda cub at the National Zoo, and celebrated the 50th anniversary of the famous March on Washington for Civil Rights, which remembered Martin Luther King Jr.’s historic “I Have A Dream” speech.
Things happened elsewhere in the broader world of disputes between executives, other employees and employers, too, including:
In the previous part, we looked at Elke Tober-Purze’s lawsuit against her employer, the City of Evanston. The federal court hearing the case ruled in Tober-Purze’s favor on Evanston’s motion to dismiss her claim that it had discriminated against her by paying her male colleagues more and ultimately terminating her from her job as an assistant city attorney.
In the same opinion, the court also denied Evanston’s motion to dismiss Tober-Purze’s claim for age discrimination based on federal law. That law – the Age Discrimination in Employment Act – requires an aggrieved employee to demonstrate that he or she: 1) is over forty; 2) otherwise meets the employer’s expectations; 3) suffered an adverse employment action – such as being terminated or passed over for promotion; and 4) was treated less favorably than others who are not over forty.
As the regulatory and business environments in which our clients operate grow increasingly complex, we identify and offer perspectives on significant legal developments affecting businesses, organizations, and individuals. Each post aims to address timely issues and trends by evaluating impactful decisions, sharing observations of key enforcement changes, or distilling best practices drawn from experience. InsightZS also features personal interest pieces about the impact of our legal work in our communities and about associate life at Zuckerman Spaeder.
Information provided on InsightZS should not be considered legal advice and expressed views are those of the authors alone. Readers should seek specific legal guidance before acting in any particular circumstance.
John J. Connolly
Partner
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Andrew N. Goldfarb
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Sara Alpert Lawson
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Nicholas M. DiCarlo
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