Show posts for: Noncompete Agreements ‎

  • The Wall Street Journal: Noncompetes are "Innovation-Killing"

    | Zuckerman Spaeder Team

    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.

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  • Massachusetts Continues To Move Towards California On Noncompetes

    | Zuckerman Spaeder Team

    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.

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  • It’s unseasonably cool here in Washington, DC, where most of our Suits by Suits editors toil.  News about the latest in disputes between employers and executives, however, is always in season.  Here are the latest headlines:

    • Ruth Simon and Angus Loten of the Wall Street Journal brought us this excellent take on the rising tide of non-compete litigation.  According to Simon and Loten, non-compete agreements are spreading beyond the executive ranks to sales representatives, engineers, and researchers.  For more, check out our ongoing State-by-State Smackdown series on the changing law of non-competes in various states (here, here, here . . . and here).
    • A conference call hosted by AOL’s chief exec Tim Armstrong took an unpleasant turn when Armstrong fired – on the spot – Abel Lenz, an employee who was videotaping the call.  The New York Times reported that Armstrong later admitted that he made a “mistake” in the hasty firing, which was broadcast to a thousand employees.  Lenz’s photos of his last moments at AOL later surfaced online at jimromenesko.com
    • The Third Circuit upheld a decision by the Luzerne County (PA) Retirement Board to terminate the benefits it was paying to a former county clerk, William Brace, based on Brace’s guilty plea to a bribery charge.  Brace claimed that the termination violated his constitutional rights, but the court disagreed, holding that Brace was not entitled to a hearing before the decision.  Brace’s crime appears to have been the acceptance of a $1,500 tailor-made suit from a county contractor, which puts this case in the unique category of Suits by Suits over Suits.
    • Matt Reynolds of Courthouse News Service reported that IMAX has sued a competitor for trade secret misappropriation.  IMAX’s complaint alleges that Gary Tsui, a former IMAX employee, sold its 2-D and 3-D conversion technology to the competitor, GDC Technology USA, which is now using the secrets to compete with IMAX.  It calls Tsui an “international fugitive.”  Sounds like this case may be exciting enough for the big screen.
    • A former U.S. Bank manager, Serge Adamov, has successfully appealed the dismissal of his claim that he was terminated in retaliation for complaints of discrimination based on his Azerbaijani origin.  The Sixth Circuit held that when an employee does not exhaust his remedies in the Department of Labor before bringing suit in federal court, that failure does not deprive a district court of jurisdiction over the case.  As a result, because the bank did not raise a failure to exhaust as part of its motion to dismiss Adamov’s suit, the district court could not raise it on its own as a ground to get rid of the claim.
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  • You may have heard about the strange case of Larry Conners, the former news anchor for KMOV-TV 4 in St. Louis, Missouri who was fired after posting on his Facebook page that he suspected that he was being targeted by the IRS in response to a hostile interview he conducted with Pres. Barack Obama in 2012.  (The IRS claims that Conners and his wife owe more than $85,000 in back taxes from 2008-2010.)  You may have even read our coverage of Conners’s subsequent lawsuit against KMOV-TV here on Suits By Suits.

    Last Friday, a state court judge in Missouri denied Conners’s motion for a temporary restraining order (TRO) that would have suspended the operation of Conners’s non-compete clause with KMOV and permitted Conners to seek another TV job in St. Louis.

    What does this mean for Conners – and, more broadly, for employers and employees in Missouri?  Read on.

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  • State-By-State Smackdown XLVIII

    | Zuckerman Spaeder Team

    If you’re a regular reader of Suits By Suits, you know that we think state law regarding the interpretation and enforceability of non-compete clauses is rapidly changing, driven in large part by recent appellate decisions in California that effectively renders most non-compete clauses unenforceable in that state.

    Last month, we kept you apprised of a new law that passed the state legislature in Connecticut; that law, Connecticut Public Act No. 13-309, would have required employers who are acquired by or merged into another company and who require their employees to accept a non-compete clause as a condition of continued employment to provide those employees with a copy of the agreement and at least 7 days’ notice to evaluate whether or not to sign the agreement.

    Notably, the final bill passed by the legislature was substantially cut down from its original form, which would have altered the common-law standard (the “Legitimate Business Interests” test or LBI) Connecticut courts use in evaluating whether or not such clauses are enforceable.  The amended bill made no changes to Connecticut’s legal standard; as such, we predicted that the law would do “very little to alter the landscape.”

    That prediction turned out to be quite the understatement, as Connecticut’s Gov. Dannel P. Malloy vetoed the bill by returning it to the legislature without his signature.

    Gov. Malloy’s articulated reason for vetoing the proposed legislation is that “the bill leaves certain key terms undefined or unclear,” which he argues “has the potential to produce legal uncertainty in the event of merger or acquisition.”  The implication is that such uncertainty would increase the risks of litigation on both sides; Gov. Malloy accordingly requested that in the next session, the legislature return with “greater clarity” for the benefit of both employers and employees.

    How the legislature will respond is anyone’s guess, but it’s worth pointing out that the current common law standard governing the enforceability of noncompete clauses in Connecticut – which the governor called “robust” in his veto statement – is itself a somewhat ambiguous balancing test (LBI) that requires a court to evaluate numerous factors, including a clause’s (1) duration, (2) geographical scope, (3) protection of the employer, (4) restraint on the employee’s right to pursue work, and (5) interference with the public interest.  See Robert S. Weiss & Assocs v. Wiederlight, 208 Conn. 525 (1988).  Obviously a “reasonable” duration is less defined than a specific term (say, six months, as is being considered in neighboring Massachusetts).

    Might Gov. Malloy’s veto and admonition encourage the Connecticut Judiciary Committee – which previously approved a bill that would have changed the Weiss common-law standard by a vote of 44-0 – to revisit that state’s long-standing use of the LBI balancing test to evaluate the validity of noncompetes?  We’ll be watching.

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  • Regular readers of this space know we’ve written a lot about non-compete clauses in executive employment agreements.  Indeed, we should write about them and you should know about them: they can have a significant impact, they’re often misunderstood or overlooked, and the law on them is in a rapid state of flux, as some states reconsider how they will treat them. 

    Now one of the editors of this blog, P. Andrew Torrez of our Baltimore office, has published a great piece in the National Law Journal about a California state supreme court decision that is spearheading a wave of changes to non-compete clauses all over the nation.  It’s a must-read for anyone dealing with employees or corporate operations in the Golden State. 

    It’s also an honor for us to have one of our own published in the National Law Journal.  And we’re not just saying that because of the old maxim about not arguing with people who buy paper by the ton and ink by the barrel, but because NLJ is, as legal periodicals go, a serious and significant one (its blog covering law in our home base of Washington, D.C., is first-rate, too).

    P.S.—While we may not find fame and fortune as legal bloggers, there is glory to be had in the ABA Journal’s Blawg 100 list. If you enjoy reading Suits by Suitsplease consider nominating us for the Blawg 100 by Friday, August 9. It will only take a few minutes. 

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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.

Contributing Editors
John J. Connolly

John J. Connolly
Partner
Email | +1 410.949.1149


Man

Andrew N. Goldfarb
Partner
Email | +1 202.778.1822


Sara Alpert Lawson_listing

Sara Alpert Lawson
Partner
Email | +1 410.949.1181


Nicholas DiCarlo

Nicholas M. DiCarlo
Associate
Email | +1 202.778.1835


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