Tag Archives: non-solicitation

Massachusetts Court Rules California Law Supersedes Massachusetts Choice-of-Law Provision and Non-Compete Clause in Employment Contract

By Gregory S. Bombard

On June 9, 2017, the Business Litigation Session (BLS) of the Massachusetts Superior Court issued a decision about the extraterritorial application of California’s public policy against non-competition agreements (Full text of the decision: Oxford Global Resources, LLC v. Jeremy Hernandez).  The plaintiff, Oxford, is a recruiting and staffing company headquartered in Massachusetts.  It hired the defendant to work as an entry-level “account manager” in an office in California.  As a condition of his employment, the employee signed a “protective covenants agreement” that included non-solicitation, non-competition, and confidentiality provisions.  This agreement contained a Massachusetts choice-of-law provision and a Massachusetts choice-of-venue provision.  Continue reading Massachusetts Court Rules California Law Supersedes Massachusetts Choice-of-Law Provision and Non-Compete Clause in Employment Contract

White House Recommends Non-Compete Reforms

By Shannon Hampton Sutherland and Gregory S. Bombard

Last week, the White House called on states to enact sweeping reforms to their non-compete laws. The White House’s new policy position is that “most workers should not be covered by a non-compete agreement” and that, although “each state faces different circumstances,” many employers have sufficient other targeted remedies to protect their legal interests.

In its policy statement, the White House called on states to enact “non-compete” reforms, including one or more of the following: Continue reading White House Recommends Non-Compete Reforms

The “No Update” Update: Massachusetts Legislature Concludes Session Without Passing Noncompete Reform

By Bronwyn L. Roberts

As reported in The Boston Globe, the Massachusetts Senate and House concluded their legislative session on July 31, 2016, without passing noncompete reform legislation. This comes as a bit of a surprise as the House and Senate have in 2016 each passed a noncompete reform bill. Additionally, Governor Charlie Baker has, through a spokesperson, recently indicated support for the House bill that sought to restrict noncompetes by creating “Garden Leave,” consisting of payment during the restricted period of at least 50 percent of the employee’s annualized base salary. However, for those who have followed this process over the years, the fact that neither bill passed is consistent with many other failed attempts over the years to overhaul the Massachusetts noncompete landscape.

Thus, the noncompete reform debate, which has been ongoing in the Massachusetts legislature since at least 2009, continues. We will keep you updated.

Continue reading The “No Update” Update: Massachusetts Legislature Concludes Session Without Passing Noncompete Reform

STRONG NON-COMPETE AND CONFIDENTIALITY AGREEMENTS AND PRACTICES ARE CRITICAL TO ACQUISITION

By: Shannon Hampton Sutherland[1]

Experts predicted that strong M&A activity would continue from 2015 into 2016.[2] So far, that prediction appears to hold true, particularly in the biotech sector. If you want to position your company for potential acquisition under attractive terms, either in 2016 or down the road, are you ready? Locking down the company’s “non-compete” and confidentiality agreements and practices early is mission-critical.

These agreements (including confidentiality and invention agreements, non-compete agreements, and non-solicit agreements) help the company protect legitimate business interests, like the benefit of its investment in its technology, confidential information, and trade secrets, goodwill with its customers, and training of its employees. If your company doesn’t have strong programs and agreements in place with its employees, independent contractors, and consultants to protect these important assets, it might lose value in the eyes of a potential acquirer.

This lesson holds especially true in industries that are heavily-reliant on sensitive technological innovation or field-based sales organizations. One of your highest priorities should be making sure that the company has strong and enforceable confidentiality and non-compete agreements (if permissible in your jurisdiction) with these individuals and programs in place to protect the company’s interests.

  • Identify and Address Gaps in the Protection of Confidential Information. The company should work with legal counsel to identify potential gaps in its programs and procedures designed to protect its confidential information. For instance, how strong is the company’s network security? Does the company have strong policies and procedures in place concerning access to data that resides outside of the network? Are the company’s written policies being followed in practice? Does the company only grant access to such information on a need-to-know basis, or is information too readily available or left unprotected? Are sensitive materials identified as such? Does the company take reasonable steps to ensure that departing employees return, and do not retain access to, confidential information? A potential acquirer will want to see strong and consistent policies and procedures in place – and followed – to protect the assets it is acquiring.
  • Address Agreements With New Employees on the Front-End. Although not required in all jurisdictions, it’s good practice to let a new candidate know that he or she will need to sign a confidentiality or non-compete agreement as a condition of employment (if appropriate for the position and permissible in your jurisdiction). Indeed, some jurisdictions have special rules about whether the employee must receive a copy of the agreement in advance, and when the new employee must sign the agreement. The company can work with HR and legal counsel with expertise in this area to ensure that the company is complying with any necessary requirements for new employees.
  • Identify and Address Individuals Without Existing Agreements. HR and legal counsel should identify employees (and independent contractors and consultants) who have not signed confidentiality, invention, non-compete, and non-solicit agreements. For individuals who don’t have an agreement, but who have access to the company’s confidential information or goodwill, the company can work closely with legal counsel well-versed in this area to consider whether an agreement is appropriate and craft an agreement that will stand muster for position at issue and in the jurisdictions that might be implicated. For instance, in some jurisdictions, for an agreement signed after the commencement of employment to be enforceable, the company must provide additional consideration to the employee (such as a promotion, payment, or increased compensation).
  • Consider Assignment and Successor Clauses. The company should consider with legal counsel whether to include provisions providing that the employee expressly consents to the assignment of the restrictive covenants by the company at any time, and that the restrictive covenants are enforceable by the company’s successors and assigns. That type of language isn’t required in all jurisdictions, but, in some jurisdictions, it may bolster a successor company’s or assignee’s ability to enforce the agreements – something a potential acquirer will look for when considering your company for potential acquisition.
  • Identify and Remediate Potential Holes in Existing Agreements. Experienced legal counsel should also review existing agreements to determine any potential holes in those documents and whether adjustments can or should be made to both meet the company’s business needs and comply with any applicable law. For example, sometimes agreements in the employee’s file pre-date important clarifications in the law that must be addressed. Or, perhaps the existing agreement is written too narrowly so that it doesn’t protect the full extent of the company’s interests or current or planned business model. On the flip side, the agreement may be too heavy-handed or written so broadly that it won’t be enforceable at all under the law of a state that won’t reasonably modify an overly broad agreement. Counsel well-versed in non-competes can help the company identify and suggest ways to remediate these (and other) potential deficiencies before it’s too late.

Bottom line: Early and regular review of the company’s non-compete and confidentiality agreements and practices is an important piece of positioning the company for favorable acquisition. Counsel well-versed in this area can help the company navigate the complex issues that come into play.

Nothing contained in this blog is intended to or does create an attorney-client relationship or provide legal advice.

[1] Shannon Hampton Sutherland is the Co-Chair of the Duane Morris Non-Compete and Trade Secrets practice and a nationally-known non-compete, trade secrets, and litigation attorney. See http://www.duanemorris.com/attorneys/shannonhamptonsutherland.html.

[2] See, e.g., http://www.forbes.com/sites/jeffgolman/2016/01/11/four-reasons-2016-will-be-a-strong-year-for-ma/#27221a634d49 (last accessed Apr. 8, 2016); http://info.kpmg.us/ma-survey/index.html (last accessed Apr. 8, 2016).

The Long Smoldering Debate About Noncompetition Reform in Massachusetts Is Re-Ignited by House Speaker

By Bronwyn L. Roberts and Gregory S. Bombard

On March 2, 2016, Massachusetts House Speaker Robert A. DeLeo promised to put new legislative limits on noncompetition agreements, reigniting the debate over non-compete reform legislation that has continued since at least 2009.  In a speech to the Greater Boston Chamber of Commerce’s annual Government Affairs Forum, DeLeo said that he would push legislative reform with the following restrictions for enforceability of noncompetition agreements:

  • noncompetition agreements would be limited to one year;
  • noncompetition agreements would not apply to lower-wage workers; and
  • workers must be clearly informed that a noncompetition agreement is required before taking a job, including a “stated right to counsel.”

Continue reading The Long Smoldering Debate About Noncompetition Reform in Massachusetts Is Re-Ignited by House Speaker