New legislation enacted in May 2019 will make noncompetes harder to enforce in Washington state and Oregon.
Washington State Enacts Sweeping Noncompete Legislation
On May 8, 2019, Washington became the latest state to enact comprehensive noncompete legislation. Under the Act Relating to Restraints, Including Noncompetition Covenants, on Persons Engaging in Lawful Professions, Trades or Businesses, noncompetition covenants will be void and unenforceable unless they meet a number of specific requirements. Although the act does not take effect until January 1, 2020, it impacts certain agreements signed and certain claims that arise before the effective date, as explained further below.
The act provides that noncompetition covenants are only enforceable against employees and independent contractors whose annual earnings exceed $100,000 and $250,000, respectively. These amounts will be adjusted annually, on September 30 of each year, to account for inflation…
Oregon Legislation Imposes Additional Notice Requirements on Employers
Modifications to Oregon’s existing Noncompetition Law, ORS 653.295, were signed into law on May 14, 2019, introducing additional restrictions on employers’ already curtailed ability to enforce noncompetition covenants, except with respect to certain “excluded employees” described in ORS 653.010(3). Under the newly amended legislation, employers will not only be required to meet preemployment notice requirements under the Noncompetition Law, they must now give employees postemployment notice of their noncompete obligations…
View the full Alert on the Duane Morris LLP website.
On April 26, 2019, the Third Circuit Court of Appeals vacated and remanded two district court decisions in which the courts had held that a restrictive covenant agreement—offered only to the company’s highest-performing sales employees in exchange for eligibility to participate in a stock-option award program—was unenforceable per se under New Jersey law. ADP, LLC v. Rafferty, 18-1796, 2019 WL 1868701 (3d Cir. Apr. 26, 2019).
ADP utilized two separate layers of agreements containing postemployment restrictive covenants: (1) sales representation agreements (SRAs) and nondisclosure agreements (NDAs) signed by all employees at the time of hire and as a condition of employment; and (2) restrictive covenant agreements (RCAs) with certain high-performing employees as a condition of those employees’ eligibility to participate in the company’s stock-option award program. The RCAs contained more restrictive provisions than the SRAs and NDAs.
View the full Alert on the Duane Morris LLP website.
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
The Pennsylvania Superior Court’s recent decision in Metalico Pittsburgh, Inc. v. Douglas Newman, et al., No. 354 WDA 2016, 2017 PA Super. 109 (Apr. 19, 2017), confirms the importance of careful contractual drafting in agreements containing non-compete clauses and other post-employment restrictive covenants. In circumstances where an employee is hired for a term of employment but later becomes an at-will employee, that contractual language may determine the enforceability of the agreement’s non-compete and non-solicitation provisions.
To read the full text of this post by Duane Morris partner Luke McLoughlin, please visit the Duane Morris Appellate Review Blog.
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
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
Lawrence H. Pockers
, co-chair of Duane Morris’ Non-Compete and Trade Secrets Practice Group
, moderated a panel discussion at the DRI Business Litigation Seminar in Nashville, Tennessee, on May 5, 2016.
The panel was titled “Restrictive Covenants Enforcement Realities Around the Country: The In-House Perspective on Chasing the Departed,” and the panelists were Kelly Grace Huller, Globus Medical Inc.; Jennifer A. McGlinn, Ricoh Americas Corp.; and Stacey N. Schmidt, Fidelity Investments.