As momentum for regulation of non-competes grows at the federal level, states continue to pass restrictive non-compete legislation on their own.
As previously reported, on January 5, 2023 the Federal Trade Commission (“FTC”) proposed a new rule which would effectively ban all non-compete agreements between employers and other workers—not only prohibiting new non-competes, but invalidating existing ones. After receiving almost 27,000 comments during an extended comment period, the FTC voted to delay a vote on the proposed rule until April 2024. Given the vehement opposition to the proposed rule by certain industry groups, even should the FTC move forward with a rule, most expect immediate legal challenges and therefore further delays.
Last month, the Supreme Judicial Court dismissed a suit brought by a Massachusetts employer to enforce a non-compete on its California-based employee on the ground of forum non conveniens. The SJC held that the non-compete’s Massachusetts choice of law provision was unenforceable and that California substantive law should apply. Recall that even with the recent change in Massachusetts non-compete law, such restrictive covenants are still permissible, while in California, employee non-competes are subject to an outright ban.
This week, the Massachusetts Noncompetition Agreement Act became effective. For employers, this means that all non-compete agreements entered into on or after October 1, 2018 must comply with the new law’s requirements. It is likely that most Massachusetts employers will have to revise their existing agreements.
On Wednesday, the Massachusetts Senate passed an Economic Development bill that revives the long-debated issue of non-compete legislation in the Commonwealth.
Over the past few years, we have reported on the Massachusetts Legislature’s unsuccessful attempts to alter non-compete law in the Commonwealth. In 2016, the Legislature was tantalizingly close to passing legislation before adjourning in July without reaching a compromise, and no fewer than six non-compete bills were introduced in 2017.
Two recent cases reaffirm that Minnesota remains among the small, but growing, list of states that require employers to provide advance notice of any non-compete to a potential future employee prior to the commencement of employment. In both Safety Center, Inc. v. Stier, No. A17-0260, 2017 WL 5077437 (Minn. Ct. App. Nov. 6, 2017) and AutoUpLink Techs., Inc. v. Lynn Clark Janson, No. A17-0485, 2017 WL 5985458 (Minn. Ct. App. Dec. 4, 2017), the Minnesota Court of Appeals affirmed that, if at-will employment is the only consideration offered, the non-compete must be presented to the employee before the offer of employment is accepted.
Our firm’s Executive Comp Exchange blog recently added a post that is useful to employers who utilize confidentiality provisions in any of their employment documents. The blog post addresses the complications of confidentiality provisions of employee agreements and perceived constraints on the employee’s ability to report relevant information or conduct to certain government agencies. The National Labor Relations Board and now the SEC appear to be ramping up efforts to address what they believe are undue restraints by employers in this area.
In the rapidly changing business world, protecting a company's human capital and proprietary information is critical to maintaining a competitive edge. On this blog, Nutter's experienced Business Litigation and Labor, Employment & Benefits attorneys offer news and insights on all aspects of restrictive covenants and trade secrets—from analyzing a rapidly evolving body of case law, to summarizing new legislation and legislative efforts, to providing other need-to-know updates and more.
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