Non-Competes

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As previously reported (here and here), some Delaware courts have recently declined to “blue pencil,” i.e., modify and narrow overbroad restrictive covenants. Instead, they have stricken in their entirety covenants deemed overbroad and declined to enforce them. On December 10, 2024, in Sunder Energy, LLC v. Tyler Jackson, et al., the Delaware Supreme Court affirmed that Delaware courts have the discretion to decline to blue pencil overbroad restrictive covenants, even if the defendant’s conduct would violate a more narrowly circumscribed covenant. Continue Reading Delaware Supreme Court Refuses to Enforce Noncompete Against Company Founder Who Joined Competitor

In Samuelian v. Life Generations Healthcare, LLC, — Cal. App. 5th —, 2024 WL 3878448 (Cal. App. Aug. 20, 2024), the California Court of Appeal answered two long outstanding questions of California law concerning the enforceability of noncompetition agreements in the context of the sale of a business:Continue Reading California Court of Appeal Rules That Partial Sale of Business Can Bind Seller-Owner to a Noncompetition Agreement

Amidst a wave of non-compete bans sweeping California, North Dakota, Oklahoma, Minnesota and, most recently, the nation via the Federal Trade Commission’s non-compete prohibition, Maine Governor Janet Mills departed from this growing trend and vetoed L.D. 1496, An Act To Prohibit Noncompete Clauses (“L.D. 1496”) in April 2024. If enacted, the L.D. 1496 would have effectively foreclosed employers from entering into non-compete clauses with employees in Maine.Continue Reading Maine Governor’s Veto of Non-Compete Ban Bucks Growing Trend Among States and Federal Trade Commission

On July 3, District Judge Ada Brown of the Northern District of Texas issued an order enjoining the Federal Trade Commission (“FTC”) from enforcing its “Final Rule” against plaintiffs Ryan, LLC (“Ryan”) and the U.S. Chamber of Commerce (the “Chamber”). If implemented, the Final Rule would effectively render nearly all non-compete agreements unlawful. Accordingly, this opinion was one of the most highly anticipated judicial decisions in antitrust and labor and employment law in recent memory.Continue Reading Not So “Final”? Texas Federal Court Enjoins Enforcement of FTC’s Noncompete Ban, Leaving Future of Commission’s Rule in Doubt

On April 23, 2024, the Federal Trade Commission (the “FTC”) voted 3-2 to issue its final rule (“Final Rule”) banning employers from imposing noncompete clauses on their workers, approving the final rule in a special Open Commission Meeting. Continue Reading FTC Votes to Ban Noncompete Agreements

California has passed two new items of legislation, Senate Bill 699 and Assembly Bill 1076, which will further regulate and restrict the enforcement of employment non-compete agreements in California, and expand the scope of remedies for those affected by them. These new laws will become effective on January 1, 2024, and now is the time for employers to assess and revise their employment-related agreements and restrictive covenants accordingly. As detailed below, they also require employers to notify employees and certain former employees by February 15, 2024 that certain non-compete provisions are void. The two new laws are detailed below.Continue Reading California Strengthens Non-Competition Law

Courts and state legislatures continue to take aim at post-employment non-competes. In a companion blog, we recently detailed the Federal Trade Commission’s proposed rule banning post-employment non-competes. However, for years (and even under the FTC’s overreaching proposed rule), non-competes in the sale of business context have generally received less scrutiny.Continue Reading Buyer Beware: Delaware Declines to Enforce Sale of Business Non-Compete

On January 5, 2023, the Federal Trade Commission (“FTC”) announced a broad proposed rule that would ban employers from imposing noncompete clauses on their workers. The FTC press release announcing the proposed rule states that noncompete clauses—which apply to about one in five American workers—suppress wages, hamper innovation, block entrepreneurs from starting new businesses and reduce American workers’ earnings between $250 billion and $296 billion per year.[1] The proposed rule would prohibit employers from: (1) entering into or attempting to enter into a noncompete with a worker; (2) maintaining a noncompete with a worker; or (3) representing to a worker, under certain circumstances, that the worker is subject to a noncompete. The term “worker” covers paid staff in addition to independent contractors and unpaid staff. The proposed rule does not apply to noncompete provisions imposed upon 25% owners of a business in transaction documents related to the sale of the business. The proposal is subject to a 60-day public comment period commencing when the Federal Register publishes the proposed rule.Continue Reading FTC Seeks to Ban Noncompete Agreements in Employment Contracts

The tension between encouraging free and fair competition and protecting competitive advantages derived from hard work and ingenuity is at the very heart of trade secrets law. Among other things, this tension manifests itself in the gray areas endemic to any legal analysis of what information may constitute a “trade secret.” In comparison, assessing the behavior of those accused of misappropriating trade secrets can sometimes be a much more straightforward exercise. And it seems that the more egregious (and less “gray”) the behavior, the more likely a court is to exercise its limited discretion to restrain competition at the preliminary relief stage to prevent disclosure and use of misappropriated trade secrets. The 3rd Circuit’s recent decision in Matthews International Corp. v. Lombardi(October 12, 2022) is a timely example of this principle.
Continue Reading One Bad Apple Won’t Spoil the Rest of the Bunch’s Ability to Fairly Compete in Matthews International Corp. v. Lombardi

On July 27, 2022, Mayor Muriel Bowser signed into law the Non-Compete Clarification Amendment Act of 2022, scaling back certain aspects of D.C.’s original Ban on Non-Compete Agreements Amendment Act of 2020. As we previously reported, the original ban included some of the most substantial non-compete restrictions in the country, including prohibiting the use of non-compete agreements for nearly all employees working in D.C. and banning anti-moonlighting policies. Here are some key takeaways from the Amendment:
Continue Reading The District of Columbia Revises Ban on Non-Competes