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
Employers faced with an apparent trade secret misappropriation by former employees must decide what jurisdiction to bring suit in. For an employer headquartered outside of California who employs California residents working primarily in California, choice of law and forum selection clauses favoring states other than California may be ineffective against them unless they had counsel who negotiated the provisions on their behalves. (Cal. Lab. Code § 925.) A recent California Court of Appeal decision highlighted this point, and found that where a California employee is sued by the employer for trade secret misappropriation in a separate state based on an out-of-state forum selection clause, the employee may separately sue in California to void the provision, despite the ongoing litigation in a sister state (See LGCY Power, LLC v. The Superior Court, 75 Cal. App. 5th 844 (2022).)
Continue Reading California Labor Code Section 925: A Word of Caution for Out-of-State Employers of California Employees
This month, the Ninth Circuit’s decision in DePuy Synthes Sales v. Howmedica Osteonics held that a U.S. district court in California properly invalidated a foreign choice-of-law and forum selection provision under California Labor Code § 925, and denied a motion to transfer the case to a different venue. While this might seem at first blush like a technical issue of federalism and contractual interpretation, the decision indicates that federal courts in the Ninth Circuit will also apply California’s partial prohibition on the use of foreign forum-selection and choice-of-law clauses as to employees.
Continue Reading Ninth Circuit Upholds Application of California Labor Code To Contractual Forum-Selection and Choice-of-Law Clause To Keep Dispute Over Non-Compete Clause in California
No-hire or “no-poaching” agreements have recently come under increasing scrutiny by the federal government, as well as various state regimes. However, a recent Ninth Circuit decision upholding a no-poach agreement highlights the various hurdles an antitrust claimant will face in bringing such a claim.
Continue Reading Illegal Deal? Ninth Circuit Rejects Attempt to Revive No-Poaching Claims