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This week, we focus on employee mobility, an area of law that’s top of mind for many employers and employees at all levels. The laws that apply to such tools as non-compete and non-solicitation agreements are changing almost daily in the courts and legislatures, and companies are finding it challenging to protect their confidential information, balance employee interests, and have enforceable protections. Aime Dempsey, from Epstein Becker Green, provides an update on some of the latest legislation in this area:
“There's a lot of activity going on right now in employee mobility in the legislative arena. Just a couple of weeks ago, on April 26th, bills were proposed in both the United States House and the United States Senate that would ban non-compete agreements. Non-compete agreements are actually right now only banned in three states: California, Oklahoma, and North Dakota. So, this would be a broad, nationwide ban for any employers who engage in commerce or who make products engaged in commerce. So that obviously touches on a great swath of employers, and those bills, if they pass, would ban non-compete agreements and potentially, based on how they're phrased, non-solicit agreements. In Idaho, a law that was favorable to employers in the non-compete arena has been pulled back a little bit. In New York City last summer, there was a law proposed to restrict non-competes for low-wage workers.”
In terms of enforcement, employers have been watching and waiting to see whether the Department of Justice’s Antitrust Division will continue the Obama-era emphasis on anti-poaching agreements and other employee mobility issues in the Trump administration. We asked Aime if 2018 has brought any new insights:
“It looks like, under this administration, the antitrust guidance will remain a priority. In October of 2016, the Department of Justice Antitrust Division announced a priority to enforce rules against no-poach agreements between employers. In January of this year, the DOJ Antitrust Division announced that it would be aggressively going after employers that violate the no-poach guidelines.”
As laws in this area continue to evolve, so does litigation. Recent rulings have created some further guidance that can help employers seeking to protect their interests and also help them know when to litigate. Here’s Peter Steinmeyer, from Epstein Becker Green, with more:
“The lessons that employers can draw from recent non-compete and trade secret cases are that courts are reluctant to restrain an individual from going to work. However, if there was an actual theft of trade secrets, a court would be far more likely to grant injunctive relief. So, the cases that we see actually going to court and being filed tend to be those where there was an actual theft.”
Even in the most restrictive legal environments, options are available for employers looking to protect their companies’ interests. California is well known for its strict limitations on employers in this area. State law prohibits nearly all non-competition and non-solicitation agreements. Jonathan Brenner, from Epstein Becker Green, tells us how, even in California, some employee departure protocols can help protect trade secrets:
“Having well-prepared and thorough exit procedures for employees can be very helpful—procedures that include an exit interview process; processes for the return of equipment and other property; and the return of information, including information stored on the cloud or other web-based storage media. And an acknowledgement and certification form that serves as a reminder and statement of intent to comply with confidentiality obligations can all be very helpful, and they are very important features of such exit procedures. There are some more substantive arrangements that are at least possible in appropriate circumstances. Agreements for terms with employees that cannot be terminated at will early on by both sides is one example of that. Deferred compensation arrangements with vesting conditions as incentive for employees to stay on the job and not leave for a competitor and even ERISA plans that contain non-competition restrictions, which, at least as a matter of federal, ERISA law can be enforceable.”
One option that employers in all jurisdictions can consider is the garden leave provision.
“Garden leave provisions are clauses under which an employee will give 30 to 90 days’ advance notice of their resignation. They help employers, because they are an alternative to a traditional non-compete. Because they’re shorter in length, and because the employee is paid during the garden leave period, both employees and their new employers tend not to challenge them, and courts are more likely to enforce them. As a result, it's an alternative to a traditional non-compete that's more likely to be enforced and less likely to be challenged.”
Expect to see more new legislation and litigation as the year progresses.