“A recent study byShepherd Law Group shows that noncompete litigation nationwide has continued to trend upward, despite a slowing economy and legislative attempts to curb noncompetes. The latest study shows that noncompete litigation has more than doubled since 1995, and has increased by 61 percent from 2004 to 2009.” For more on this trend visit Gruntled Employees.
My personal experience is consistent with the trends noted by the Shepherd Law Group study. More employers are seeking non-competes from new employees, existing employees and even employees who have been fired (and offered severance).
A Boston law firm, Beck Reed Riden, has developed achartthat outlines the law of non-competes in all 50 states. It is pretty good tool and an easy way to get some basic information about non-compete law. Review of information related to states with which I am familiar suggested this chart is accurate. This is just a starting point for information but every search begins somewhere.
UPDATED (9/5/2011): The chart was updated as has this blog post.
In Bimbo Sues the Muffin Man, I briefly discussed the inevitable disclosure case filed by Bimbo Bakeries against a former manager, who had ran one of its English muffins facilities. To prevent disclosure of its trade secrets, Bimbo asked a judge to keep the former manager from working for a competitor, even though the manager had never signed a non-compete. In a follow-up post, Judge Sides with Bimbo, I provided a link to Judge Barclay’s 37-page opinion in Bimbo Bakeries USA Inc. v. Botticella, which granted the preliminary injunction. Botticella appealed to the 3rd Circuit Court of Appeals, which just issued an opinion upholding the preliminary injunction.[click to continue…]
“Can they get an injunction?” is among the first several questions asked by folks seeking advice about a non-compete agreement. As a lawyer, I would like to be able to offer a straight answer. And sometimes I do, but almost always with a disclaimer. I can know what existing law states but I cannot know what the judge will say it means in your case. However, there is a standard process and factors for courts considering motions for injunctive relief, and it is helpful for the client to understand the basics.
The South Carolina Supreme Court has issued a new non-compete case, which overturned a lower court decision that enforced a non-compete after it modified (i.e.,“blue penciled”) the agreement’s overly broad provisions. The case of Poynter Investments v. Century Builders(Op. No. 26821 May 24, 2010) is skinny on the details, but on the surface, the opinion suggests that “blue-penciling” is dead in South Carolina. However, the opinion fails to acknowledge and/or discuss language in older opinions suggesting an openness to blue penciling (discussed below) and completely ignores a federal court case permitting blue-penciling under South Carolina law (discussed below). Accordingly, there is still some room for a stubborn employer to argue for a limited reading of Poynter. Nonetheless, this case is important precedent for those seeking to invalidate a non-compete.
Umm, this infoclip is really just an introduction to an introduction of non-compete agreements. The brevity of the introduction means that you can probably find exceptions to some of my general statements. When dealing with covenants not to compete, details matter.
But by way of review,under South Carolina law and the law of most states, non-competes which are a general restraint of trade are against public policy and void, while those founded upon valid consideration and reasonable in their scope and operation are valid. For more, read this more detailed introduction to non-compete law (using South Carolina law).
Several posts on this blog have focused on the inevitable disclosure doctrine, which seeks to further erode an employee’s power to quitand work elsewhere. Nucor v. Bell has produced two published decisions related to a trade secret battle waged against a former employee, who was not quite blameless. However, I have come across an unreported decision from that case (2008) in which U.S. District Court Judge David Norton found that South Carolina would adopt the inevitable disclosure doctrine. Judge Norton used the inevitable disclosure doctrine to grant injunctive relief against the former employee. This case deserves our attention.
Okay. I confess: I have been really busy (what a blessing) and have not had a chance to write much. But, I have had a chance to read, and I came across something else I wanted to share. Management-side employment lawyer, Jay Shepherd, has written a good article directed at employees: Eight Ways to Guarantee Yourself a Non-Compete Lawsuit.Pretty good advice. Because, in the end, beating your non-compete begins with not acting stupidly and dishonestly, and even if you have a non-compete that will never hold-up in court, being dishonest before you leave your job or taking stuff with you when you leave will make your non-compete the least of your problems. Remember you can delete, but you cannot hide.
A quick follow-up on the last post (Inevitable Disclosure: Bimbo Sues Muffin Man): “In his 37-page opinion in Bimbo Bakeries USA Inc. v. Botticella, U.S. District Judge R. Barclay Surrick granted a preliminary injunction, ruling that Chris Botticella, a former senior vice president at Bimbo, cannot start to work for Hostess Inc. because his extensive knowledge of Bimbo’s trade secrets makes it substantially likely, if not inevitable, that he would disclose Bimbo’s secrets to Hostess.” Read the rest onLaw.com.
Here’s an articleabout an inevitable disclosure case recently filed in federal court in Pennsylvania. Bimbo Bakeries sued a former manager at one of its english muffins facilities, saying “he is one of fewer than 10 people in the world who know how to make the muffins with the special ‘nooks and crannies.'” To prevent disclosure of its trade secrets, Bimbo asked a judge to keep the former manager from working for a competitor. Although, he had not even signed a noncompete. Read the rest of the article on Law.com.