Articles Posted in Non-Compete Agreement / Covenant Not to Compete

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There’s no doubt that self-driving cars will be the next big thing in the automobile industry, which is why Google got so upset when a former employee allegedly took trade secrets regarding their self-driving technology to a competitor.

Anthony Levandowski claims he has been working on technology for driverless automobiles since he was in college. He entered a self-driving motorcycle into the Pentagon’s first competition for driverless vehicles in 2004, when he was still a graduate student at the University of California in Berkeley.

In 2007, Levandowski started working for Google on their maps program. When Google gave the go-ahead to start experimenting with self-driving automobiles, Levandowski was one of the first people chosen for the team.

Levandowski left Google early in 2016 to start his own business, a driverless truck company named Otto. That company was bought by Uber, at which point Levandowski became the vice president in charge of Uber’s driverless vehicle project. Continue reading ›

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The Society for Human Resource Management recently published an interesting article discussing the use of non-compete agreements by businesses throughout the country and a White House paper on the issues raised by non-compete agreements.  The article states in part:

Noncompetes may be unpopular among employees, but they’re becoming more common, according to Michael Elkon, an attorney with Fisher Phillips in Atlanta.

As a practical matter, most courts won’t enforce them against lower-level employees, he noted, but their more widespread use is attracting political attention.

The White House paper criticized the growing use of noncompetes, saying that they impact nearly one-fifth of U.S. workers. It cited a 2013 study commissioned by The Wall Street Journalthat found a 61 percent rise from 2002 to 2013 in the number of employees getting sued by former companies for breach of noncompete agreements.

Approximately 14 percent of workers earning less than $40,000 are subject to noncompete clauses, including fast-food employees, warehouse workers and camp counselors, the White House said.

Noncompetes are even prevalent in California, where courts do not enforce them; 19 percent of workers in California report signing a noncompete. Many workers are not aware of the lack of enforcement in California when they sign the agreements, the report noted.

Several states ban noncompete agreements for certain sectors, occupations and time periods. Hawaii banned noncompetes for technology jobs, and New Mexico banned them for health care jobs. Oregon banned noncompete agreements that last longer than 18 months, while Utah has limited them to a year.

Delaware, Illinois, Massachusetts, Tennessee and Texas do not enforce noncompetes against physicians, the White House report noted.

However, some state courts strike offensive clauses from noncompetes if doing so renders the remaining language enforceable under the state’s law. Meanwhile, other courts, most recently the Nevada Supreme Court, reject this so-called blue penciling of noncompetes.

You can view the full article by clicking here. Continue reading ›

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Under the federal Fair Labor Standards Act (FLSA), all hourly, non-exempt employees are entitled to one and one-half times their normal hourly rate for all the overtime they spend working. It sounds simple enough, and for most workers it is, but employers need to make sure they’re including all the compensation earned by workers when calculating their overtime rate.

An overtime class action lawsuit against the U.S. division of Weatherford PLC alleges, among other things, that the oil company failed to properly calculate employees’ overtime rates. According to the wage and hour lawsuit, the company did not take into account certain bonuses (called “wellness bonuses”) that employees had earned when calculating the premium overtime compensation they should be paid when working more than eight hours a day or forty hours a week.

The class action lawsuit, which was filed in California in 2014, also alleges that Weatherford illegally denied workers compensation for the meal breaks they worked through.

Although the FLSA does not require employers to provide their workers with breaks throughout the workday, some state labor laws do, including California. Under California labor law, all hourly, nonexempt workers are entitled to one, paid, uninterrupted rest break of at least ten minutes for every four hours they spend working. For every five hours worked, employees are entitled to one, unpaid, uninterrupted meal break lasting at least half an hour. For every day an employee does not take one of these breaks, for any reason, that employee is entitled to one hour’s worth of pay, in addition to all other wages, bonuses, tips, etc. earned that day. Continue reading ›

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For the past few years, many of the large employers across the country have had to face the possibility of redefining what they consider to be “work.” The federal Fair Labor Standards Act (FLSA) does not provide a definition of “work,” although the U.S. Department of Labor (DOL) does define a “workday” as beginning with the first “principal activity” the employee performs and ending with the last “principal activity” they perform. But what can and cannot be considered a “principal activity” has long been debated between employers and their workers.

In general, anything that is required by the employer and provides a direct benefit to the employer qualifies as a “principal activity,” but the courts continue to go back and forth about the kinds of activities that meet this requirement. For example, many employees argue that the time they spend putting on protective gear when they’re required to wear it while performing their jobs constitutes a principal activity, and as such, they should be paid for that time. Not every employer agrees with that assertion and the DOL itself has gone back and forth on whether employees should be paid for that time. Continue reading ›

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The federal Fair Labor Standards Act (FLSA) defines overtime as any time spent working after eight hours a day or forty hours a week. It also requires employers to pay their workers one and one-half times their normal hourly rate for all the overtime they spend working. Some employers maintain agreements with their workers in which, instead of additional wages, the workers are compensated in the form of extra paid time off, which is not always legal.

Most employers are required to compensate their workers for overtime by paying them the premium overtime rate, but there are exceptions to that rule. For example, government employees can legally receive overtime compensation in the form of one and one-half hours of paid time off for every hour of overtime they work. But there is a limit of a total of 480 overtime hours that are eligible for this method of compensation, and once that limit has been reached, the employees must be compensated in the form of additional wages.

According to an investigation conducted by the U.S. Department of Labor (DOL), the Puerto Rico Police Department was using paid time off to compensate police officers for the overtime they worked, but the department did not pay overtime wages when officers worked more than 480 hours of overtime.

The DOL’s investigation further found the police department had not compensated former police officers for the compensatory time they had built up by the time their employment was terminated. They also did not pay canine officers for the time they spent taking care of dogs for the police department, and did not pay academy cadets the proper compensation for the overtime hours they worked performing activities that were required by the department. Continue reading ›

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Non-compete agreements were initially included in employment contracts with high-level executives at tech companies, but in recent years employers have increasingly been including them in their contracts with almost all their workers.

Non-compete agreements were designed to protect the company’s legitimate business interests by preventing executives with trade secrets and/or valuable relationships with customers from taking those resources to a competitor across the street. However, in an attempt to make their employment contracts air tight, some employers have gotten a little carried away and created non-compete agreements that make it unreasonably difficult for their workers to find any other form of employment at all.

Despite the increased propensity for and strictness of these agreements, many companies don’t bother to enforce them when their lower-level workers start working for a competitor in another region. But when an employer does try to enforce what might be considered an overly restrictive non-compete agreement, workers have been known to fight back, arguing that the agreement is too strict to be legally enforceable. Continue reading ›

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Non-compete agreements were originally created as a way for businesses to prevent competitors from poaching their employees. If a high-level executive who knows a lot about the company’s trade secrets and/or has established valuable relationships with clients takes those assets to a competitor working just around the corner, the result could be disastrous for the worker’s former employer.

In order to prevent that from happening, most employers include non-compete agreements in almost all their employment contracts. These agreements usually specify a geographical area in which the employee cannot work for a competitor in a given time frame (usually six months to a year).

Although non-compete agreements can be an effective way for companies to protect their legitimate business interests, some companies have become overzealous in their attempts to hold on to their workers and have included non-compete agreements in all their employment contracts, even with their lowest-paid employees. Continue reading ›

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When someone makes a promise, many people will ask them to “put it in writing” as a way to make sure they follow through. These written documents then form contracts that can be upheld in court if necessary, but the courts don’t always agree to uphold a contract. Just because it was signed and agreed upon by both parties at one point in time does not necessarily make a contract legally binding.

One promise that employers are having an increasingly difficult time enforcing is the noncompete agreement. It’s an agreement included in an employment contract in which both the employer and the worker agree that the employee will not work for a competitor. Noncompete agreements were originally designed to protect the vested interest employers have in their high-level executives – the ones who are most likely to have access to sensitive information, trade secrets, and important relationships with clients. For these kinds of employees to leave with all that business and work for a competitor across the street could be disastrous for a company.

But in their efforts to make iron-clad noncompete agreements, employers sometimes overstretch and include requirements that make it unreasonably difficult for the employee to find any work at all after their employment ends. Continue reading ›

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A recent trade secrets case in the U.S. District Court for the Central District of Illinois may make individuals think twice before they attempt to recruit a proxy to get around a noncompete clause. (Orthofix Inc. v. Melissa Gordon (2016 WL 1170896))

Medical device company Orthofix Inc. sued former sales representative Melissa G. for violating the non-solicitation, unfair competition, and nondisclosure provisions of her employment contract; appropriating trade secrets in violation of the Illinois Trade Secrets Act (ITSA); and tortious interference with its business relations.

Orthofix sells “bone growth stimulators,” which purportedly promote the healing of broken bones, to physicians. Melissa worked for Orthofix from 2007 until March 2013. Melissa’s sales territory was central Illinois, later expanding to Chicago, and her job involved keeping detailed notes on physician clients. Upon hire, she signed an agreement promising not to do business with Orthofix customers or compete with the company for one year following separation, nor disclose its trade secrets or confidential information. Continue reading ›

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What happens when an employee brings substantial expertise and business contacts in a specialized area to a new employer, then the employer changes ownership and attempts to enforce restrictive covenants against him? A recent Illinois appellate case AssuredPartners, Inc. v. Schmitt, 2015 IL App (1st) 141863 (2015) does not bode well for employer plaintiffs.

William S. was a wholesale broker in the lawyers’ professional liability insurance market (LPLI). In 2006 he became a senior vice president for ProAccess, a New Jersey-based insurance brokerage with offices in Chicago. William had formerly been a broker for ProQuest, where he built an extensive network of contacts and brokered millions of dollars in LPLI transactions with insurers in the U.S. and United Kingdom. He signed an employment agreement with ProAccess which provided that the restrictive covenants contained therein did not apply to LPLI activity, in acknowledgement of his pre-existing connections in the area.

In late 2011, ProAccess was acquired by AssuredPartners LLC. According to William, he was told he had to sign a new, more restrictive employment agreement to retain his job and that he could not alter any of its provisions. Schmitt resigned from AssuredPartners in 2013 and began brokering LPLI under a new retail brokerage, and, purportedly, soliciting ProAccess business and customers. AssuredPartners sued William to enforce the restrictive covenants. He filed a counterclaim seeking a declaratory judgment that the covenants were unenforceable as a matter of law. The circuit court found the covenants overbroad and unreasonable because William was “prevented from any business activity related to any type of professional liability insurance, not just LPLI.”

On appeal, AssuredPartners argued it had a legitimate protectable business interest in its “customer expiration” list, which contained information about LPLI customers and which it claimed William “blatantly” stole and used to siphon business away from ProAccess. The plaintiffs contended the noncompetition provision at issue was no broader than necessary to protect the company’s interest in the list. Continue reading ›

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