For the last several years, non-compete agreements have been under attack in the U.S. by regulators, legislators, and even the courts. For example, in October 2018, Massachusetts joined states like California, North Dakota, Montana, Idaho, Utah, and others by enacting a law regulating non-compete agreements, including providing for “garden leave” and making them inapplicable to “non-exempt” employees. Courts do not favor non-competes and will often look for any reason to limit them or invalidate them completely. But, love them or hate them, non-compete agreements are here to stay, and businesses continue to rely on them as one way to protect customer goodwill along with confidential and proprietary information. See, for example, the recent battle between Google’s Waymo unit and Uber over Anthony Levandowski and the theft of self-driving car technology and know-how. Still, it’s clear that the forces fighting against non-competes are stronger than ever. For example, there is legislation pending in Vermont to ban all non-compete agreements, and at the federal level to ban them for low-wage workers. Which is why it’s important for in-house counsel to take every step possible to ensure the non-compete agreements used by their companies have the best chance of surviving regulatory and judicial scrutiny. This edition of “Ten Things” discusses some tips on how to draft an enforceable non-compete agreement:
How’s this for a nightmare scenario: You get a call from the company’s Chief Operating Officer informing you that Ms. Smith is leaving the company to go to work for a competitor. You’re told she has knowledge and copies of many confidential projects and strategies, including key marketing strategy presentations. The COO wants to know what can be done to protect the company. You tell him not to worry because Ms. Smith signed a confidentiality agreement when she joined the company and therefore everything will be fine. A few days later you need to go back to the COO and tell him everything might not be fine regarding Ms. Smith and, in fact, according to outside counsel, the company has likely failed to do a number of things necessary to protect some of its trade secrets, meaning there may be little that can be done to stop Ms. Smith from divulging those items to her new employer – your competitor.