Noncompete News - February 2014

As discussed previously, noncompete agreements can be a powerful tool to help employers protect their confidential, proprietary or trade secret information from disgruntled departing employees. However, the differing requirements imposed by state laws applicable to noncompetition agreements can cause unforeseen problems for employers seeking to enforce these agreements in multiple states. For example, some states permit courts to "blue pencil" or amend unenforceable portions of otherwise enforceable agreements, while other states prohibit such amendments. Additionally, in some states, such as California, covenants not to compete are illegal because they violate public policy by limiting open competition and employee mobility.

To assist employers in navigating the requirements of the various state laws, FordHarrison attorneys have prepared a 50-State Survey of Noncompete Laws highlighting the significant provisions of these laws.

Potential Antitrust Liability in the Employment Context

Executive Summary: Although direct information sharing by competitors of product pricing has long been a basis for triggering findings of antitrust violations, other types of agreements and information sharing have raised antitrust concerns in the employment context. For example, employees in the technology industry have claimed that "no poaching" agreements between competitors suppressed their wages in violation of the antitrust laws. Additionally, in some situations, sharing HR information, such as salary information of non-union employees, may raise antitrust concerns. Employers should be aware of the developments in this area of the law to avoid unexpected liability.

No Poaching Agreements Among Tech Employers

After completing its 2010 investigation of the employee hiring practices of certain competitor software companies, the Department of Justice (DOJ) concluded that they had engaged in "facially uncompetitive" understandings that limited job opportunities for employees of the participating companies. The DOJ concluded that the companies had an understanding that they would not compete for each other's engineers. For example, the participating companies had shared information with each other when one of them made a job offer to an employee of a competitor company. The DOJ ordered the companies to end these practices.

Subsequently, employees who worked as software engineers for the participating companies filed a lawsuit claiming the companies engaged in...