Part 28 of the “The Restricting Covenant Series”: Worldwide Noncompete Restrictions

Grab your passports, compass and other essential travel gear, as this edition of The Restricting Covenant Series navigates through the treacherous waters of noncompete agreements and their geographic reach.

First Stop: New Jersey

Ah, the Garden State. Home to the most diners and shopping malls. Where the state bird is the American goldfinch, the state flower is the violet, but alas there is no official state song (perhaps a New Jersey native such as Bruce Springsteen, John Bon Jovi or Queen Latifah will change that). Who would ever want to leave? Well, suppose you worked for a New Jersey company that required you to sign a noncompete with a geographic restriction that prohibits you from competing in business against your employer anywhere within the entire Garden State after your employment ends (that’s right, all 365 exits and entrances on the Garden State Parkway). Could such a statewide geographic restriction be enforced? The short answer is: Maybe.

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State & Local Employment Law Developments: Q3 2021

2021 continues the trend of increasing regulation of the workplace by state and local governments. Although it is not possible to discuss all state and local laws, this update provides an overview of recent and upcoming legislative developments to help you and your organization stay compliant. (Please note that developments specifically related to minimum wage rates and COVID-19 are not included.)

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President Biden Targets Non-Compete Agreements in New Executive Order on Promoting Competition

As part of “a whole-of-government effort to promote competition in the American economy,” President Biden’s July 9 Executive Order on Promoting Competition in the American Economy encourages the Federal Trade Commission to ban or limit non-compete agreements. In doing so, President Biden continues — and potentially accelerates — what to date has been a piecemeal effort conducted almost exclusively at the state level to limit, and in some cases prohibit, the use of non-competes, particularly for low-wage workers.

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Amendments to the Illinois Freedom to Work Act: Significant Changes Coming to Illinois Noncompete and Nonsolicitation Agreements

While restrictive covenants abound in the employment landscape, the Illinois legislature is shoring up efforts to rein in the use of such agreements. The latest push? A bill to amend the Illinois Freedom to Work Act to expand the ban on noncompetes to a larger population of workers and provide certain rights to employees who are asked to sign noncompete and nonsolicitation agreements as a condition of employment. With Gov. J.B. Pritzker poised to sign that bill, employers should begin evaluating how those amendments will impact their use of noncompete and nonsolicitation agreements and what changes will be necessary to comply with the new law.

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Supreme Court Limits Application of the Computer Fraud and Abuse Act Against Employees Who Abuse Their Network Access Credentials

In a decision handed down yesterday, the Supreme Court held that civil liability under the Computer Fraud and Abuse Act (“CFAA”) does not attach for employees who abuse or misuse their access credentials in accessing their current or former employers’ computer networks.  Rather, to be liable under the CFAA, the employees must access databases or other electronic materials that are outside of their access rights and otherwise off-limits to them.

The Case

The case, Van Buren v. United States, arose out of the actions of a former police sergeant.  The former officer, Van Buren, used his valid login credentials to search his police department database for a particular license plate number in exchange for a bribe, but was caught by an FBI sting operation.  Van Buren was charged with a felony violation of the CFAA—18 U.S.C. § 1030(a)(2).  An individual is liable under this section (which can carry both civil and criminal penalties) if he “intentionally accesses a computer without authorization or exceeds authorized access.”  The statute defines “exceeds authorized access” to mean “to access a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter.” 18 U.S.C. § 1030(e)(6).

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The Pennsylvania Supreme Court Strikes Down a No-Hire Agreement as an Unreasonable Restraint on Trade

Recently, in Pittsburgh Logistics Systems, Inc. v. Beemac Trucking, LLC, No. 31 WAP 2019, — A.3d –, 2021 WL 1676399 (Apr. 29, 2021), the Pennsylvania Supreme Court found that a no-hire provision that was ancillary to a services contract between two businesses was an unreasonable restraint on trade and was therefore not enforceable. In ruling on this matter of first impression, the Court identified several important factors that employers should consider before entering into a no-hire provision that places restrictions on the movement of their employees.

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