Coming August 2022: Colorado Substantially Limits Noncompete Agreements

Beginning August 10, 2022, Colorado will drastically narrow the circumstances in which Colorado employers can seek to enforce noncompete and other restrictive employment agreements. Despite Colorado law already having a general restriction against the use of noncompete agreements, the Colorado General Assembly recently passed, and Gov. Jared Polis has now signed, HB 22-1317. With this bill, Colorado joins the growing number of states enacting increased employee protections against restrictive covenant agreements, including banning such agreements with workers earning below a certain threshold.

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U.K. Employment Law Update: Worker Status, Non-Compete Restrictions and COVID-19 Dismissal

Clarification on Worker Status

In Nursing and Midwifery Council v Somerville [2022] EWCA Civ 229, the Court of Appeal (CoA) considered whether an obligation on the part of a worker to perform a minimum amount of work was a prerequisite for worker status.

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Third Circuit Rejects Employer’s Attempt to Block Executive’s Move to Rival Despite Non-Compete Agreement

As we have written about previously, an increasing number of states, and Washington, D.C., have limited the circumstances under which employers can bind their employees to non-compete and similar agreements, particularly when low-wage workers (however defined) are involved. The courts, however, are not immune to the trend, as evidenced by the April 21, 2022 decision from the U.S. Third Circuit Court of Appeals, ADP, Inc. v. Levin. In that case, the Third Circuit affirmed a district court’s denial of a preliminary injunction against a senior executive who had resigned from his Chief Strategy Officer position at his prior employer, ADP, to take over the Chief Executive Officer position at rival Benefitfocus.

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DOJ Remains Committed to Aggressive Antitrust Enforcement Against Employers and Their Employees Even in the Wake of Recent Trial Defeats

The Department of Justice Antitrust Division (DOJ) recently suffered significant losses in two criminal trials involving alleged criminal wage-fixing and related “no-poach” agreements by and between competitors. These were the first cases ever where the parties have proceeded to trial after the DOJ pursued criminal charges under Section 1 of the Sherman Antitrust Act predicated on such conduct. The Sherman Act includes penalties for criminal violations of the statute that can reach up to $100 million per violation for companies, and individual defendants can face $1 million fines and up to 10 years in prison. While the DOJ’s trial setbacks raise legitimate questions regarding the efficacy of its aggressive antitrust enforcement agenda — particularly in labor markets — the primary federal agency tasked with enforcing criminal violations of federal antitrust laws shows no signs of pulling back on similar investigations and prosecutions in the future.

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Washington, D.C.’s Non-Compete Ban Delayed Again

The Washington, D.C. Ban on Non-Compete Agreements Act of 2020 (D.C. Act) is on hold once again, this time due to emergency legislation signed by Mayor Muriel Bowser earlier this week.  The new legislation pushes the D.C. Act’s effective date from April 1 to October 1, 2022.  As reported here, the D.C. Act is one of the most comprehensive bans on employee non-competition restrictions to date.  It not only prohibits post-separation non-competes for employees working within the District (consistent with what a handful of states, including California, already do), but also rejects common “anti-moonlighting” provisions that prevent employees from working for another employer, including a competitor, during their employment.

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9th Circuit Says Forum Selection and Choice of Law in Employment Agreement Violate California Law

On March 14, 2022, the 9th Circuit affirmed the U.S. District Court for the Central District of California’s decision in DePuy Synthes Sales, Inc. v. Howmedica Osteonics Corp. and Stryker Corp., that invalidated the New Jersey forum selection clause in the employment contract of Stryker’s former sales associate as a matter of California law and denied Stryker’s motion to transfer the litigation to New Jersey. Though forum selection clauses are generally enforceable under federal law, the 9th Circuit reasoned that deference must be given to state law in determining the validity of a forum selection clause before considering whether the clause is enforceable under 28 U.S.C. § 1404(a).

The case involved a former Stryker medical device sales associate, Jonathan Waber, who was employed by Stryker in California and who signed an employment contract with Stryker without legal representation. The agreement included non-competition and non-solicitation provisions, and also included forum-selection and choice-of-law clauses requiring adjudication of contract disputes in New Jersey. After less than one year of employment with Stryker, Waber left Stryker to work for one of its competitors, DePuy. After receiving a cease-and-desist letter from Stryker, DePuy and Waber preemptively filed a declaratory judgment action in the U.S. District Court for the Central District of California against Stryker and its subsidiary, Howmedica.

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