Lawyer Monthly - April 2022

EXPERT INSIGHT 54 WWW.LAWYER-MONTHLY.COM | APR 2022 now, employers should revisit the laws of their state to make sure that their agreements and policies are up-todate and will survive scrutiny. What significant developments or case law concerning non-compete clauses have you observed since 2020? After the pandemic began, with widespread job loss, courts have become more reluctant to enforce non-compete clauses, particularly those that would limit a worker’s ability to earn a living. It appears that judges are on high alert to the current economic climate. The trend is to only enforce a non-compete if it is necessary to protect a truly legitimate business interest and if competitive harm is truly irreparable. The typical vehicle to enforce a non-compete is to file a lawsuit for injunctive relief to immediately stop unfair competition in its tracks. Federal and state courts across jurisdictions will generally require the employer to prove that it is likely to succeed on the merits, likely to suffer irreparable harm, that the balance of equities tips in its favour, and that enforcement is in the public interest. The pandemic has tipped the balance to favour employees. Courts are more sensitive to employees who have been laid off or who are faced with additional challenges of finding a new job in their area of expertise because of the restrictive terms of a non-compete agreement. Many courts have refused to uphold non-competes against former employees who face a more difficult re-employment landscape than previously anticipated prior to COVID, including employees in industries where the pandemic had and continues to have a devastating impact. In sum, courts are now scrutinising the factual circumstances behind non-compete cases more than ever to ensure that enforcement is a truly necessary measure to protect the employer from potential or further irreparable harm. What advice would you give to an employer who is uncertain of how to enforce non-compete clauses in the “new normal”? The first step would be to look at the clause that the employer is seeking to enforce to see if is narrowly tailored and does not restrict more than what is necessary to protect the business. This depends on the nature of business and the former employee’s particular position. If the non-compete terms read like a boilerplate clause that is broad, generic, and conveniently tucked into hiring documents where the employee lacked fair bargaining power, it might not be cost-effective to bring it to court, and the employer should consider other measures to prevent or stop unfair competition by a former employee. A sloppy non-compete clause that contain restrictions that are overly broad essentially renders the clause entirely useless, especially in the COVID era. I highly encourage employers to review the language of their non-compete agreements and revise them as necessary to prevent a situation where an action to enforce it would be futile. On the other hand, if the non-compete is sufficiently tailored in duration, geography and scope, or if the harm is truly great or irreparable, employers are still faced with a heavy burden to prove that injunctive relief is justified. I would highly recommend that employers conduct their own investigation, rather than to rely on second-hand information, to verify if the non-compete has been violated and to assess the severity of the harm. A cost-benefit analysis should be performed, and the ramifications of potentially losing a non-compete litigation should also be considered. If legal action is warranted, employers should act fast, as courts will also consider how quickly the employer acted to protect its interest. Are there any other methods you would suggest employers consider in order to better secure their proprietary information? Prevention is oftentimes better than cure. An employer will be much better able to take effective and expeditious action against a current employee who may be misusing confidential information rather than a former employee who has already left to join a competitor. Employers should examine whether their business interests would be sufficiently protected by a thorough nondisclosure agreement or nonsolicitation agreement, which are more likely to survive scrutiny. Drafting and consistently implementing company policies aimed at safeguarding confidential information is another great way to set rules and A sloppy noncompete clause that contain restrictions that are overly broad essentially renders the clause entirely useless, especially in the COVID era.

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