Boost Your Non-Solicitation Agreement Legitimacy with eSignature Technology

How to eSign a document: eSignature legitimateness for Non-Solicitation Agreement

welcome everyone to con maciel carey's uh monthly labor and employment webinar series uh today uh megan shackett and myself will be discussing um avoiding common pitfalls of company trade secret and non-compete and non-solicitation agreements um yeah with everything else going on in the world the the past year or two um issues with non-compete and non-solicitation agreements may not be in the forefront of your mind unless or until you're embroiled in some sort of dispute regarding trade secrets or non-compete agreements and all of a sudden then these issues become crucial um at the same time even though we may not have been thinking about these issues so much the last year or two there has been a ton of updates um from various state legislatures and even even federally there has been some movement so if somehow you know you it's just been under your radar um you know not realizing what you know that there's been any movement on this you might be in a state that all of a sudden is now um prohibiting non-compete agreements so uh megan and i just thought it would be prudent to to go through this topic with you remind you about the positives and negatives you know what you want to be thinking about in this regard and importantly provide you with some updates about what is the current status of the law and what may be changing um so that you know whether your current business practices need to change uh with regard to the non-compete agreements um so what i'll be doing or what megan and i will be doing is we'll give a discussion about um just generally how you want to protect your trade secrets then we'll move into um how your non-compete agreement should be utilized during the hiring process and um on the flip side the termination process then i'll walk through the the legal update of what's been going on in the last you know 18 months or so that may be very different from from uh what has been going on in the past and then i will give you some [Music] um specific tips for how to deal with choice of law provisions and form selection clauses while you are drafting your non-competes or while you are revising your non-competes um just so that you you make sure to take advantage of of the most advantageous law uh laws that you can while because every state is so different in this regard you really want to make sure to take advantage of the favorable states um that you can while you're dealing with these types of restrictive covenants so you know who i am for those of you who don't know me my name is jordan schwartz um i'm a partner here at con maciel cary um i focus on all aspects of labor and employment in litigation at both federal and state levels in all matters relating to restrictive covenant issues the ada the flsa the fmla um yeah i i counsel employers on all issues relating to hiring discipline internal investigations termination and and restrictive covenant issues and of course like many employment lawyers now i advise on all issues um stemming from coven 19. um and now you will hear from megan who will introduce herself and then who will start the presentation thanks jordan hi everyone i'm megan shakeed i am an associate in our con massey i'll carry san francisco office uh so i practice in both our labor and employment groups and our osha groups handling our california osha matters on the labor and employment side i handle litigation in california state and federal court and also counsel employers on all sorts of employment issues including the ones we're going to discuss today um lately it's been a lot of certainly covid19 advice but also keeping up with all of the constant changes in california law um so today we're going to dive right in and before we get to the much anticipated legal updates i'm just going to go over kind of some foundational concepts to remind everybody uh what what it is we're talking about so those updates make a little bit of sense and the first topic is uh on protecting trade secrets this is something that is uh you know when covet is not the only thing that people are worrying about this is often um actually top of mind for companies to protect their trade secrets uh so what what are we talking about when we use the term trade secrets okay there are and today's presentation where we will highlight when there are major differences from jurisdiction to jurisdiction uh but we'll try to kind of give an overview that would uh so if depending on where you are in nationwide this presentation makes sense um and and one interesting thing to note about even just the definition of trade secrets is that there has been efforts to have a uniform standard nationwide um there is a uniform trade secret act that has been adopted by the vast majority of states in an attempt to have a common definition of what a trade secret is but generally speaking a trade secret is information that is not generally known to others and that gives an employer a competitive advantage so you have to think about both um the information actually being confidential and you have to think about the value that it holds to the company and you know the flip side of that is kind of the risk in what's at stake if that information were to be shared with a competitor uh so the kind of corollary to that that we'll talk about in defining a trade secret is uh the efforts to maintain its secrecy uh and what uh will kind of die dive into these concepts in a little bit more detail uh but some general considerations to keep in mind uh as we continue through the slides or those kind of general idea of it being confidential and the value to the to the company so despite uh what i just said about an attempt to have a uniform definition it is uh can be kind of a hard concept to pin down because it is so fact specific so you really have to look at the nature of the information and how it's used and so some of the things that courts will consider in determining whether information is a trade secret or not is whether the information is known outside of the business uh is this really something that's kind of a secret internally or is this generally held information in the industry or in uh in a certain kind of business what are the measures taken by the company to protect the secrecy of this information like i mentioned a moment ago what is the value of the information to the both the owner internally to their operations and also to the competitor so what's that risk of that information being shared another thing that courts will look at is the amount of effort and funds that are um put towards developing and protecting the information and then how easy or difficult would it be for this information to be acquired or duplicated by others and how those factors are interpreted from jurisdiction to jurisdiction matters because uh depending on where your employees are working how this courts have interpreted these factors in that jurisdiction is going to be what determines whether or not information is considered a trade secret and kind of rises to that highest level of protection so when we talk about um you know you often hear the word like the phrase confidential proprietary or trade secret information so you can kind of think of confidential confidential information as being a really broad category and trade secret information being within that category so something may be confidential and you may treat it as confidential but it may not rise to the level of a trade secret so examples of things that have been considered trade secrets in the courts um are things like customer lists or formulas manufacturing processes marketing plans pricing information uh internal studies like research studies or processes strategic business plans uh testing data and training manuals and this is not to say that these categories will always constitute a trade secret but these are examples of things that have been considered a trade secret yeah and else to just to um to build off that point you know you need to look at this list in the context of what megan said in the slide before about the factors that that a court would consider so for customer lists for example if that if your company has treated the customer list as confidential and private and has not disseminated that list anywhere yeah there's a better chance that that a customer list would be considered a trade secret but if you know your competitors know your customer list then you know if it's published somewhere then all of a sudden customer list is in no way shape or form a trade secret so you have to look at these examples um again in conjunction with with what megan just explained for the various measures that you as a company must take in order to show that you value this information and that it's private to you absolutely so another key example we like to give is let's say um customer lists let's say you just have a you know generic list of all of the um potential customers in your industry and it could be readily found by a quick internet search versus a customer list that actually has key contacts within those customers and those key contacts you know you wouldn't be able to find those people just by googling the company on the internet and having a roster of employees let's say those those individual businesses don't make that information readily available so those are those are the kinds of really really fact specific inquiry a really detailed inquiry that a court would would get into if this were to um if this were really to be a litigated issue so one of the one of the factors that we talk about is protecting the trade secrets so how do you go about doing that the key here is that the company really wants to take affirmative steps to both communicate with its employees what is the confidential information that the company is trying to protect and then also what are the steps that are expected of the employees to protect that information so one way that this is often done is through a confidentiality agreement that's signed at the beginning of employ of employment and it can also be repeated in a company handbook and this can just very clearly in easily understandable language lay out what is the information that is confidential what is the information that's trying to be protected and what are the obligations of the employee so you know not to disclose it certain restrictions on how to use it and then depending on where you are and what your jurisdiction permits in terms of restrictive covenants it may even go as far as restricting the ability to solicit customers and employees and oftentimes even though the confidentiality agreement and handbook are often reviewed and signed at the beginning of the employment the reality is that oftentimes these don't become an issue until an employee has left a company and is now potentially with a competitor uh so the agreement the another key thing that the agreement or the and or the handbook can describe is an employee's duty to return confidential and proprietary information at the end of employment and we'll talk about that in a little bit more detail in in a little bit um so not only is it important to lay out very clearly the expectation but it's also important to have steps to really protect the information physically right if there are uh printouts of this information or if there's a physical thing that we're talking about protecting that it's labeled as such and that access to it is restricted to only those who need to access it and if we're talking about information that's available on software systems computer systems then making sure that they're adequate protections like password protections software programs that would protect it or whatnot there are also steps that you can take to protect the information internally like limiting access to the information to only those who who need to have it and access it and considering restricting access to those who really don't need access to it same thing with circulating documentation if an email is going out and it doesn't need to go company-wide it only needs to go to the people who are using that information then that's something to to pay attention to as well and recognizing that how information is being developed and used may change over time it's certainly a good practice to take periodic inventory of your trade secrets and your policies and practices in this area and consider whether any changes need to be made and then of course communicate those changes to your workforce and if you were ever in a situation where you're let's say having a meeting in a conference room and you're actually printing out uh or sharing information that is protected that you make sure that those printouts don't end up sitting around on the on the conference table after the meeting is over another kind of subset agreement that is uh sometimes considered along with just a generic confidentiality agreement is you know confidentiality but also non-disclosure agreement and uh the scope of a non-disclosure agreement in terms of what is permitted and and kind of the standard that applies for whether it's a proper agreement or not varies uh state by state for example as a california lawyer i know that california has uh not surprisingly quite a few restrictions in this area um in terms of all of the restrictive covenants that we're talking about today but the non-disclosure agreements isn't is an area that has specific restrictions so this is something to to definitely look at state to state and if you are operating more than one state uh maybe it makes sense to have different agreements for different states where employees are operating or maybe it makes sense to have um you know whatever state is the most restrictive and have that apply uh to your entire uh workforce depending on what makes sense for a company so uh again recognizing that there may be some variety state to state typically when a court looks at whether or not a non-disclosure agreement is reasonable they're going to look at several factors including the interests of the disclosing party and keeping the information secret also the period of time that the information is being asked to be to remain secret uh the com the burden uh that it places on the party to maintain the secrecy of it and the general interests of the public so the the courts will consider all of these but then at the end of the day they'll also keep in mind whether the information being asked to be protected is actually confidential and and it's important not to lose sight of that because oftentimes uh and it makes sense that companies want to be very inclusive in kind of putting a circle around the confidential information but recognize that some of the information that a company might sweep up might not actually be confidential and it might behoove a company to be more selective in the information that it's trying to protect so that if if there were ever a dispute you you can make clear that you're that you really are trying to protect genuine secret information so moving on kind of from trade secret confidential confidential information and what that is and there's also the concept of having a non-compete agreement both um at higher and sometimes even during the middle of an employee's uh employment relationship so when we talk about a non-compete agreement we're talking about either you know a part of an employment agreement that includes a non-compete clause or a stand-alone non-compete agreement where an employee is essentially agreeing not to complete compete with their employer after they've left the uh employment relationship and even during the course of the employment relationship and uh again this agreement oftentimes is signed at the beginning of employment or even in the middle during the course of employment but when it really comes into play is after an employee has left so where a non-compete agreement is permitted and they're not valid in their nationwide we'll get into that in a moment but where they are permitted they're often considered to be uh valid when there's three factors that are present one they're supported by consideration two they protect a legitimate business interest of the employer and three they're reasonable in scope geography and time and just a note on the consideration something to keep in mind is that depending on the jurisdiction there may be a difference in what constitutes adequate consideration depending on whether the agreement is entered into at the beginning of the employment or in the middle of the employment so oftentimes just being hired is enough adequate consideration for the non-compete agreement at the beginning of employment but it varies state to state if the non-compete agreement is presented to the employee during the course of their employment relationship yeah just just to expand on that just a bit further uh you know we have lots of clients asking um oh yeah we we have we've had this employee for four or five years now we want him to enter into a non-compete we we do that right and you know the answer that that lawyers love to give is it depends um because as megan said in some states just saying okay you're still an employee your continued employment um you know that could constitute sufficient consideration um so fine you can have the employees sign the new non-compete but there's a you know a handful of states where continued employment you know regardless of how long that employment has been for or will before does not constitute adequate consideration to enter into a non-compete um so in those cases you know typically you have to give some sort of bonus or raise or change the employee's job title and promote the employee and then typically that's akin to a new employment relationship and somewhat at least in this in this context and that should um constitute sufficient consideration but just deciding you want to have an employee sign a non-compete agreement in the middle of his or her employment um isn't necessarily the way to go depending on on what state you're in sorry to interrupt megan i appreciate it thanks jordan so where um there are certain states and and jurisdictions you'll hear from jordan a little bit later about watching an update from washington dc there are certain places where non-compete agreements are not permitted at all california being one of them uh oklahoma and north dakota are among the lists also so you know just as an example in california we non-compete agreements have been prohibited since the 1800s there's a specific statute on point and it has been continues to be interpreted uh pretty broadly to prevent restrictions uh and the concern is is restricting trade essentially and and a worker's ability to perform their chosen profession and even you know follow their personal interests if they're if their uh profession changes over time so even in jurisdictions where non-compete agreements are permitted courts are still going to scrutinize non-compete agreements to make sure that they aren't too restrictive against uh trade essentially and so it's important even if you're considering a non-compete agreement where they are permitted that the non-compete agreement be reasonable and be narrowly tailored to address the true concerns and this brings us to the topic of a legitimate business interest so again regardless of how well a non-compete agreement may be written at the end of the day no court is going to enforce it unless the employer can identify a legitimate business interest that the restrictive covern covenant is protecting and what a legitimate business interest means can vary and is subject to court interpretation and as many of these things are that are a multi-factor consideration and courts look uh at different things in order to make this decision now while in some ways it's difficult to define what a legitimate this business interest is courts oftentimes will make it easier to know what a legitimate business is interest is not so courts have said that it does not include merely protecting an employer from general competition general competition is fair game it's unfair competition that is problematic in the eyes of the court so uh enough to give you an example employers do not have an interest in preventing employees from competing through their use of general knowledge or their general skill or you know their general experience that they've acquired through training or just their years on the job to give you some examples of legitimate business interests that courts have have identified as as deserving protection are again that large category of trade secrets that we discussed earlier also intellectual property things like customer lists good will with customers uh knowledge of business practices and methods profit margins costs pricing and other confidential information that is of value to the company and that would be harmful if shared with competitors uh training in education again depending on what this actually looks like and what the how the information is gathered and how it's used and how it's protected all come into play in this analysis as well and then the element of the of the non-compete agreement being reasonable in scope geography and time is something that the court's going to essentially ask whether or not the non-compete agreement is too broad uh and so they'll look they'll look kind of at all the all the details of the agreement um but essentially they're they're asking the question is this a reasonable restriction or not so with respect to time is you know a six-month period of time where they're not allowed to compete with a uh with their former employer reasonable um you know often times where this is permitted yeah six months is going to be a presumptively reasonable period of time the higher that time period goes then more scrutiny will be given to it and maybe it will reach a time period where it's not reasonable any longer same thing with geography perhaps there's a mileage restriction uh surrounding a location that's a reasonable uh geographic limitation but perhaps a nationwide restriction would be too too broad same thing with uh kind of the overall scope of the agreement the courts will ask is it is it really necessary to protect the employer's legitimate business interest or is it going a step too far yeah and just one point there with the scope that that's something that um employers sometimes forget about but different states take that pretty seriously for example in virginia uh the scope of the non-compete really should be limited um to the same essentially the same job the employee is performing so let's say the employer um the employee um does marketing and you have a non-compete and the non-compete should say the this employee cannot perform marketing for a competitor for you know let's say six to 12 months if you just say the employee cannot work for a competitor for six months the employee the court will likely say well it's not limited in scope um yeah this is something and i'll talk about this if there was just a recent illinois case on this it's called the janitor rule that uh you know the plaintiff the defendant would argue oh i can't go work for a competitor as a janitor you know that that uh you know this all impacts everything that megan was talking about in the beginning though the whole reason for this is that the trade secrets and confidential information of the employer is protected so of course if he's working in the same capacity he has some sort of trade secret or confidential information potentially has that knowledge if he's working in a totally com different capacity for example a janitor he wouldn't have the um trade secret or confidential or proprietary um knowledge of of of that job so that that's what the scope means and people sometimes only think about time or geography but you really want to limit the scope to the same duties or at least similar duties that the employee performed while he was working for you i won't dwell too much on this slide but just wanted to mention that some professions may have statutory exemptions that apply depending on the jurisdiction um for example in certain industries there may be a public policy justification for exempting them from non-compete agreements for example um some in the in the medical profession uh to basically allow the free flow of information and and ideas and uh to again not put too too harsh restriction on ability to to move the the the interesting one there and lawyers some people think it's because the lawyers wrote the rule that lawyers are exempt from non-competes although it is so the clients can uh have their full choice of representation the one that i'm always surprised about is broadcasters but for some reason there's a carve out and i don't think it's for all broadcasters but for a substantial amount of broadcasters they are exempt from non-compete agreements so i always find that interesting so for the next few slides we're going to talk about kind of what do you do um once you've considered hiring somebody with a restrictive covenant with a non-compete and then kind of how do you treat that employee uh after they've left the employee so so first if you're you're considering hiring someone uh with a non-compete agreement or other restrictive covenant like a non-solicitation of customers or uh or employees clause so first you want to take reasonable steps to protect your business from interfering with your competitor's restrictive covenants so you have to think outside of your company this employee now coming into your company may be subject to a restrictive covenant from their former employer so during the interview stage you can ask an applicant whether they are subject to an employment agreement with any restrictive covenants and you can even obtain a copy of that agreement and understand what the scope of the restriction is and communicate very clearly that the company insists on full compliance with the employment agreement so you're making clear you're not trying to have them violate their any restrictive covenant that they may be subject to right clear clear there sorry to interrupt megan you might all know this but if you don't do that it's not only this new employee that might be sued and then you have to start over the process of potentially looking for another employee and you know it's a lot of wasted time effort and money but you will be sued for tortious interference with contractual relations and uh it goes from the old employer initially wanting to sue this new employee to then caring much more about suing you your company because your company has deeper pockets so it it you know it ends up even though this is all prudent to do it's absolutely necessary or all of a sudden you're you're on the hook for being a defendant in a case and you know just saying up we didn't know about the non-compete is isn't really a great defense so these points that megan are going through right now are very important both to be just a prudent new employer but to protect yourself from significant legal exposure absolutely so making really clear to the applicant that that that agreement they resp the company respects that agreement acknowledges that agreement wants them to continue following that agreement and really if it's not if it's not clear in the language making it very clear that the company does not want the applicant to disclose or use any of the competitors confidential or proprietary data if they come on to the company and the way to to kind of solidify this is if you do extend an offer to lay this out very clearly in the offer letter which can then confirm and set the expectations of the employee to comply with any existing restrictive covenants and that agreement is a written document it is put in the employee file and uh it can be referenced if there if the former com company raises any issue or if you need it in any um in any case down the line to defend against a claim of of interference or misappropriation of confidentiality confidential or trade secret information but it's not enough to just leave it as you know a line or a couple lines in the offer letter you you really want to take a proactive approach and review with the uh now employee to ensure that everybody understands uh what this actually means in reality and how to comply and uh kind of sit down with them and create a list of customers that they worked with um and kind of the scope of that work and what figure out if they're um kind of if they're if there needs to be a clear delineation of what that employee can customers that employee can continue to work for and and ones that they may need to be restricted from working for and and one of the ways to do this is to create an ethical wall so that if an employee worked with uh with with customers that they that they shouldn't be working with going forward that there's a clear process for that and that uh everybody who's who's involved knows that so that information isn't shared unintentionally with that employee they're not asked to perform work that they shouldn't be performing and that that kind of separation is is understood and respected um and and you want to a good an important reason for this is to avoid allegations of flipping where the former employer thinks that you just hired that person to then directly compete with them and so set creating these ethical walls and creating procedures to be mindful and protect against these things shows that you're taking it seriously and that you're not trying to do anything nefarious or that that competitor would have a problem with and then the corollary to this is how do you treat an employee when they leave for a competitor again you want to take reasonable steps to secure that confidential information so it's a one thing you can consider is having a comprehensive exit interview where you go over excuse me it may be it may have been a while since that employee signed their confidentiality agreement or reviewed their handbook or signed their offer letter and so you can remind them of the confidentiality agreement any other restrictive covenants that applies to them so it's fresh in their mind when they leave your employment the exit interview is a really good opportunity to collect any company issued property cell phones computers ask that they remove any employee information from you know personal computers or devices or things that they may have printed out over the years um it's also uh one [Music] oh one thing here is um about returning company issued property is that that's something that i mentioned earlier on when uh considering a confidentiality agreement or language to put in your handbook that you've put out there since the very beginning that if an employee leaves the company they will be asked to return everything so then in the exit interview when you ask them to return everything that's expected and they know how to comply you want to of course remove employee access to computer networks or emails or servers and then if they do have any laptops or desktop any hard uh hard copy anything that you take all that back but then also really consider hanging on to that information because if you have say an employee who leaves through a compet for a competitor and then an issue arises down the line and there is a concern that they may have taken trade secret information or they may be misappropriating this information with their new employer that you have the ability to check their hard drive do a forensic analysis if need be and find out what were they doing before they left the company and is there any evidence that they've taken trade secret or other confidential information and then you can even contact their new employer and just notify them of the employee's obligation under their employment agreement because the competitor may not be taking all of the prudent steps that you are taking in reminding new employees to comply with their existing agreements so you can you can really like any kind of tricky issue in the employment realm i like to say that messaging really matters and so you can really fight for your customers and business in a very positive way by communicating publicly about new hires so you can identify you brought somebody new onto the team you can identify them publicly you can you know shoot out a message in your whatever social media you use or or whatever advertising or communication you use to say hey we have a new person on our team you can kind of facilitate the new relationship between this new team member and your customers or vendors or other business relationships especially those that you may be concerned about to say hey you're in good hands here's our new team member you are in good hands with this person and make sure that you solidify that relationship and the emphasis can really be on why your customers or vendors or whoever should continue to do business with you and rather than putting the focus on not doing business with the employee who is who has since left and really careful consideration needs to be done to make sure that there's no uh false information or defamatory information being shared about the former employee you know when in doubt simple is best a clear communication that the former employee is no longer with the company uh and really leave it at that you can't control all communications with your workforce you can't protect against all gossip but to make really clear that if there are rumors spread about a former employee particularly when they are not accurate that that can give rise to a liability on behalf of the company for the invasion of privacy or defamation or other such claims and you can certainly make clear if there are questions about well what can we say what can't we say um to make clear uh how the employees who remain can can legitimately communicate about a team members uh no longer being there generally speaking uh an employee has the ability to use their kind of general knowledge skills and experience to compete with a former employer but again along the lines of avoiding unfair competition it's pretty consistent nationwide that employees cannot use confidential information or trade secrets that they acquired during employment uh to compete with their that former employer once they've left or even during the course of employment so if there's questions when somebody leaves and it raises these questions it's a really good time to remind your employees about the about the expectations that are hopefully laid out in their confidentiality agreement or the company handbook and again to keep in mind if you're considering whether you have an issue on your hands or not uh you can investigate whether an employee may have taken confidential or trade secret information you can you know rely on your forensic abilities or your abilities to check their emails or their other communications to find out you know are they potentially misappropriating trade secrets are they potentially soliciting customers in violation of a restrictive covenant either you know while they were still working or after they've left depending on what the scope of the agreement is have they solicited other co-workers to leave if that is something that's subject uh to the to the agreement and have they you know have they really walked away with information that is of value to the company that could be of great value to a competitor and some some other kind of detailed steps that you can take you can you know not only make sure that you don't reissue a device but you can make sure that you're saving emails make sure that you know any information that you might want to turn to to find out what the employee was up to or what the employee might have taken or forwarded to a personal email address while they were still employed make sure that you have the ability to capture that information if you need to and uh you know this sort of if you if you are at this level where you are investigating an employee this is certainly something to be very careful with in terms of who knows this you don't want to you don't want to open yourself up to like i said an invasion of privacy or defamation lawsuit and these this is just a list of depending on your operations and where information might be stored these are some things to consider in checking when you might have a an issue on your hands like a personal computer the employee's email voicemail a company smartphone if one was issued to that employee but even cell phone records not just the physical phone itself but also the cell phone records if that might show uh phone calls that the person was making before their employment ended uh you know phone numbers that they were dialing from numbers that were making calls to them uh also card access records to show if that shows where they were what they may have been had access to uh same with video surveillance cameras so at this point we can move on to the much anticipated uh updates from jordan uh thank you very much megan um yeah just um in summary there is both federal movement on this issue although the federal movement isn't substantive and then just a ton of state movement uh really the states were kind of quiet for a while california had their rule that everyone knew about um other states had their case law but it really in 2018 when massachusetts um they kind of jump started the this trend and instituted some some harsh requirements in terms of the effectiveness of non-compete agreements uh specifically for low-wage workers which is something that a lot of states have have grabbed on to um and since that time there there's over a dozen states um that have issued uh non-compete laws and i'm going to go through them real quickly um knowing that everyone on this call is from different states but you know just to make sure you know um you know what what's going on in in your state but before i do that let me just talk about the federal um federal update really really quickly um in july uh the biden administration um issued an executive order i think was called the promoting competition in the american economy order um and it didn't necessarily do anything immediately but it encourages the the federal trade commission to uh as it says on the slide here curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility um so you know the question is what exactly does that mean um you know in the past decade or so there have been calls for federal agencies to to curtail the use of of non-competes um but this is this is a little more even though it's not substantive it's more direct than anything that's ever happened on the federal level before and you know keep in mind that um in biden's campaign yeah he did stress that he would like to eliminate all non-compete agreements except for the very few that are absolutely necessary to protect the narrowly defined category of trade secrets so this order you know is a step towards fulfilling that that campaign promise um so yeah we're gonna see what happens if somehow the federal government does join the growing number of states that actually institute legislation but for now so for now there's nothing to do from a federal standpoint however some of the things megan discussed you know you do want to be on the lookout about whether your non-competes are narrowly tailored and impose no greater restraint than necessary to protect your interests you know are they reasonably limited in duration and geographic scope and scope of duties um do you have low wage workers now and again i'm gonna get to that in a second in various states but at this point the momentum is huge to basically eliminate non-competes for low-wage workers um and you know with just another general tip is you want to make sure that you don't prevent an employee from doing business with clients or customers with whom they had a relationship with prior to your your employment um and then are there confidentiality or other provisions not solicit that you can do instead of non-competes so that's just things you want to think about um then going to some of the state um rules and the big one i mean there's a bunch but the real big one here is in washington dc um it is not in effect yet it will be in effect in in a few months in april um although it's it's gotten pushed back once or twice and it's possible it it'll get pushed back again but yeah this really makes dc the most stringent uh non-compete law anywhere other than california i believe it really prohibits uh non-agreements for virtually all employees that there's one or two extremely limited situations and i think it um you know you have to be over 250 000 and a specific medical professional um and that's it um but the really big thing is it goes further than that it bans anti-moon lighting and other workplace policies which prohibit an employee from performing work or for being employed by any other person even a direct competitor or operating your own business um again this is during the employment not even after many clients have some sort of anti-moon lighting provision and those provisions will not be valid in a few more months there is also a specific notice that dc employers will have to provide their employees basically saying no employers may require you to sign any sort of non-competition agreement so that that is something in case an employee somehow doesn't know you will be violating the law even if you don't give this notice um so you know that there's just so so many things it provides a private right of action for the employees it does permit the employer to to still have protections um regarding confidentiality so at least the law does not ban businesses from entering into agreements with employees that prevent the employee from disclosing confidential proprietary or sensitive information customer lists or client lists or trade secrets however any agreement regarding protecting the sensitive information cannot restrict an employee's access to new or other employment opportunities in the course of enforcing those protections if you want to move to the next slide megan um the one interesting thing is this law doesn't mention non-solicitation agreements so at this point we don't really know if non-select non-solicits will be um prohibited or not um you know for now we're focused on making sure our clients know that the anti-moon lighting provisions are are are now something we need to be aware of and just general not non-competes um you know and this act again is so unique in prohibiting um dc employees from performing other work while employed and that's just something that that our clients are having trouble getting their heads around and quite frankly um you know i'm having trouble getting my head around that and the the other thing is in addition to non-compete agreements and anti-mumma and not and anti-moonlighting agreements not being valid the act also impacts other commonly used employment policies because the moonlighting provisions could affect standard duty of loyalty and conflict of interest policies i mean i've reviewed for clients a bunch of conflict of interest policies which typically preclude some sort of conflicting employment during an employee's you know time that they are employed and and those conflict of interest policies especially you know lots of government um employers have conflict of interest policies those may not even be valid anymore so it's going to be very interesting to see what happens um in dc uh real quickly going to some other states now because i i do not have a lot of time here um there's going to be a big theme here um for both maryland uh oh one other thing about dc is it will only apply to new um agreements going forward it will not apply retroactively so at least that that's one thing uh employers can breathe a sigh of relief um both maryland and virginia you know talking about the dc area here are now prohibiting employers from requiring low-wage employers a low-wage employees to enter into non-compete agreements um in maryland it's similar to dc in a way although it doesn't ban non-competes but this ban on on low-wage non-competes does apply during employment not just after an employee leaves that that is not the case in virginia but again both maryland and virginia if you have low wage employees you want to be extremely careful not to have them enter into non-competes similarly if you look at the illinois law which i think is two slides up that goes into effect um in about uh a month uh you know the start of 2022 which is the same you know similar um although the the maryland virginia the wage threshold was much lower in illinois non-compete agreements will be banned for employees earning less than 75 000 annually and then that annual salary threshold will increase over time and the interesting thing in illinois is that non-solicit agreements will be banned for employees earning less than 45 000 a year uh yeah all these states have just little interesting carve outs that other states don't and illinois um is interesting and that they have this carve out not just if you're terminated but if you're terminated or furloughed due to covet 19 or something to that effect if that's the case then the restrictive covenant would not be able to be enforced um a few a handful of other states i just wanted to mention real quickly washington state they are now void and unenforceable for employees making less than a hundred thousand dollars annually um also um megan had talked earlier you know about various time limitations um it is now a presumption in washington state that if it's longer if the non-compete is longer than 18 months it is unreasonable per se so you know that that is something something to keep in mind a few other of the states out west nevada law just went into effect uh you know last month um that non-compete agreements may not apply to employees who are paid on an hourly basis and that law also precludes employers from restricting former employers from working for a prior customer or client um if the employee did not solicit so if the employee was at a company and they didn't solicit the employees the other clients they work for they can now work with those clients going forward um oregon similar to washington state has now reduced the maximum length of lawful restricted period not only from 18 months as washington states was to now 12 months so if you have a non-compete with someone for more than a year with very limited exceptions um though non-compete will be invalid and again i don't know the breakdown of everyone on this call but if you're in any of these states i'm mentioning uh you you really want want to keep uh these these issues in mind and talk to me or someone else to get more details and then the last two states i'll just talk about real briefly and then i know i have to let you go is uh new york and new jersey now unlike the other states i mentioned new york and new jersey do not have laws as as of right this second however the trend will continue and the the proposal in new york is that um it would prohibit the use of non-compete clauses in their entirety provide no exceptions and have in addition to you know regular damages liquidated damages of up to ten thousand dollars so if that's passed obviously that would be a huge change um and then going to new jersey a bill also was proposed a few months ago um it would be a little bit different than new york but it would limit non-compete agreements to terms not exceeding one year and provide various restrictions for the reasonableness of a restrictive covenant and like many of those other states um it would prohibit non-competes regarding low-wage employees although they did not define what a low-wage employee would be although it would probably be higher than how they define it in in other uh jurisdictions and as with new york's bill it would it also contemplates liquidated damages so if i mentioned your state yeah you and you somehow didn't know about um these restrictions you want to look into that asap if i didn't mention your state these things are coming down the pike anyway so you know you really want to be careful uh with with your with your non-compete issues going forward um we did not have time to talk about uh forum selection provisions um if that's something you're interested in you could just email me and you know we could discuss whether or not you're in a state um that the law is a little bit more harsh um we're almost done with our 2021 labor employment webinar series in december there'll be a recap of the biden administration but you know stay tuned where we'll have our 2022 series coming up shortly um feel free to give us a call or drop us an email if you have any other questions on this issue and uh we enjoyed presenting and we hoped you enjoyed listening to our webinar and um found it useful uh we look forward to speaking with you all again very soon thank you very much