United States: New Developments In Non-Competes

I have written about noncompetition agreements in the broadcasting industry before. See (December 8, 2008 ) (January 8, 2013 ) (January 22, 2013 ). In an industry so focused on the development and promotion of personalities and distinguishing its information and entertainment from the competition, talent non-competition agreements can be critical. But, as the saying goes, "it's complicated." This is a field that is tricky and always changing. It pays to stay up on new developments.

A recent article in a legal publication brought my attention to several new developments that are worthy of broadcasters attention. While many of these new developments are specific to the state in which the case arose, they reflect general principles often relied upon in all states and therefore sew a cautionary tale worth hearing.

Note also that the issues here are really two-sided: broadcaster employers will want to craft agreements that protect their business interests and investments in personalities, and employees want to emerge from negotiations with an agreement that will not unreasonably hinder their ability to change jobs while continuing to work in the market and the industry without disruption to their personal and family life.

Nevada Law Allows Judges to Blue-Pencil

Employers may be pleased with a new Nevada statute that empowers judges to analyze a noncompetition agreement and fix them when they might otherwise be required to be nullified. Under the law, Nevada judges can "blue-pencil" or tweak provisions which otherwise could not pass muster for being too inclusive. The law reverses a Nevada Supreme Court ruling that judicial blue-penciling exceeds the court's judicial authority under preexisting law. The court's revisions must cause the limitations contained in the covenant as to time, geographical area and scope of activity to be restrained to be reasonable and to impose a restraint that is not greater than is necessary for the protection of the employer for whose benefit the restraint is imposed.

Additionally, as in most other states, even the Nevada court blue-penciled revisions would likely be invalid unless they protect something of value, do not restrain the employee more than is necessary for the necessary purpose, do not impose an "undue hardship" and impose restrictions only as appropriate in relation to the value protected. Further, employers cannot enforce non-competes against a laid-off worker unless they still pay his or her salaries and benefits.

LinkedIn Invitations Don't Violate Non-solicitation (Take Me Along) Agreements.

An Illinois appeals court recently held an email "connect" request on job networking site LinkedIn, sent to former colleagues did not violate a non-solicitation agreement, equating the emails to generic invitations to connect, rather than attempts to solicit former co-workers. The court held it's the content of the communications that matters, not the medium used to communicate it. "There are certain features about LinkedIn that are going to send out this blast as soon as you update your status, but what's really the difference between that and your new employer buying an ad on cranes ... announcing that you've arrived?" The court left open the question of whether a different, possibly more specific agreement, could restrict a former worker's use of social media. The court speculated that "digital social media is still an area that the courts have not caught up with, that the law is trailing behind the tech," and more developments will likely come.

Difficulty Enforcing Non-Solicitation Clauses.

Last June, in a case captioned In re: Document Technologies Litigation, U.S. District Judge Jed Rakoff held that four sales executives who left their firm could not be barred from working for a competitor, holding a non-solicitation agreement blocking them from soliciting colleagues to jump ship with them failed New York's test for reasonableness. Interestingly, one of the tipping points that caused the sales executives to leave was the sale of their company to a larger company they viewed as a "low cost" provider that would harm their reputation and their relationship with their clients."

In a broad and far reaching opinion, the court held that an employer cannot prevent an employee from "preparing to compete" after the period of the non-compete, because restraining such acts "would have the effect of extending the term of the covenant." The court also held that a restrictive covenant could not prevent at-will employees, who have yet to accept an offer of new employment, from "inducing" or even "encouraging" their coworkers to leave with them. According to New York courts, such a covenant is reasonable only if it: (1) is no greater than is required to protect legitimate business interests of the employer, (2) does not impose undue hardship on the employee, and (3) is not injurious to the public."

The case is a reminder that such post-employment non-competes and non-solicitation restrictive agreements must be based on something truly unique and valuable, and will not survive if they simply restrict an employee's post-employment behavior.

These cases point out the necessity for well-crafted non-compete agreements, and the need for specific legal advice for entering into, relying upon, and interpreting, non-compete agreements. In other words, cutting and pasting from a non-compete agreement used by another broadcaster in another state or from years ago may save pennies in legal fees but later incur substantial costs when new developments or dissimilarities in state law impact its enforceability.

This article originally was published by AllAccess.com. Click here for more at All Access.

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