Trade Secrets & Employee Mobility

On May 4, the Superior Court in Massachusetts ruled that EMC, a Massachusetts corporation, could obtain injunctive relief preventing Mr. Donatelli, who had been President of one of EMC's major divisions, from starting a job at HP in California even though California has a statutory prohibition on covenants not to compete. The Court made some important findings in its decision.

An executive's resignation and intention to begin work for a competitor of his former employer has resulted in a bicoastal battle of lawsuits over the terms of a noncompete clause in his employment agreement.

States vary widely in their willingness to enforce noncompetition agreements. Illinois, for example, will enforce a noncompetition agreement, but only after fairly rigorous judicial scrutiny. Notwithstanding such scrutiny, Illinois employers can draft enforceable noncompetition agreements.

Penthouse Club, the adult nightclub chain, filed a suit seeking a temporary restraining order and other injunctive relief against a former director for violating a noncompete and nondisclosure agreement.

In a recent case, Florida's Third District Court of Appeals reversed the issuance of a temporary injunction because it failed to specify with reasonable particularity the conduct being enjoined.

As the enforcement of non-competition agreements becomes more crucial than ever, some employers are including provisions that require or promise payments to the former employees during the post-employment period of non-competition. If properly crafted, such a payment may act as the additional consideration needed for the promise not to compete and may dissipate the former employee's argument of undue hardship during the non-competition period. Employers promising to make such payments must be prepared to follow through with their promises, as the Eighth Circuit recently held.

The Florida Second District Court of Appeals' recent decision in Fiberglass Coatings v. Interstate Chemical, Inc., Case No. 2DO8-1847 (Fla. 2d DCA, February 27, 2009), illustrates an interesting defense to a tortious interference claim. Absent evidence that the new employer induced the former employee to violate his non-compete agreement, merely hiring an employee whom the employer knows to be in violation of a non-compete agreement may not be sufficient to sustain a tortious interference claim under Florida law.

A Florida trial court should not have entered a temporary injunction enforcing a non-compete agreement against a former employee on an ex parte basis, i.e., without notice to the employee, according to Florida's Fourth District Court of Appeals in a recent decision, Bookall v. Sunbelt Rentals, Case No. 08-26291 (Fla. 4th DCA, December 3, 2008).

Under Florida law, where an employment contract expires by its terms and the parties continue to perform as before, an implication arises that they have mutually assented to a new contract containing the same provisions as the old. But this principle does not apply to non-competes and other restrictive covenants contained in employment contracts, as illustrated by a recent decision by the Third District Court of Appeal, Zupnik v. All Florida Paper, Inc., Case No. 3D08-1371 (Fla. 3d DCA, Dec. 31, 2008).