Nevada’s All-New Non-Compete Statute

nevadaOnce again, Nevada has re-written the landscape the law regarding enforcement of post-employment non-competition agreements.  Please see the article posted on our website, written by Elayna J. Youchah and Joshua A. Sliker of our Las Vegas office.  They analyze Assembly Bill 276, amending Chapter 613 of the Nevada Revised Statutes, signed into law by Governor Brian Sandoval on June 3, 2017.

The full article can be found here: http://www.jacksonlewis.com/publication/new-law-brings-changes-nevada-s-non-compete-law.

And, for further background, please see this post from last summer:  Nevada Confirms Its Restrictive Covenant Law, But Rejects Blue Penciling.

Members of Jackson Lewis’s Non-Competes Practice Group are prepared to help Nevada employers and anyone else with Nevada-based employees navigate this new law.

 

Nebraska Court Enforces Forum Selection Clause

NebraskaNebraska’s legal history on the enforceability of non-compete agreements is usually a surprise for employers who view Nebraska as pro-business.  Nebraska courts routinely invalidate employee non-compete agreements that venture beyond restricting the employee from doing business with and soliciting customers with whom that employee did business and had personal contact. If there is a non-compete component to the agreement, or if the non-solicitation applies to all customers, Nebraska courts typically invalidate the entire agreement.  Companies using a one-size-fits-all agreement for their Nebraska employees are routinely victimized by this surprise. The reaction is typically a scramble to litigate in a venue outside the Cornhusker state.

The reverse is also true. In a recent case, six former employees received cease and desist letters threatening litigation over non-compete agreement violations. Those employees and their new employer selected Nebraska as their venue – likely with knowledge a Nebraska court could invalidate the agreement.

In that case, Consolidated Infrastructure Group, Inc., et al.  v. USIC, the former and current employer had a litigious history. Upon receiving cease and desist letters, six former employees and the new employer knew litigation was likely. Of the six, one was a Nebraska resident who lived and worked in Nebraska and two were Iowa residents who worked in Nebraska. The remaining three former employees did not allege they worked in Nebraska, nor were they Nebraska residents.  The six, likely recognizing that a Nebraska court may invalidate the non-compete agreement with their former employer, filed a declaratory judgment lawsuit in Nebraska federal court. The six asked the court to declare their agreements void and enjoin their former employer from future litigation relating to the restrictive covenant agreements.  Almost simultaneously, the former employer filed a lawsuit against the individuals and their new employer in Indiana, the choice of law and forum in the non-compete agreements at issue.

The former employer moved to transfer venue of the Nebraska lawsuit to Indiana based on lack of personal jurisdiction and the venue selection clause in the agreements.  The Nebraska court denied the motion to dismiss for lack of personal jurisdiction, finding that the former employer had sufficient minimum contacts.  However, the court enforced the choice of venue clause in the agreement and granted the motion to transfer venue to Indiana. In enforcing the forum selection clause, the court also found the plaintiffs did not demonstrate the clause is unconscionable, the result of fraud, or that the agreements were not freely negotiated.

By securing a transfer of the case, the former employer likely saved its agreements from an expected finding of unenforceability by the Nebraska court.

The immediate takeaways from this case for employers are:

  • Ensure the non-compete agreement is enforceable for the state in which the employee works.  In this manner, there should be no surprises as to enforceability if the Company needs to file a lawsuit, or needs to defend against a declaratory judgment action.

 

  • A valid forum selection clause in any agreement, including non-compete agreements, coupled with a choice of law provision, may help save the agreement. Choice of forum and choice of law provisions may not always be enforced, but in some cases, like this one, it could mean all the difference.

The case is CIG Inc. et al. v. USIC et al., Civil Action No. 8:16 cv 472 (D. Neb. May 18, 2017).

State and Federal Trade Secrets Claims Upheld By Northern District of Illinois

2000px-Seal_of_Illinois_svgA May 11, 2017 decision by Judge Chang, in the Northern District of Illinois, found misappropriation alleged under the Defend Trade Secrets Act (DTSA) and the Illinois Trade Secrets Act (ITSA), in a case where the employee downloaded files while still employed.  Denying the Defendant’s Motion to Dismiss a Third Amended Complaint, the Court examined the key pleading elements of: (1) trade secret, (2) misappropriation, and (3) acquisition or use, as defined under both the Illinois Trade Secrets Act and the Defend Trade Secrets Act.  To survive a motion to dismiss under the ITSA and DTSA, a plaintiff must get over all three of these hurdles.

The Plaintiff contended that its former Head of Quality Control, Manish Desai, copied confidential data onto a portable data drive before taking up a new job at Plaintiff’s competitor, Nidec. Plaintiff further alleged that Nidec, a direct competitor, used and continues to make use of the secrets that Desai downloaded.  Defendant moved to dismiss the trade secrets claims arguing that there was nothing unlawful about Desai copying the files while he was still Plaintiff’s employee and that there is no plausible allegation that Nidec has used the trade secrets contained on the thumb drive. The Court found that Plaintiff easily cleared the first element by sufficiently alleging the existence of trade secrets.

The second hurdle – misappropriation – required closer examination. Desai argued that because Plaintiff alleged he downloaded Plaintiff’s trade secrets while he was still employed, he did not “misappropriate” the trade secrets, because he had authorization at the time he downloaded the files. The Court rejected this argument and instead agreed with Plaintiff, who cited the definition of “improper means” from the trade secret statutes and argued that the employee’s actions qualified as a “breach or inducement of a breach of a confidential relationship or other duty to maintain secrecy or limit use.”  This confidential relationship and duty to maintain secrecy was established via the nondisclosure clause contained in the employment agreement with Plaintiff.

Having established misappropriation, Plaintiff still faced the “acquisition or use” barrier. Without evidence of actual use, this can be difficult hurdle for a plaintiff.  To ease the leap over this last hurdle, the Court pointed to the inevitable disclosure doctrine. “Inevitable disclosure” allows a plaintiff to “prove a claim of trade secret misappropriation by demonstrating that defendant’s new employment will inevitably lead him to rely on the plaintiff’s trade secrets.” PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995).  This, too has three elements courts must consider. “inevitable disclosure is established by examining “(1) the level of competition between the former employer and the new employer; (2) whether the employee’s position with the new employer is comparable to the position he held with the former employer; and (3) the actions the new employer has taken to prevent the former employee from using or disclosing trade secrets of the former employer.” Saban v. Caremark Rx, L.L.C., 780 F. Supp. 2d 700, 734-35 (N.D. Ill. 2011). The Court agreed that Plaintiff’s allegations were sufficient to meet the first two elements and then gave a pass to Plaintiff noting that the third element could not necessarily be known at the pleading stage and would have to wait for discovery.

The key lesson for employers here is that having the signed employment agreement with the nondisclosure clause created a duty – one which was alleged violated – and, which, provided the basis for meeting both the ITSA and DTSA’s misappropriation definition. The case is Molon Motor v. Nidec Motor (ND Ill.), Case No. 16-cv-03545, May 17, 2017.

 

Texas Pre-Suit Discovery – Obligations Under Unusual Procedure Clarified

2000px-Texas_flag_map_svgAlthough most employers are very familiar with the usual discovery process of litigation, they may not be as familiar with the Texas Rules of Civil Procedure’s Rule 202, which concerns pre-suit depositions. Rule 202 can be used, for example, by an employer who wants to learn more about a former employee’s activities before commencing a non-compete or trade secrets lawsuit.  Texas employers should be familiar with the availability of Rule 202 depositions, as well as with how to oppose an inadequately supported 202 petition, and how to use it effectively when needed.

Rule 202 allows a person to “petition the court for an order authorizing the taking of a deposition on oral examination or on written questions:

  • To perpetuate or obtain the person’s own testimony or that of any other person for use in an anticipated suit; or
  • to investigate a potential claim or suit.”

Tex. R. Civ. P. 202.1.

In doing so, a person must file a “verified petition” stating the subject matter of the anticipated action and the petitioner’s interest therein. Tex. R. Civ. P. 202.2.  The court “must” grant the petition and order the deposition to be taken if it finds that:

  • allowing the petitioner to take the requested deposition may prevent a failure or delay of justice in an anticipated suit; or
  • the likely benefit of allowing the petitioner to take the requested deposition to investigate a potential claim outweighs the burden or expense of the procedure.

Tex. R. Civ. P. 202.4(a).

A recent decision from the Tenth District Court of Appeals of Texas in Waco provides appellate authority regarding the required evidentiary support for a Rule 202 petition. In In re Pickrell, No. 10-17-00091-CV (Tex. App. 10th Dist. 4/19/17), 2017 BL 129282, the Tenth District Court of Appeals found that a verified petition and the attorney’s arguments were insufficient to support a Rule 202 petition and, therefore, the trial court abused its discretion in ordering a Rule 202 deposition. The bottom line of that portion of the decision is that Texas practitioners should go to be prepared to present witness testimony at hearings regarding Rule 202 petitions.

An additional, important ruling in Pickrell is that the trial court abused its discretion in ordering the production of documents.  While the statute is silent about document production, many Texas practitioners include document requests with requests for permission to take Rule 202 depositions, and with notices regarding such depositions. Pickrell provides appellate authority opposing that practice, finding that Rule 202 does not provide for such document discovery nor imply that it might be available.  2017 BL 129282 at *4.

Jackson Lewis attorneys are available to answer inquiries regarding pre-suit discovery and other questions regarding the Texas Rules of Civil Procedure.

What Does it Mean to “Modify” an Unenforceable Non-Competition Covenant Under Georgia’s Restrictive Covenants Act?

               Although Georgia’s Restrictive Covenants Act has been on the books since the spring of 2011, no judge has decided the exact scope of Georgia courts’ blue-penciling abilities – until now.  In a case of first impression, Judge Thrash of the United States District Court for the Northern District of Georgia, in LifeBrite Laboratories, LLC v. Nina H. Cooksey, 1:15-cv-04309 (N.D. Ga. Dec. 9, 2016), held that the term “modify” in Georgia’s Restrictive Covenants Act limits blue-penciling to striking unreasonable restrictions and to narrowing overbroad, existing terms.  Judge Thrash did not adopt an expansive reading of the term “modify” that could allow a court to supply entirely new terms to render a non-competition covenant enforceable.

               In this case, LifeBrite Laboratories hired Nina Cooksey as a business consultant tasked with selling LifeBrite’s toxicology tests to various medical practices and physicians.  The parties entered into an employment agreement containing a non-competition covenant.  The provision prohibited Ms. Cooksey from working for any potentially-competitive laboratory testing facility during her employment with LifeBrite and for one year thereafter.  The restrictive covenant did not include any geographic restrictions.  After a short period of employment with LifeBrite, Ms. Cooksey sought other employment and accepted an offer from another lab testing facility.  LifeBrite sued Ms. Cooksey for breach of the non-competition covenant.  In response, Ms. Cooksey sought a declaratory judgment that the non-compete was unenforceable without a geographic limitation.

               Under Georgia law, a non-competition covenant will generally be enforceable if it is “reasonable in time, geographic area, and scope of prohibited activities.”  O.C.G.A. § 13-8-53(a).  Judge Thrash noted that the lack of any geographic limitation rendered the parties’ non-competition covenant unenforceable.  Prior to the passage of Georgia’s Restrictive Covenants Act, Judge Thrash’s analysis would end there.  However, that Act permits courts to “modify a covenant that is otherwise void and unenforceable so long as the modification does not render the covenant more restrictive with regard to the employee than as originally drafted by the parties.”  O.C.G.A. § 13-8-53(d).  Judge Thrash stated that the “question in this case is whether ‘modify’ means that courts may only excise offending language, or whether courts are empowered to actually reform and rewrite a contract.” LifeBrite, 1:15-cv-04309, at 16.  Judge Thrash considered the latter to be an issue of first impression in Georgia.

               Judge Thrash relied on Georgia common law to reject a broad interpretation of the term “modify.”  He noted that, prior to 2011, Georgia courts strictly reviewed non-competition covenants in the employment context and struck covenants in their entirety if any portion was unenforceable.  In the sale-of-business context, however, Georgia courts did permit the excision of unenforceable language and the narrowing of unreasonable geographic areas when reviewing non-compete covenants. See Hamrick v. Kelley, 260 Ga. 307 (1990).  Judge Thrash determined that nothing in Georgia’s Restrictive Covenants Act indicated a “change [in] Georgia’s common law approach to blue-penciling other than to allow it in more circumstances.” LifeBrite, 1:15-cv-04309, at 20.  In the end, Judge Thrash held that the term “modify” should be limited to striking any unreasonable restrictions and narrowing the existing, overbroad terms.

               The LifeBrite case is a case of first impression and a decision by a well-respected United States District Court judge.  Though it was not an interpretation of Georgia common law by a Georgia state court, this decision is still likely a harbinger of future cases.  The takeaway is that Georgia courts are likely still reluctant to rewrite or reform unenforceable non-competition covenants by supplying new terms.  But Georgia courts may now feel more comfortable narrowing existing terms to make restrictions more reasonable and thus enforceable, and refusing to add missing terms.

Selective Enforcement Not A Viable Defense to Non-Competition Agreements Under Ohio Law

UnknownEmployers sometimes worry whether seeking to enforce their non-competes in some circumstances but not others might preclude enforcement altogether in the future.  Not so, says one court.  Applying Ohio law, the United States District Court for the Western District of Tennessee, in GCA Services v. ParCou, held in a discovery ruling that information regarding an employer’s selective enforcement of its non-competition agreements is irrelevant to the issue of whether such agreements are enforceable.

 

In this case, ParCou hired several former GCA employees subject to non-competition agreements with GCA.  In response, GCA sued ParCou and the former employees, alleging violations of the non-competition agreements and unfair competition.  During discovery, ParCou requested information relating to previous attempts by GCA to enforce non-competition agreements against former employees.  GCA objected to such requests on the basis of relevance, and ParCou filed a motion to compel discovery relating to GCA’s prior enforcement of non-competition agreements.

 

A Magistrate Judge denied ParCou’s requests for information pertaining to its selective enforcement defense, holding that selective enforcement is not a defense to claims of violation of non-competition agreements.  In reaching that decision, the Magistrate Judge determined that the selective enforcement doctrine only applies in the context of criminal charges and civil regulatory enforcement.  The Magistrate Judge declined to extend the selective enforcement doctrine to cases involving non-competition agreements because Plaintiff failed to provide case law supporting selective enforcement as a defense in such matters.  The District Court affirmed the Magistrate Judge’s Order, and confirmed that there is no authority for the proposition that selective enforcement is viable defense in cases involving non-competition agreements. The District Court further stated that the only case offered by ParCou to support the viability of the selective enforcement defense, Petland v. Hendrix, did not reach the issue of whether selective enforcement is a viable defense, and that ParCou had provided no additional support for application of a selective enforcement defense.

 

The GCA decision provides support for Ohio employers to argue that selective enforcement is not a viable defense in cases involving an alleged breach of a non-competition agreement by a former employee.  As such, an employer’s business decision not to enforce a non-competition agreement against a former employee should not negatively impact its chances of having a non-competition agreement enforced at a later time against a different employee.

Federal District Court In Missouri Raises Doubts Concerning Whether At-Will Employment Is Consideration For A Non-Compete Agreement

The United States District Court for the Eastern District of Missouri, in Durrell v. Tech Electronics, Inc., 4:16-CV-01367 (E.D. Mo. Nov. 15, 2016), held that an at-will employee’s non-compete agreement may not be enforceable where the only form of consideration is the employee’s at-will employment status since an at-will employment relationship cannot constitute consideration.

In Durrell, a former employee filed a complaint asserting various employment claims including FMLA retaliation and discrimination under the ADA and MHRA, along with a claim for declaratory relief alleging that the non-compete clause in his employment agreement was unenforceable because an at-will employment relationship cannot form the basis for consideration to enforce a non-compete agreement.

With respect to the former employee’s claim for declaratory relief, the employer moved to dismiss, arguing that Missouri courts have consistently recognized, for decades, that continued at-will employment provides sufficient consideration to render employee non-compete agreements enforceable under Missouri law. See, e.g., JumboSack Corp. v. Buyck, 407 S.W.3d 51, 55-56 (Mo. App. 2013) (“Missouri courts have recognized that continued at-will employment constitutes consideration for a non-compete agreement where the employer allows the employee by virtue of the employment, to have continued access to its protectable assets and relationships.”) (internal quotations omitted).

The Eastern District of Missouri rejected the employer’s argument. The court relied upon a series of Missouri cases regarding arbitration agreements in the employment context which have held that at-will employment is not a source of consideration for an arbitration agreement.  The Eastern District, however, did not address the fact that those cases explicitly distinguished non-compete agreements and arbitration agreements. See Morrow v. Hallmark Cards, Inc., 273 S.W.3d 15, 28 (Mo. App. 2008) (“[I]t is a mistake to think that the judicial approach to enforcement of a covenant not to compete is comparable to enforcement of an employer-dictated condition of continued employment requiring the employee to arbitrate claims against the employer.  We enforce covenants not to compete for equitable and policy reasons[.]”).

In the end, the court held that the employee’s claim to declare the non-compete clause unenforceable survives the motion to dismiss, and adequately states a claim upon which relief can be granted. Given the procedural context, perhaps the ramifications of this opinion will be minimal. Nevertheless, since the opinion extends the contract formation analysis from arbitration agreements to non-compete agreements and numerous recent Missouri court opinions have refused to enforce arbitration agreements, employers should take note.  At a minimum, employers should review their non-compete agreements and consider including alternative forms of consideration supporting a non-compete agreement, such as bonuses, vacation time, or any other benefit to which the employee would not otherwise be entitled but for his or her execution of the non-compete agreement.

White House Continues Attack on Non-Compete Agreements

white houseThe assault on non-compete agreements has continued in a significant way, as outlined in our web article, White House Continues Attack on Non-Compete Agreements.  The latest White House document, coupled with prior reports from the White House and Treasury Department, as well as actions initiated by the Attorney General of New York and the Attorney General or Illinois, raise a number of questions about this effort to rein in the use of non-competes.

  • Are employers really increasing their use of non-compete agreements with lower-level employees, or is this a matter of perception becoming reality?
  • Is state legislation the answer to the perceived question, or will the courts continue to be capable of addressing these issues on a case-by-case basis?
  • Is it a good idea for states to adopt what are now referred to as “red-pencil” rules of construction, especially where non-compete clauses are folded into incentive compensation or profit sharing or similar agreements or plans?
  • Is the Defend Trade Secrets Act sufficient to protect employers’ legitimate business interests, when federal agencies like the SEC, NLRB and EEOC have tried to curtail the use of non-disclosure of confidential information agreements?

We welcome your thoughts about these issues, as we all continue to monitor these developments.

Non-Solicitation Agreement Enforced in Wisconsin

WISCONSINThere are so many stories about restrictive covenants being unenforceable in Wisconsin that it is refreshing to see a case where a restrictive covenant is enforced – especially at the preliminary injunction stage.   This week, the U.S. District Court for the Eastern District of Wisconsin granted a preliminary injunction in favor of BMO Harris Bank, ordering the bank’s former employee to abide by her customer non-solicitation agreement for the remainder of its term.  (BMO Harris Bank N.A. v. Lailer, E.D. Wis., Case No. 16-CV-545-JPS, 10/21/16)

The court found that it was highly likely that the bank could show that the agreement was enforceable, and that the harm it would suffer if the agreement was not enforced was far greater than the harm the former employee and her new employer would suffer if the employee was required to abide by her contract.  The Court also noted that the agreement is narrowly tailored to protect the bank’s interest in its customer relations without preventing the former employee from maintaining new employment.

The agreement provided that:

During your employment and for twelve months following the end of your employment with the Company, you must not, directly or indirectly, solicit … any client of the Company that you serviced during your last twelve months with the Company to offer any product or service that is the same or similar to any product or service that you provided to that client previously.

The court noted with approval that this covenant was reasonably restricted as to time, because it was limited both retroactively – applying only to customers with whom the employee actually worked within the last year – and prospectively – restricting solicitation only for one year post-employment.  It also found that the customer-based restriction could appropriately substitute for a territorial limitation because it was probably more narrowly tailored than a geographic restriction.

Having found that the covenant was reasonable, the court then looked at the harms from enforcing and not enforcing its terms during litigation.  Because the former employee served as a liaison between the bank and its high-net worth clients, she had developed good will with clients that properly belonged to the bank.  She solicited those clients by telling them that her research in the industry led her to her new employer, effectively telling them that her new employer was a superior financial services provider compared to BMO.  Such solicitations, the court ruled, irreparably damaged BMO’s reputation and made this a “particularly strong candidate for injunctive relief.”  The potential harm to the former employee and her new employer, by contrast, was fairly limited, as the restrictive covenant would be in effect for only a limited time and they could solicit other potential customers in the meanwhile.

The take-away is that restrictive covenants can be enforced in Wisconsin, as long as they are narrowly drafted.  Jackson Lewis’s Non-Competes Practice Group are available to assist.

Applying Delaware Law, Federal Trial Court in Texas Determines that Restrictive Covenants in Incentive Stock Agreements Are Overbroad and Unenforceable as Written

The importance of drafting non-competition and other restrictive covenant agreements narrowly in terms of geography, duration and scope of activities to reasonably meet the employer’s legitimate business interests should not be underestimated. A recent decision from the Southern District of Texas illustrates the importance of narrowly crafting post-employment restrictions.

In Cameron International Corporation v. Abbiss, Civil Action No. 4:16-cv-02117, ECF  No. 49 (S.D. Tex. Sept. 27, 2016), the employee, Steven Abbiss, worked for Cameron International Corporation from 1990 to June 2016.  From 2010 to 2014, Abbiss was Regional Manager for Asia, stationed in Singapore.  Beginning in January 2014, Abbiss was District Manager in Oman.  In June 2016, Abbiss was hired by FMC Technologies Singapore PTE Ltd., a competitor of Cameron, as its General Manager for the Middle East.

Abbiss was awarded restricted Cameron stock between 2013 and 2016 pursuant to annual Restricted Stock Unit Award Agreements.  The four RSU Award Agreements, which were largely the same, precluded Abbiss for a period of one year following his resignation from Cameron from, among other things, rendering “services for any person or organization, or engaging directly or indirectly in any business, which is or becomes competitive with [Cameron] or any Subsidiary” and from “directly or indirectly soliciting the trade or business of any customer of [Cameron] or any Subsidiary.”  The Agreements failed to contain a geographic scope.

Cameron filed suit against Abbiss in federal court and sought a preliminary and a permanent injunction precluding Abbiss from soliciting Cameron’s customers or otherwise competing with Cameron in the Middle East.  In response, Abbiss filed a motion for summary judgment in which he argued that the non-compete and non-solicitation provisions in the Agreements were overbroad and unenforceable.  The parties agreed that Delaware law controlled their dispute.  Delaware law follows the usual rule of reasonableness: “for a non-compete clause to be enforceable, it must (1) be reasonable in geographic scope and temporal duration, (2) advance a legitimate economic interest of the party seeking its enforcement, and (3) survive a balancing of the equities.” Opinion p. 5.  As is the law in many jurisdictions, Delaware law permits a court that determines that a restrictive covenant fails because it does not include a reasonable limitation or unreasonably restricts an overly broad scope of activity to limit the scope of the covenant to what is reasonable.  Opinion p. 6-7.   In ruling on Abbiss’ motion for summary judgment, the Court in Cameron used this so-called “blue-pencil rule.”

In assessing the enforceability of the non-compete and non-solicitation provisions, the Court first found, and the parties did not dispute, that the one-year restriction was a reasonable time limit under Delaware law.  But because neither of the two restrictive covenants included a geographic limitation, the Court concluded that they were unenforceable as written.  The Court also found that the restrictions were overbroad because they were not limited to preventing Abbiss from directly competing with Cameron in his former area of responsibility or from soliciting only those Cameron customers with whom he dealt while he was employed by Cameron.  The Court noted that Cameron did not have a legitimate business interest in preventing Abbiss from rendering services or engaging in business with any entity which is or becomes a competitor of Cameron or a subsidiary, or from soliciting business from customers with whom he had no material contact while a Cameron employee.  To make its point, the Court used an example that often appears in restrictive covenant decisions.  Specifically, the Court explained that the covenants before it would, as written, prevent Abbiss from soliciting janitorial services contracts from Cameron customers or competitors in Norway.  The Court stated that these restrictions go unreasonably beyond protecting Cameron’s legitimate economic interests and would, as written, preclude Abbiss from employment with any company in the oil and gas industry anywhere in the world.

Notwithstanding its determination that the restrictive covenants in the Agreements were overbroad as to the geographic region and the scope of activities prohibited, the Court instructed the parties to confer and attempt to reach agreement on the reasonable scope of the provisions at issue.  If the parties are unable to agree, the Court will take up the reasonable scope of the restrictive covenants at the preliminary injunction hearing that is set for October 17.

Here, the employer was lucky that the judge is willing to address the reasonable scope of the agreement.  Not all courts apply the blue-pencil rule to post-employment restrictions, and not all judges will exercise their discretion to blue pencil in all cases.  Perhaps the Court felt so inclined as a result of the RSU’s which were granted to Abbiss, although the Court does not mention this one way or the other.  On balance, employers should review their restrictive covenant agreements to confirm that the restrictions are reasonably limited in time, geographic area, and scope; that they are designed to protect the employer’s legitimate business interests; and that they extend no further than is necessary to protect those interests.

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