Russell Beck and Erika Hahn Featured in Law360 on Federal Noncompete Reform

Russell Beck and Erika Hahn‘s analysis of the misconceptions underlying various efforts to reform, and even ban, noncompete agreements was published by Law360 under the title, “Noncompete Misconceptions May Be Inhibiting Reform.”

The full analysis is also available (without subscription) at Fair Competition Law as “Federal Noncompete Initiatives: When you can’t convince the states, ask the feds.

The analysis discusses recent efforts at the federal level to restrict or ban noncompetes, which follows on the heels of several years of legislative efforts across myriad states to modify noncompete laws. Although very few states have enacted laws that ban noncompete agreements outright, recently-filed federal legislation seeks to just that.

According to Russell and Erika’s analysis, much of the push for restrictions or a ban is premised on:

  • The mistaken assumption that Silicon Valley is the epicenter of tech because California bans noncompetes;
  • Recent preliminary, inconclusive and somewhat inconsistent studies, the nuances of which are ignored;
  • The mistaken belief that trade secret laws and nondisclosure agreements provide adequate protections for trade secrets;
  • The mistaken belief that noncompetes prevent employees from using their general skill and knowledge; and
  • The prevalence of abuses in the use and drafting of noncompetes.

As discussed in the article, Russell Beck submitted testimony to the United States Senate Committee on Small Business and Entrepreneurship hearing on “Noncompete Agreements and American Workers.”

In his testimony and in the article, Russell made the five following recommendations:

  1. Ban noncompetes for low-wage workers.

As a group, low-wage workers rarely have the level of exposure to trade secrets or depth and breadth of customer relationships that might warrant the enforcement of a noncompete, given the countervailing issues.

  1. Ban noncompetes for medical professionals.

The use of noncompetes for doctors, nurses and other health care providers has received substantial scrutiny in the past few years, with many states changing their noncompete laws to ban such agreements. Given the overwhelming public interest in patients having the ability to select who provides their medical care, exempting medical professionals is certainly a rational policy.

  1. Require employers to provide advance notice if they wish employees to sign a noncompete.

One of the other major criticisms of noncompetes is that they are often sprung on employees the day they show up to work. A simple way to eliminate that problem, while retaining the potential benefits of negotiated noncompetes . . ., is to require advance notice.

  1. Adopt the so-called purple pencil approach for overly broad noncompetes.

That approach is a hybrid of the reformation approach (where courts rewrite overly broad agreements) and the red pencil approach (where courts void an overly broad noncompete in its entirety). Specifically, it requires courts to void an overly broad noncompete unless the language reflects a good faith intent to draft a narrow restriction, in which case the court may reform it

  1. Expressly authorize springing noncompetes.

To the extent that one of the goals is to encourage companies to limit their use of noncompetes generally, employers must have a viable remedy for when employees violate other, less-restrictive, obligations such as nondisclosure agreements and nonsolicitation agreements, misappropriate trade secrets, or breach their fiduciary duties to the company. In Massachusetts, the new noncompete law expressly authorizes courts to do this, essentially by imposing a noncompete.

These recommendations were among those suggested by the Obama administration in its 2016 call to action on noncompetes and adopted by many of the states making changes to their laws in the past few years.

In July 2019, Law360 published Russell Beck’s analysis of misconceptions in the noncompete debate.

____

For up-to-the-minute analysis of legal issues concerning noncompete agreements in Massachusetts and across the United States, read Russell Beck’s blog, Fair Competition Law.

eck Reed Riden LLP is among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment law and business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience.

The Wall Street Journal featured Beck Reed Riden LLP’s noncompete agreement experience. In 2016, the White House issued a report entitled, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses,” relying in part on Beck Reed Riden LLP’s research and analysis, including its 50 State Noncompete Survey.

Russell Beck’s work in this area is well recognized, and includes:

  • Over twenty four years of working on trade secret, noncompete, and unfair competition matters
  • Assisting the Obama White House as part of a small working group to develop President Obama’s Noncompete Call to Action
  • Authoring the book Negotiating, Drafting, and Enforcing Noncompetition Agreements and Related Restrictive Covenants (5th ed., MCLE, Inc. 2015), used by other lawyers to help them with their noncompete matters
  • Drafting and advising on legislation for the Massachusetts Legislature to define, codify, and improve noncompetition law
  • Teaching Trade Secrets and Restrictive Covenants at Boston University School of Law
  • Founding and administrating the award-winning blog, Fair Competition Law
  • Establishing and administrating the Noncompete Lawyers and Trade Secret Protection groups on LinkedIn, with over 1,600 members around the world
  • Founded and chaired the Trade Secret / Noncompete Practice for an AmLaw 100 firm

In addition, Russell was honored for his work in this area of law in the 2019 Chambers USA Guide, which stated that Russell Beck is a “terrific” attorney, who “is an excellent choice of counsel regarding noncompete agreements and the resolution of restrictive covenant disputes.” Chambers noted that Russell “basically wrote the new Massachusetts statute on noncompetes” and that “he’s an expert in employee mobility and nonrestrictive covenants.”

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and employment. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

 

Law360 Publishes Russell Beck’s Analysis of Misconceptions in the Noncompete Debate

Russell Beck‘s analysis of the misconceptions concerning the impacts of noncompete agreements was published by Law360 under the title, “Misconceptions In The Debate About Noncompetes.”

According to Law360, Russell Beck’s article is one of the “10 Most-Read” employment Law360 articles of 2019.

The analysis focuses on how the mistaken assumption that correlation implies causation has been increasingly informing decisions in the ongoing debate about the effects of noncompetes on the economy.

In particular, the analysis addresses two primary errors: (1) assuming that California’s ban on employee noncompetes is the reason for Silicon Valley’s success; (2) interpreting the developing research on the impacts of noncompetes as establishing that noncompetes are bad for the economy; and (3) failing to understand the unintended consequences of a ban on noncompetes, including, in particular, the elimination of an important tool for the protection of trade secrets.

The analysis ends with a caution to lawmakers considering changes to noncompete laws:

The proper regulation of employee noncompetes is an extremely complicated issue with no silver bullet. If policymakers believe that the prevailing market forces are insufficient to adequately limit the abusive use of noncompetes, legislative action is certainly an appropriate response. But, absent making the affirmative decision to base legislative policy on a visceral antipathy toward noncompetes, policymakers should engage in a critical analysis and avoid the temptation to rush to judgment. In particular, they need to be aware of – and at least consider, if not carefully weigh – the unintended adverse consequences of a policy that would ban noncompetes wholesale. The research into those considerations is, however, even more nascent than the research into the theorized adverse impacts of noncompetes.

In light of this, lawmakers should tread cautiously down any path that leads to the elimination of noncompete agreements. Indeed, the Obama Administration in its Call to Action and every state changing its noncompete laws has so far recognized this as well – and all have taken a tempered, considered approach.

The full analysis is also available (without subscription) at on Fair Competition Law as “Correlation Does Not Imply Causation: The False Comparison of Silicon Valley and Boston’s Route 128.”

____

For up-to-the-minute analysis of legal issues concerning noncompete agreements in Massachusetts and across the United States, read Russell Beck’s blog, Fair Competition Law.

eck Reed Riden LLP is among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment law and business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience.

The Wall Street Journal featured Beck Reed Riden LLP’s noncompete agreement experience. In 2016, the White House issued a report entitled, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses,” relying in part on Beck Reed Riden LLP’s research and analysis, including its 50 State Noncompete Survey.

Russell Beck’s work in this area is well recognized, and includes:

  • Over twenty four years of working on trade secret, noncompete, and unfair competition matters
  • Assisting the Obama White House as part of a small working group to develop President Obama’s Noncompete Call to Action
  • Authoring the book Negotiating, Drafting, and Enforcing Noncompetition Agreements and Related Restrictive Covenants (5th ed., MCLE, Inc. 2015), used by other lawyers to help them with their noncompete matters
  • Drafting and advising on legislation for the Massachusetts Legislature to define, codify, and improve noncompetition law
  • Teaching Trade Secrets and Restrictive Covenants at Boston University School of Law
  • Founding and administrating the award-winning blog, Fair Competition Law
  • Establishing and administrating the Noncompete Lawyers and Trade Secret Protection groups on LinkedIn, with over 1,600 members around the world
  • Founded and chaired the Trade Secret / Noncompete Practice for an AmLaw 100 firm

In addition, Russell was honored for his work in this area of law in the 2019 Chambers USA Guide, which stated that Russell Beck is a “terrific” attorney, who “is an excellent choice of counsel regarding noncompete agreements and the resolution of restrictive covenant disputes.” Chambers noted that Russell “basically wrote the new Massachusetts statute on noncompetes” and that “he’s an expert in employee mobility and nonrestrictive covenants.”

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and employment. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

 

Russell Beck’s Presentations on the Defend Trade Secrets Act

Russell BeckRussell Beck is giving a series of presentations across the country about the Defend Trade Secrets Act.

In May 2016, President Obama signed the Defend Trade Secrets Act of 2016 (“DTSA”)—a law that is arguably the most significant development in trade secrets law in over 30 years—putting trade secrets on par with other intellectual property.

On May 24, Russell spoke on a panel at the Boston Bar Association titled “The Defend Trade Secrets Act of 2016: A Federal Private Action for Global Unfair Competition.” The presentation focused on the anticipated utility of the new federal law:

Last month, responding to estimated annual losses to foreign thieves of $300 billion of trade secrets and 2.1 million jobs, Congress voted nearly unanimously (Senate 87-0, House 410-2) to enact the Defend Trade Secrets Act of 2016 (“DTSA”).

Will the new ex parte seizure provision adapted from anti-counterfeiting law help stem these losses?  Or does the existing Economic Espionage Act of 1996 framework into which DTSA was inserted expose American companies to claims of misappropriation in foreign territory?

On May 26, Russell appeared with a panel on a webinar hosted by the American Intellectual Property Law Association titled “Are you ready for the Defend Trade Secrets Act?” The presentation focused on what practitioners need to know and do regarding the DTSA. The panelists discussed the law’s addition of federal jurisdiction as an option for litigants, the statute creates opportunities and uncertainties around how and where to file litigation, as well as how to deal with combined state and federal claims.

White HouseOn May 26, Russell also gave a presentation with a panel at the Massachusetts Bar Association titled “What’s Mine is Mine — Trade Secrets: The new federal private right of action for misappropriation of trade secrets.”

On May 27, Russell and Stephen Chow, of Burns & Levinson, LLP, gave a seminar at Massachusetts Continuing Legal Education titled “‘1st Look at the Defend Trade Secrets Act.” The MCLE seminar focused on the impact of the DTSA on companies’ ability to protect their trade secrets, the potential ramifications of missteps along the way, and the risks to U.S. companies and others. A recording of this webcast is available online from MCLE.

In addition, on May 19, Russell moderated a panel discussion at the American Intellectual Property Law Association‘s 2016 Spring Meeting Session in Minneapolis, MN. The AIPLA presentation was titled “Corporate Practice/ Trade Secret Law” and it focused on topics including the ethics of monitoring employees for security breaches and the use of restrictive covenants for in-house counsel.

On June 13, 2016, Russell will be a panelist at the 8th Annual Symposium on Non-Compete Agreements and Trade Secrets in Boston. The Boston Bar Association is sponsoring the Symposium, which will be held on Monday, June 13, 2016, from 4 to 6:30 p.m. at 16 Beacon Street in Boston. Registration information is here.

BLF 2014_Silver_GeneralBeck Reed Riden LLPis among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment law and business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience.

Russell Beck’s work in this area is well recognized; it includes:

  • Over sixteen years of working on trade secret, noncompete, and unfair competition matters

  • Authoring the book Negotiating, Drafting, and Enforcing Noncompetition Agreements and Related Restrictive Covenants (5th ed., MCLE, Inc. 2015), used by other lawyers to help them with their noncompete cases

  • Drafting and advising on legislation for the Massachusetts Legislature to define, codify, and improve noncompetition law

  • Teaching Trade Secrets and Restrictive Covenants at Boston University School of Law

  • Founding and administrating the award-winning blog, Fair Competition Law

  • Establishing and administrating the Noncompete Lawyers and Trade Secret Protection groups on LinkedIn, with over 750 members around the world

  • Founded and chaired the Trade Secret / Noncompete Practice for an AmLaw 100 firm

In addition, Russell has been repeatedly honored for his work in this area of law in the Chambers USA Guide, which explained that “Russell Beck of Beck Reed Riden LLP specializes in noncompete litigation and is a trade secrets expert. He comes highly recommended by his peers for his nationwide practice in this niche. ‘He’s fantastic,’ sources say.”

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and labor and employment. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

What if noncompete agreements are eliminated in Massachusetts?

Russell BeckThe current issue of Massachusetts Lawyers Weekly features Russell Beck’s article about potential changes to the landscape of noncompete agreements in Massachusetts. The article is called “What to do if non-competes are eliminated in Massachusetts.” Russell Beck’s articlMassachusetts Lawyers Weeklye, which appears below, can also be found on Russell’s blog, Fair Competition Law.

 

The Patrick administration has spent a great deal of time putting together comprehensive legislation designed to promote growth and opportunity in Massachusetts. Of particular note is the proposal to adopt a version of the Uniform Trade Secrets Act coupled with a California-like ban of employee non-competes.

In the interest of full disclosure, I have been working with the administration (in particular, the Office of Housing and Economic Development) on the language of Section 53, the relevant section of the bill, and with other lawmakers at the State House on other versions as well. However, I view my role purely as an advisor on the drafting to accomplish the particular policy, not on what that policy should be.

If the Patrick administration’s version is the one that succeeds, the obvious question is: What should companies do to protect their legitimate business interests without non-competes?

There are a number of steps that should be taken, many of which companies have been taking all along, though perhaps not as vigilantly as they will need to going forward.

Here are the five key steps:

FIRSTand foremost is to review all existing restrictive covenant, employee and independent contractor agreements. If the bill is adopted in its current form, the language states that it will apply to existing agreements — and not just agreements with employees, but with independent contractors as well.

That means that existing agreements are not immune and may need to be changed. If they include well-drafted non-solicitation State house strt(of customers), no-raid (of employees), and confidentiality provisions, it is possible they can be left intact, recognizing that the non-compete provision will simply be unenforceable.

However, if those other protections are missing, too limited or simply not well-drafted, they will need to be revised. If they need to be revised, the employer should consider the best timing and method to do so in order to avoid running afoul of arguments concerning notice, equity/fairness and consideration.

SECONDand equally important, proper safeguards must be in place to protect company trade secrets (which in Massachusetts include confidential information and can cover anything from the secret formula to Coke to customer lists) from the risk of misappropriation in the first place.

Accordingly, a trade secrets protection plan (sometimes called a “trade secrets audit”) will be more important now than ever before. Key elements are steps to lock down information, education of employees and others with access to trade secrets, and plans for responding to a possible misappropriation.

Instituting a proper trade secrets protection plan does not guarantee confidential information will never be misappropriated or that the employer cannot still sue if it is. (Seventy-five percent of employees admit to taking company information.) But, a proper trade secrets protection plan should help limit the number of times an employer will need to resort to litigation, while simultaneously increasing the likelihood of obtaining injunctive relief through litigation.

Note that trade secrets litigation is more costly than non-compete litigation, because there is no bright line to rely on for purposes of getting quick injunctive relief. With non-compete litigation (assuming the agreement is enforceable), it is generally clear whether the obligation has been breached or not: Either the employee is at the competitor or he is not. With trade secrets litigation, the odds are much greater that discovery will be necessary to determine whether the employer’s information is, in fact, being used and how.

THIRDLike the prophylactic protections for trade secrets, safeguards should also be put in place to protect the company’s customer goodwill from the risk of misappropriation. The most obvious is non-solicitation agreements.But other steps should be taken as well. Those include having multiple points of contact with each customer when feasible, plans for securing the relationships upon an employee’s departure, and proper mechanisms for managing social media accounts and contacts.

Screen Shot 2014-04-22 at 4.06.01 PMThe protections available for retaining talent should not be forgotten. If an employer wants to limit departing employees from poaching the remaining employees, it must have proper no-raid (or no-hire) agreements (sometimes called non-solicitation agreements or no-poach agreements) in place.In addition, the employer should take steps to give employees reason to stay — and, separately, disincentives to leave. For example, forfeiture agreements (agreements that require the forfeiture of certain benefits or payments if the employee leaves) are one tool that should be considered.

FIFTHIf litigation is necessary, move quickly. Delay can be the biggest problem for companies in these cases. And, without the protections of non-compete agreements, delay can create even greater risks of loss of trade secrets, relationships or employees.

 

Beck Reed Riden LLP is among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment law and business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience. The Wall Street Journal recently featured Beck Reed Riden LLP’s noncompete agreement experience.

Russell Beck’s work in this area is well recognized; it includes:

  • Over sixteen years of working on trade secret, noncompete, and unfair competition matters
  • Authoring the book Negotiating, Drafting, and Enforcing Noncompetition Agreements and Related Restrictive Covenants (4th ed., MCLE, Inc. 2010), used by other lawyers to help them with their noncompete cases
  • Drafting and advising on the current bill pending before the Massachusetts Legislature to define, codify, and improve noncompetition law
  • Teaching Trade Secrets and Restrictive Covenants at Boston University School of Law
  • Founding and administrating the award-winning blog, Fair Competition Law
  • Establishing and administrating the Noncompete Lawyers and Trade Secret Protection groups on LinkedIn, with over 750 members around the world
  • Founded and chaired the Trade Secret / Noncompete Practice for an AmLaw 100 firm

In addition, Russell was honored for his work in this area of law in the 2013 Chambers USA Guide, which included Russell in its “Notable Practitioners” section, adding that “Russell Beck of Beck Reed Riden LLP is respected by commentators for his skills as a litigator. His areas of specialty include noncompete and trade secrets matters.”

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience at large law firms, working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and labor and employment. We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.