This May, the Obama Administration released a report analyzing the use of non-compete agreements in the American economy, potential issues arising from such use, and the effectiveness of various state responses. This analysis suggests that the misuse of non-competes at various occupational levels places an unnecessary burden on employees, consumers, and the economy.
"Can my employer really enforce this noncompete?" -- this is a question routinely posed to employment lawyers. The answer depends on many factors. First and foremost, it depends on which state's law will be applied to the noncompete. The answer to that question might seem obvious initially, since most employment agreements and separation agreements contain a choice-of-law clause designating a particular state's law to apply to disputes. One might think that if the agreement designates a state that generally enforces noncompetes, the noncompete will be enforceable and the employee is out of luck. But the issue is not always that simple.
Employees, particularly those with access to sensitive company information, are typically required by their employers to maintain the confidentiality of such information. This requirement may be found in the employee handbook or may be contained in a restrictive covenant agreement, employment agreement, or severance agreement. Violating a confidentiality obligation can have serious consequences, including hefty monetary damages in a civil lawsuit. For one Goldman Sachs employee, however, the consequences were even more severe: Sergey Aleynikov was criminally prosecuted--twice--for taking confidential material with him when he resigned his position. His controversial second conviction was overturned earlier this week.
On May 7, at the ABA Midyear Meeting of the Section of Labor and Employment Law, the International Committee presented a panel-- "Restrictive Covenants and Labor Mobility: A Case Study of Non-Competes, and Choice-of-Law Provisions, in the Legal Profession."