In a blog earlier this year, we discussed the Delaware Chancery Court’s refusal to enforce a sale of business non-compete in Kodiak Building Partners, LLC v Adams. We wondered then whether Kodiak represented a one-off decision or whether it augured a trend that might give buyers of businesses pause. Delaware courts seem to have answered the question. In what constitutes a notable trend for buyers of businesses, Delaware courts have twice more refused to enforce non-competes under a sale of a business analysis. Continue Reading Buyer Beware: Delaware Courts Continue to Refuse to Enforce Deal-Based Non-Competes
Courts and state legislatures continue to take aim at post-employment non-competes. In a companion blog, we recently detailed the Federal Trade Commission’s proposed rule banning post-employment non-competes. However, for years (and even under the FTC’s overreaching proposed rule), non-competes in the sale of business context have generally received less scrutiny.Continue Reading Buyer Beware: Delaware Declines to Enforce Sale of Business Non-Compete
On January 5, 2023, the Federal Trade Commission (“FTC”) announced a broad proposed rule that would ban employers from imposing noncompete clauses on their workers. The FTC press release announcing the proposed rule states that noncompete clauses—which apply to about one in five American workers—suppress wages, hamper innovation, block entrepreneurs from starting new businesses and reduce American workers’ earnings between $250 billion and $296 billion per year. The proposed rule would prohibit employers from: (1) entering into or attempting to enter into a noncompete with a worker; (2) maintaining a noncompete with a worker; or (3) representing to a worker, under certain circumstances, that the worker is subject to a noncompete. The term “worker” covers paid staff in addition to independent contractors and unpaid staff. The proposed rule does not apply to noncompete provisions imposed upon 25% owners of a business in transaction documents related to the sale of the business. The proposal is subject to a 60-day public comment period commencing when the Federal Register publishes the proposed rule.Continue Reading FTC Seeks to Ban Noncompete Agreements in Employment Contracts
The Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) recently issued a joint statement (the “COVID-19 Statement”) regarding what constitutes lawful “procompetitive collaborations” between companies to address certain needs for consumers and businesses during the coronavirus pandemic. It also detailed what constitutes unlawful anticompetitive behavior related to essential and frontline workers and other vulnerable employees. The DOJ and FTC used this opportunity to send a clear warning to companies who may seek to take advantage of the current pandemic by entering into agreements to restrain competition and employee mobility or lower wages. Separately, for those companies who are actively working to assist essential workers, businesses and the country as a whole, the COVID-19 Statement provides guidance on engaging in lawful “procompetitive collaboration” to benefit essential workers and the economy amidst the coronavirus pandemic.
Continue Reading DOJ and FTC Issue Joint Statement Regarding COVID-19 and Antitrust Violations
In October, the Department of Justice (“DOJ”) Antitrust Division and the Federal Trade Commission (“FTC” and collectively the “Antitrust Agencies”) jointly issued new guidance for Human Resource professionals regarding agreements between competitors related to hiring and compensation of employees (the “Guidance”). The Guidance explains the Antitrust Agencies’ position with regard to wage-fixing and no-poaching agreements between competitors in the employment marketplace. It also highlights the agencies’ intent to shift toward criminal prosecution of companies and individuals who enter into these types of agreements when they are not ancillary to a legitimate business collaboration, such as a joint venture or a merger or acquisition.
Continue Reading New Guidance for HR Professionals Regarding Wage-Fixing and No-Poaching Agreements Highlights New Focus on Criminal Prosecutions and Raises New Concerns for Employer