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.

2. 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.

3. 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.

4. 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

5. 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.

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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.