Many companies have ceased using noncompete clauses for employees working in California. At best the clauses have become unenforceable, at worst, a liability for the company.
If you thought this issue was behind you, think again…
A change to California Business and Professions Code Section 16600, enacted as Section 16600.1 and effective January 1, 2024, requires employers to notify current and certain former employees who are signatories to any noncompete clause or agreement that the restriction is void. Employers must do this by February 14, 2024, or risk liability for an act of unfair competition under Section 17200, which provides remedies such as injunctions and restitution.
Specifically, Section 16600.1(b)(1) requires that employers provide notice to the following individuals:
- Current employees whose contracts include a noncompete clause or who were required to enter a noncompete agreement; and
- Former employees employed after January 1, 2022, whose contracts include a noncompete clause or who were required to enter a noncompete agreement.
The notice to employees must:
- Be in writing;
- Be an individualized communication to the employee;
- Be mailed or hand delivered to the last known address of the employee;
- Be emailed to the employee;
- State that the employee’s noncompete clause
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On the one hand, business insurance provides in-house counsel with the peace of mind to know that if their company is involved in a covered event, the insurer will be responsible for some or all of the damages and also may be responsible for footing the bill for legal fees and defense costs. On the other hand, insurance carriers usually are incentivized to engage inexpensive attorneys who may not have the industry, business or other expertise which in-house counsel typically desire. Further, even when insurance carriers allow the insured to select defense counsel, the carriers often only agree to reimburse the insured at insurance defense rates – not the actual legal fees paid.
What many in-house counsel are not aware of, however, is that the 2007 decision by Judge Ralph Gants in Watts Water Techs., Inc. v. Fireman’s Fund Ins. Co. gives insureds significant leverage in selecting insurance defense counsel and having the insurance carrier pay all the associated legal fees.
In 2001 Watts Water and its affiliates were named as defendants in hundreds of asbestos lawsuits, and Watts tendered the claims to various insurance carriers. Those carriers responded by disputing coverage, saying that they only had a … Keep reading
Let’s be clear: the Massachusetts Wage Act is draconian. If you violate it, you are on the hook for triple damages and attorneys’ fees. The Massachusetts Supreme Judicial Court has confirmed that there are no good faith exceptions to the statute’s penalty provisions – no matter how benign or innocent the reason an employer failed to comply.
While a lot of out-of-state employers know this, and try to limit the risks associated with the Wage Act by including a choice of law provision calling for the application of their home state’s law to their employment agreements, as Evolve Cellular recently learned, simply including a standard, broad choice of law provision is not enough….
In 2016 Evolve Cellular hired Alan Berrey as an employee, and the parties entered into an Employment Agreement with the following choice of law provision:
This Agreement, and any contest, dispute, controversy or claim arising hereunder or related hereto … shall be governed by and construed in accordance with the internal laws of the State of Texas applicable to agreements made and to be performed in that state, without reference to its principles of conflicts of law that would apply the laws of another jurisdiction.
In … Keep reading
I have written a number of blog posts on liquidated damages over the years, and one of the foundational points under Massachusetts law is that they will be enforceable if, but only if, at the time the contract is executed:
- It would be difficult to determine the damages that would accrue if the contemplated breach were to occur; and
- The liquidated amount designated in the contract is a reasonable estimate of the actual damages that a party would suffer if the breach were to occur.
In Cummings Properties v. Hines, the Supreme Judicial Court emphatically re-affirmed Massachusetts’s commitment to this “single look” doctrine.
In 2016, Cummings Properties entered into a five-year lease with MCO, Inc., and Darryl Hines, MCO’s sole officer and director, signed on as guarantor. The lease provided that if MCO defaulted, Cummings could terminate and the “entire balance of rent due . . . immediately [would] become due and payable as liquidated damages, since both parties agree that such amount is a reasonable estimate of the actual damages likely to result from such breach.”
Within only a few months of signing the lease, MCO defaulted on its payment obligations and was evicted. One … Keep reading
Most people expect that by signing a contract they are going to be bound by it absent special circumstances. But do situations where the signatory is unsophisticated and/or doesn’t even speak the language in which the contract is written qualify as such special circumstances? As the Massachusetts Appeals Court recently confirmed in Lopez Rivera v. Stetson, the answer to that question is a resounding No!
Carlos Lopez Rivera was awaiting surgery and signed a form stating that any disputes regarding the surgery would be subject to arbitration. Notwithstanding the foregoing, Lopez Rivera later filed a malpractice action against Steven Stetson in the Massachusetts Superior Court. Stetson moved to dismiss based on the arbitration clause in the form Lopez Rivera signed, but Lopez Reiver countered that because he did not speak English and no one translated the form to him, his supposed agreement to arbitrate was invalid based on the doctrines of fraud, mistake and unconscionability.
The Superior Court agreed with Lopez Rivera, noting that he did not speak English and no translation of the form was provided to him. Stetson appealed that ruling, and the Appeals Court acknowledged that a party who signs a contract can avoid his … Keep reading
A recent decision from the Superior Court of Massachusetts in MIM Mass Convertible Note v. MIM Management, LLC reminded me of other posts I have written warning that a seemingly clear choice of law provision is not always clear enough.
In MIM Mass Convertible Note, the parties had a business relationship memorialized by a promissory note and Loan Agreement, paragraph 23 of which stated that “The laws of [South Carolina] shall govern in the interpretation, enforcement, and all other aspects of the obligations and duties created under this Agreement and all other instruments referred to in this Agreement.” Sounds pretty clear and all-encompassing, right…?
The relationship between the parties eventually soured, and the plaintiff filed suit. The defendant answered, and filed counterclaims, including a counterclaim for deceptive and unfair conduct in violation of Massachusetts General Laws Chapter. 93A.
The plaintiff moved to dismiss the Chapter 93A counterclaim, arguing that the choice of law provision in the Loan Agreement limited claims to those available under South Carolina law, and Chapter 93A was a Massachusetts statute. In addressing that motion, the Superior Court emphasized that the choice of law provision in the Loan Agreement was self-limiting and only … Keep reading
No company wants to be sued by its current or former employees, particularly for discrimination claims. Even if you prevail, litigating such claims inevitably exposes you to public stigma and internal discord. In such situations, an early “procedural victory” can be worth much more than the mere cost savings of legal fees. So, wouldn’t it be nice if you could do something now to either decrease the chance of such a suit being filed and/or increase the chance of obtaining a quick, procedural victory if litigation does ensue? As a recent decision in the Federal District Court, Morales v. FedEx, makes clear, a contractual “statute of limitations provision” may allow your company to achieve these objectives.
Hector Morales began working for Federal Express in 2015 and was terminated on July 31, 2017. In May 2018, Morales filed a claim with the Massachusetts Commission Against Discrimination, alleging that his termination was based on racial discrimination and was retaliatory. In July of 2020, Morales filed a complaint in the Federal District Court, alleging, among other things, that FedEx had discriminated against him in violation of 49 U.S.C. § 1981.
Eventually, FedEx moved for summary judgment on the § 1981 claim … Keep reading
Few terms make litigators shudder like the dreaded spoliation; and for good reason. The consequences of a company’s failure to preserve evidence that might be relevant in prospective litigation can be severe. What many non-litigators (including in-house counsel) may not realize, however, is that decisions made before litigation counsel is engaged can profoundly affect the chances that spoliation will later become a significant issue during litigation. A recent decision in the Business Litigation Session, JFF Cecilia LLC v. Weiner Ventures, LLC, highlights that very risk.
In JFF Cecilia, Weiner Ventures and its principals, Stephen and Adam Weiner, agreed to partner with Suffolk Construction owner, John Fish, to develop a luxury, high-rise tower on Boylston Street over the Massachusetts Turnpike in Boston. Just as construction was set to begin, the Weiners abruptly backed out of the project, which had been over a decade in the making. Four days later, on August 20, 2019, Fish sent the Weiners a formal notice, claiming that they had breached their agreement and stating that he was reserving all rights. While Fish ultimately filed suit, he did not do so until two months later. During the period between Fish’s August 20th… Keep reading
As a follow up to my post a few weeks ago on McLaren Macomb, the NLRB has issued new Guidance of which in-house counsel should take note.
- The McLaren Macomb decision is retroactive. This means that any severance agreement entered into by an employee prior to February 21, 2023, which violates the McLaren Macomb decision, is now unlawful.
- An unlawful severance agreement is a “continuing violation” of the Act, such that the six-month statute of limitations does not prohibit an employee from bringing a claim based upon a past severance agreement entered into over six months ago.
- The decision applies to current and former non-supervisory employees, which means in-house counsel must consider whether past and current severance agreements are lawful.
- Employees cannot waive their right to lawful confidentiality and/or non-disparagement clauses.
- An employee need not execute a settlement agreement for there to be a violation; the Board will find a violation of the Act if an unlawful severance agreement is offered, which could result in equitable and economic remedies in favor of the impacted employee.
- The McLaren Macomb decision impacts any employer communication to employees that tends to interfere, restrain, or coerce an employee’s Section 7 rights (i.e.,
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If your company, like many, includes “standard” confidentiality and non-disparagement provisions in its employee severance agreements, those agreements may contravene a recent NLRB decision, McLaren Macomb. In that matter, the NLRB considered the validity of severance agreements offered to 11 employees who were furloughed where such severance was conditioned on them agreeing to the following, seemingly innocuous, confidentiality and non-disclosure provisions:
Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse . . . professional advisors . . . or unless legally compelled to do so . . . .
Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agent and representatives.
Prior to McLaren Macomb, such provisions had … Keep reading