BROADCASTERS AND NONCOMPETES: NY HAS A BETTER WAY

New York Governor David Paterson signed into law this month the Broadcast Employees Freedom to Work Act. The new law prohibits certain restrictions on broadcast employees that had placed a hardship on professionals in the industry by limiting their flexibility to be hired after leaving a company. The law bans contract provisions that condition employment based on certain types of noncompete agreements such as not allowing broadcasters to take another job in a particular region, with a competitor in the same market, or within a certain period of time.

The new law would allow anchors, reporters, and others in the industry to change jobs within their current markets. The law protects the rights of employees, provides those employees with an opportunity to earn a livelihood and grow in their profession, and is a boon to innovation and economic growth.

This is a good law and Virginia should follow New York's lead.

LINKEDIN AND NON-COMPETE: WHAT IS THE CONNECTION?

Most business professionals, especially those under age 35, are aware of and participate in such social networking sites on the Internet like LinkedIn.com. For those readers unfamiliar with this amazing site, LinkedIn is a popular business networking service that allows individual users to create profiles that look like resumes. Each user may build a network of other users, each of whom has to create a LinkedIn profile to join. Users who are linked together may view each other's contacts, and can take advantage of "friends of friends" for business purposes.

Now, here comes the connection to a non-compete contract.

Mark Ions was employed by the recruiting company Hays Specialist Recruitment until he left to start his own competing firm. Following his departure, Hays became concerned that Ions had taken business contact information with him in violation of his employment contract, which prohibited him from making use of a range of confidential information, including "client database" information, and from soliciting clients with whom he had had contact during his employment.

The focus of Hays' concern was Ions' LinkedIn account. LinkedIn includes a feature that will upload a user's e-mail contacts and send selected contacts a LinkedIn invitation. In a lawsuit filed by Hays, the company alleged Ions uploaded Hays' customer contacts to LinkedIn at a point shortly before he announced to Hays he was leaving the firm. Hays denied doing so and, after being confronted with the allegation, deleted his entire LinkedIn network.

The court in England (where the case was filed) ordered Ions to disclose documents that evidenced his uploading of business contacts while he was employed by Hays.

What is the lesson? As an employee make damn certain you do not leave a trail of evidence on LinkedIn or any other social networking site on the Internet. Otherwise, your employer may just prove its case against you by subpoenaing your account records!

CALIFORNIA GOT IT RIGHT!

Many commentators on law, politics and society often poke fun at California! They claim California is too liberal...too environmentally concerned....too Granola! But, regardless of what you may think, I believe California's got it right when it comes to protecting the rights of employees.

California law is very unfavorable to non-compete agreements. The state's legislators believe that an employer should not be able to limit the ability of ex-employees right to work and compete in the same business or industry.

I am happy to report that the California Supreme Court just decided a case which reinforced California's position as the state with the greatest employee protections. In the case -- originally brought by a former tax manager in the Los Angeles office of Arthur Andersen, LLP who refused to sign a non-compete agreement -- the company asked the court to adopt a "narrow-restraint" exception under the law. Andersen argued that its agreement wasn't illegal because it didn't broadly prevent the manager, Raymond Edwards II, from working in his profession, but only prevented him from soliciting clients from the company.

The court sided with Mr. Edwards and against Arthur Andersen. Not only does this decision favor employees, it also favors innovation. Many high tech companies in Boston have moved to California as Massachusetts law upholds non-compete agreements and the companies have found it difficult to hire a sufficient number of tech savvy employees due to existing non-compete agreements and the state law which enforces them.

Non Compete Attorneys in Virginia

Probably only 1 of every 10 contracts we review, turns into litigation. The others we review for clients, either before they sign, or before they leave their current employment.

Sometimes we get folks too late and their old employer has hired counsel and is seeking damages or an injunction.

We review non -compete contracts across the Commonwealth. Although we do not litigate matters in the Norfolk / Va Beach area - we will accept litigation most everywhere else in the state.

YES - that means, Leesburg, Loudoun County area, Fairfax, Richmond, Charlotesville, Winchester, Abingdon, Blacksburg and everywhere in between.

We would be honored to review your contract - and or assist should litigation occur. The difficulty in being an employee with a non-compete, is that you have little control as to what happens. Could be the most unreasonable contract in the world, and the employer could still sue. Or, you could have not breached it at all, and suit is filed. The wait and see approach is one we typically take, until you are forced to defend in litigation.

CUSTOMER LISTS AND TRADE SECRETS

We defend employees in non-competition cases filed by their former employers. In many of these cases, the employer asserts that our client has taken a "customer list" from the employer and is using that list to illegally compete with the former employer. The employer sometimes even argues that the "customer list" is a "trade secret."

Virginia law recognizes that trade secrets exist and must be protected. The Virginia Uniform Trade Secrets Act (Va. Code Sections 59.1-336 to -343) provides a very vague definition of just what actually constitutes a "trade secret" but Virginia courts have held that trade secrets may include customer lists, pricing information, business leads, sales techniques and methods of conducting business.

My take: Consult with a knowledgeable attorney before you leave your current employer if you have signed a non-compete agreement - you may just prevent some serious headaches.

BIG GUYS THWARTED BY NON-COMPETE

What do AOL and TimeWarner have in common with your employer? They make employees sign non-competes too...

Article from TechCrunch.com reprinted on Washington Post's website, tells all about the sad tale of executive non-competes.


Time Warner Nixes Jonathan Miller's Appointment To Yahoo Board. Pokes Potential AOL Buyer In the Eye.

Erick Schonfeld - TechCrunch.com

The Yahoo shareholder meeting is going on right now, but already not everything is going according to plan. Yahoo was able to avoid a showdown today with activist investor Carl Icahn by agreeing to open up three board seats. Icahn is taking one, and the board will vote for the other two members. Former AOL CEO Jonathan Miller was added to the list of candidates at the request of Yahoo, and was considered a shoe-in for one of the two other available seats. Not anymore.
At the 11th hour last night, Time Warner decided to object to Miller's appointment to the board, according to three sources, including a former AOL executive close to Miller. Without Time Warner's blessing, Miller cannot serve on Yahoo's board since he is still under a non-compete agreement with AOL.
Why Time Warner would decide to do this is unclear. Before Yahoo and Carl Icahn publicly disclosed Miler's name as an addition to the slate of people Yahoo's board will choose from to fill the extra seats, Time Warner gave the green light to Miller's inclusion. Now the strategy has changed, and last night Time Warner CEO Jeffrey Bewkes reneged on his earlier approval in a phone call to Miller. It gave no reason for the about-face. (Former Viacom CEO Frank Biondi is now a favorite to take one of the two available board seats).

So Time Warner just pissed off one of two possible buyers for AOL. Time Warner management has been obsessed with trying to sell off AOL, and the only two realistic buyers are Yahoo and Microsoft. "It is the entire AOL strategy," says the former AOL executive. Now,Time Warner is angering a potential bidder for AOL, and effectively giving Microsoft more leverage to give a lowball offer. Institutional shareholders, many of whom own large chunks of both Yahoo and Time Warner, won't be too happy about that.
"If you are the SS Titanic of AOL, you have to be friends with everybody," says the befuddled former AOL exec. What is ironic is that if anyone could have made a Yahoo-AOL deal work it would have been Miller.
So does Time Warner think that it can make Yahoo less attractive to Microsoft, and AOL more attractive, by keeping Miller off the board? Or can Jeff Bewkes simply not stand the thought of Miller (whom he removed as CEO of AOL in favor of his own guy) becoming the CEO of a merged Yahoo-AOL down the road? That might make Bewkes' earlier decision look stupid, especially given AOL's poor performance since the switch. In business, it's always personal."

PS - Erick, I agree - in non-competes, it is always personal!

WHAT IS A TRADE SECRET?

Many Virginia employment agreements state the employee is prohibited from using or sharing any trade secret information, or proprietary information.

Well that is well and good, but what does that mean, "Trade Secret?"

Most states have law that defines what a trade secret is.

In Section 59.1-336 of the Virginia Act, a trade secret is defined as “information, including but not limited to, a formula, pattern, compilation, program, device, method, technique or process."

That doesn't help much, does it?

The Virginia Journal of Law and Technology (VJOLT) - an esteemed legal journal at UVA - provides a great summary of Va. Trade Secret Act law and cases in an article on their website: http://www.vjolt.net/vol5/issue3/v5i3a15-Babirak.html#IIIB.

In the article, Attorney Milton Babirak says " Some common examples of low-tech trade secrets in published cases are: customer lists, business leads, financial information, marketing strategies, sales techniques and methods of conducting business. The definitions of trade secrets in the Virginia Act, Uniform Act and the Restatement are significant in several other respects as well. These definitions do not require that the information exist in some tangible format, as is the case in patent law. In fact, the information need not be more than an idea, theory or concept. Further, these definitions do not require that the trade secret be novel. Several courts have stated that novelty is not a requirement for a trade secret but that maintaining its secrecy is necessary. In addition, those definitions do not impose any limit on the length of time a trade secret can be protected. While patents may be protected by statute for twenty years, trade secrets may be protected as long as their secrecy is maintained, they are not generally known and they are not readily ascertainable. The Virginia Act and the Uniform Act do not require a profit motive for the misappropriation."

Thank you Mr. Babirak - I know this is scary for Virginians looking for advice. It means the sky is the limit as far as information you cannot take.... so employees, be careful. You don't have to write it down - memorizing customer list could be in violation...prices lists etc.

When I am defending a Trade Secret claim, the first thing I try to do is determine if the information at issue, is really "secret" or if it is open to the public. If it is open to all - the employer will have a difficult time proving the information is secret, and that any damages occurred as a result of its use.

For more information, check out the VJOLT article - it is a good one!

QUIT YOUR JOB...JUST BE SMART!

We are often contacted by an employee after they have left their job to start a new and competing business....and yes, they signed a noncompete but don't really know what it means. We can and do help people like this all of the time. But, if we could counsel these clients before they left their current job we would make the following recommendations:

1. Do not take any customer or pricing lists from your employer.

2. Do not use company email and computers to make plans for your new (competing) job.

3. Do not tell current customers/clients of your plans to start a competing business or to join a company already competing with your current employer.

4. If you are starting a new business, remember the date of incorporation, registration, etc., can easily be discovered afterwards and can be used as evidence against you in litigation.

5. Make a copy of all non-compete and non-solicitation agreements which you may have signed during your employment with your current employer.

6. Seek an attorney with experience in this specialized area of the law and have a frank discussion of the risks and costs of going forward.