Court Blocks LinkedIn From Restricting Access to User Profiles

Data mining LinkedIn profilesA Federal Judge recently blocked LinkedIn from restricting another company from using data from LinkedIn’s website. The suit involves Linkedin and hiQ Labs, Inc. The suit also has significant ramifications for job-seekers and employers. See LinkedIn Profiles Used to Alert Employers Which Employees are Job-Hunting.

hiQ Labs Business Depends Upon Access to LinkedIn Profiles

hiQ Lab offers data analytics services that can be used to identify employees job-hunting or likely to join a competitor. It does this by automatically “scraping” data from publicly available LinkedIn profiles. hiQ Lab’s business model relies exclusively on access to data LinkedIn users have opted to publish publicly.

In the suit, hiQ Labs sought an injunction to prevent LinkedIn from blocking its access to public profiles. The Judge granted hiQ Labs’ injunction on August 14, 2017. Here is a copy of the hiQ Labs v LinkedIn, 8-14-17 Injunction Order. In sum:

  1. LinkedIn cannot prevent hiQ Labs from accessing, copying, or using public profiles on LinkedIn‟s website.
  2. LinkedIn cannot put in place any mechanism (whether legal or technical) with the effect of blocking hiQ Labs’ access to LinkedIn’s members’ public profiles.
  3. To the extent LinkedIn had put in place technology to prevent hiQ Labs from accessing this information, it must be removed within 24 hours of issuing the Court’s Order.

The Court’s decision was met with surprise and concern from industry tech experts. A great explanation for both was provided by David Berlind, editor in chief of Programmable Web, Why Forcing LinkedIn to Allow Scrapers Sets a Dangerous Precedent for the API Economy.

Limiting the Computer Fraud and Abuse Act?

While I don’t dispute the technological concerns raised by Mr. Berlind, I think the Judge’s decision also provides a positive direction from a legal perspective.

First, the Court signaled its reluctance to expand the federal Computer Fraud and Abuse Act (CFAA) to support LinkedIn’s claim. LinkedIn initially threatened to sue hiQ Labs for CFAA violations. Rather than sit and wait, hiQ Labs took preemptive action in filing suit and seeking an injunction against LinkedIn.

The CFAA, as initially enacted, criminalized computer hacking. However, it expanded over the years to extend to civil claims. It also often applies to conduct that does not bear any semblance to “computer hacking.” But this mutation has not been without concern. Here is how the Judge in the hiQ Labs opinion summarized the conflict:

As hiQ points out, application of the CFAA to the accessing of websites open to the public would have sweeping consequences well beyond anything Congress could have contemplated; it would ‘expand its scope well beyond computer hacking.’ Under LinkedIn’s interpretation of the CFAA, a website would be free to revoke ‘authorization’ with respect to any person, at any time, for any reason, and invoke the CFAA for enforcement, potentially subjecting an Internet user to criminal, as well as civil, liability.

(internal citations omitted).

The CFAA’s expansion to civil liability often creates perverse results. For example, I represented a former executive in a discrimination and breach of contract suit against her former employer. The executive had retained copies of a handful of emails with a supervisor. These emails, however, solely discussed the executive’s terms of compensation and benefits. Further, the emails were not a secret and were properly disclosed in the litigation.

The defendant employer, however, manufactured the claim that possession of these emails made for a CFAA violation. It claimed an employee handbook that discussed the ownership of company information and returning company property had been violated. This claim didn’t gain traction with the judge or mediator, but it was not for lack of trying by defense counsel.

Similarly, the hiQ Labs opinion echoed the concern about needlessly expanding the CFAA:

… the Court has serious doubt whether LinkedIn’s revocation of permission to access the public portions of its site renders hiQ‟s access “without authorization” within the meaning of the CFAA.

Second,  LinkedIn argued that hiQ Lab’s manner of accessing the publically available information on the site (by using software to automate the scraping of user data) also violated the CFAA. The Court disagreed:

A user does not ‘access’ a computer ‘without authorization’ by using bots, even in the face of technical countermeasures, when the data it accesses is otherwise open to the public.

Similarly, it is not uncommon for companies to make similar arguments about the method of access creating CFAA liability when suing a former employee.

A common example is when an employee is given computer access in one context, but accessing it or using it in another. It may be as innocuous as downloading company data to work remotely (e.g., over the weekend, while traveling, or on vacation). But the act of removing the data from the company’s networked environment – even where the employee had permission to access the data in the first place – has been claimed to be a violation.

The LinkedIn/hiQ Labs case is not over, but winning at the injunction stage is often a huge spoiler on who will ultimately prevail. For more information about this case or issues under the Computer Fraud and Abuse Act, contact attorney Jason Shinn. He represents companies and individuals in computer fraud, misappropriation of trade secret, and other business claims.

Is it Lawful to Terminate an Employee Who Attended a Neo-Nazi or White Supremacist Rally?

Is “check to see if any employees came out to support Nazis or White Supremacist” the new normal for HR? After this weekend’s tragic and despicable events in Virginia, it looks like the answer is yes.

The events in question involved a rally of white supremacist, KKK members, and Neo-Nazis that took place at the University of Virginia. Numerous videos showcase why these organizations should be despised. Further, a peaceful counter-protester, Heather Heyer, was tragically killed and more were injured when a white supremacist is alleged to have deliberately driven his car into a crowd.

However, these hate-mongers who once hid behind hoods and on the fringe are being called out for their actions. Consider the following:

  • The Washington Post (by Maura Judkis)  reported one individual was fired after he was photographed marching with torch wielding Nazis, White Supremacist, and/or KKK members. The employee, Cole White, was identified online and his photo was widely circulated.
  • CNN reported about an online crowdsourcing campaign that identifies demonstrators who attended white nationalist rallies in Charlottesville, Virginia. The campaign, led by a Twitter account, @YesYoureRacist, asks people on social media to identify white nationalists who appear in news photos of “Unite the Right” rallies.

So this raises the question of whether employers face any risks in firing an employee for off-duty attendance at a rally supporting hate-groups like the Klan or Neo-Nazis.

For private employers, the short answer is no. Michigan, like most states, is an “at-will” employment state meaning the employment relationship may be ended for any reason that is not unlawful discrimination. Supporting racist views is not a protected category.

Further, First Amendment and free assembly protections apply to government action – not private-sector employers. But even those protections probably do not extend to circumstances like those presented over the weekend.

And if you are a Michigan employer and you have questions about firing an employee who has participated in a Neo-Nazi/KKK rally or other hate groups, please feel free to contact us for a pro bono consultation. Simply put: while some American politicians are ok with legitimizing or tolerating Nazi salutes, chanting derogatory statements about blacks, Hispanics, Jews, Muslims, or LGBTQ, or others, I do not believe that business leaders should. Do this for the good of your company and for the good of society.

LinkedIn Profiles Used to Alert Employers Which Employees are Job-Hunting

Predictive HR using data analyticsUsing Linked for your job searches? Your employer may also be monitoring your LinkedIn profile to find out the same in order to take preemptive action. If this sounds like an HR remake of the sci-fi movie Minority Report, you wouldn’t be too far off.

In that movie, Tom Cruise played a detective in the “Precrime Unit.” The unit used psychics (called “precogs”) to make arrests before the crimes were committed. Here, however, the tech-start-up, HiQ Labs collects LinkedIn user data, analyzes it through an algorithm, and sells the analysis to employers to identify which employees may be looking to join a competitor.

According to hiQ Lab’s website, its “Keeper” tool provides organization with “predictive attrition insights about an organization’s employees … [and] turns those attrition insights into consumable, easy-to-deploy action plans so HR and business leaders can retain their key talent.”

But on May 23, 2017, LinkedIn sent hiQ Labs a cease-and-desist letter to stop accessing LinkedIn’s site. LinkedIn further threatened that its continued access would violate the Computer Fraud and Abuse Act, Digital Millennium Copyright Act, and California Penal Code § 502(c) and constitute common law trespass.

However, hiQ Labs preempted LinkedIn’s threatened litigation and sued for declaratory relief in California District Court. The suit, a copy is available here (hiQ Labs v Linked (PDF), essentially says, everything LinkedIn threatened is a certain waste product from a bull’s digestion system. Or if you prefer a more legalistic and euphemistic explanation:

hiQ seeks a declaration from the Court that hiQ has not violated and will not violate federal or state law by accessing and copying wholly public information from LinkedIn’s website. hiQ further seeks injunctive relief preventing LinkedIn from misusing the law to destroy hiQ’s business, and give itself a competitive advantage through unlawful and unfair business practices and suppression of California Constitutional free speech fair guarantees.

* * *

… it has instead threatened to sue hiQ under federal and state laws pertaining to hacking and unauthorized computer and network access in order to intimidate hiQ and force it to stop accessing these public profiles. But LinkedIn cannot use those laws for an improper purpose to obtain exclusive proprietary control over wholly public data in which it otherwise has no exclusive interest and which hiQ, and anyone else, can freely access on the world wide web with no log-in credentials or password. … LinkedIn would not have that data on its website in the first place but for its promise to LinkedIn members that they can publicly disclose that information on LinkedIn for all the world to see and use.

Aside from the declaratory relief, hiQ has also sued for intentional interference with contracts and business advantages; unfair and fraudulent competition under California law; promissory estoppel; free speech violations under California law (which seems problematic but maybe the judge would see it differently).

On June 30, 2017, LinkedIn and hiQ Labs agreed hiQ may continue to operate, conduct searches, and sell the results like it did before the threatened litigation while the litigation proceeds or until further order.

LinkedIn and Employment Litigation

After an employee leaves his or her employment, LinkedIn provides a wealth of potential evidence. But this evidence is used in post-employment lawsuits, often involving non-compete disputes, trade secret misappropriation, or related claims between individuals and their former employers.

But hiQ Labs seeks to change this by arming companies with data to prevent or head-off such claims. hiQ Labs (unrealistically) argues that this insight is beneficial to LinkedIn and its members because an “employer using [its services] might give an employee a ‘stay bonus’ or a career development or internal mobility opportunity” to keep them from leaving. More likely, the employee is going to be immediately locked out of the employer’s network, fired, and lucky if no further legal action is taken.

And this is precisely why LinkedIn is concerned. It argued that if its members “knew that hiQ was accessing and collecting their data” to flag them to their current employers, “many would not update their profile.”

Also, this is yet another example of how the federal 1986 Computer Fraud and Abuse Act (CFAA) should be applied to advances in technology. Originally, this statute was targeted at criminal hackers. It was later amended to provide civil remedies. Having a federal criminal statute to use or contend with in civil litigation is a game-changer – and not always for the better. For policy considerations see Computer Fraud and Abuse Act: A Criminal Statute That Extends to the Employment Relationship?).

We will continue to monitor this case given the significant impact it has on companies and their employees. For more information, contact attorney Jason Shinn. Since 2001, he has focused on addressing non-compete and trade secret misappropriation claims. He routinely represents businesses and individuals involved in these claims in federal and Michigan Courts, and frequently writes and speaks about these legal issues. Mr. Shinn also routinely represents individuals and businesses involved in CFAA claims that arise from a prior employment relationship.

Social Media – Truth Serum in an Age of Alternative Facts?

One aspect of my legal practice that has changed over the years is the amount of time I focus on my clients’ social media use, as well as investigating an opposing party’s social media accounts. The reason for such attention is simple; it is often a goldmine for inconsistencies, admissions, or even outright lies that can make or break a case.

Trump, Tweets, and Truth – Consistency is Optional

This point was recently made in a recent tweet by President Trump. He tweeted that he was the subject of a “Witch Hunt” headed up by the “man who told me to fire the FBI Director!” The man Mr. Trump references is Rod J. Rosenstein, the deputy attorney general, who authored a memorandum recommending the dismissal of Mr. Comey.

President Trump Obstruction

One problem with Mr. Trump’s tweet, however, is that it is inconsistent with what he said to NBC’s Lester Holt (the other problem is that Mr. Trump gratuitously confirms he is under investigation).

In that interview, Mr. Trump stated unequivocally that he alone had made the decision to fire Mr. Comey. He also confirmed that he reached his decision to fire Mr. Comey irrespective of any other recommendations, including that of the man leading the witch hunt.

Whether such inconsistencies prove to be detrimental in the political arena where “alternative facts” have taken hold as “acceptable” remains to be seen.

Social Media, Facts, and Litigation – Consistency Matters

However, outside of politics where facts do matter, inconsistencies between social media posts and trial evidence is detrimental. For example, we recently had a similar situation in a lawsuit involving the Michigan Whistleblower Protection Act. The manager (who was also the husband of the company’s owner) gave various reasons for why our client was fired. He eventually settled on the claim that our client lied to him about cleaning grease traps at the restaurant. The failure to clean these traps caused a dispersal of raw sewage to back up and contaminate areas of the restaurant, including the food pantry. Our client had called a Michigan Agency responsible for regulating restaurants out of concerns for how the clean-up was being handled.

The problem with the defendant’s claim was that the manager texted our client the reason he was fired was for his idea to coHawkpeak Brewing Companyntact the health department. And just to avoid any ambiguity, the manager announced, the “Health department should not have been called,” because “Shutting down is never an option!”

In a somewhat “Trumpian” move, the manager simply testified that the text message was fraudulent, which later changed to the manager’s belief it was fraudulent. Never mind the defendant previously authenticated the text message earlier in the litigation process and it was sent from the same number that the manager used to communicate with the employee (inconvenient facts).

The bottom line is, social media is increasingly a central issue when it comes to litigation. And unless you are the President, sometimes this will mean owning up to or having to explain an “inconvenient” or errant Facebook post, Tweet, text message, etc. But ignoring it or calling it “fake” or fraudulent without a factual basis is never going to work out well. Outside of politics, judges and jurors are simply too smart for such shenanigans to be fooled.

For more information about this article, contact attorney Jason Shinn. Since 2001, Mr. Shinn has addressed employment and complex litigation matters, including investigating and using social media and other digital evidence to represent his clients’ interests. Jason has also been a featured speaker on the topic of social media digital evidence and recently presented “How to Get Your Social Media, Email, and Text Evidence Admitted,” to an attorney conference.

Corporate Funeral Home Argues Religious Belief Exempts Title VII Anti-Discrimination Law

Major world religionsOn May 17, 2017, attorneys for a corporation operating a Detroit funeral home that fired a transgender employee filed its appeal brief. The brief argues that the corporation could fire a transgender employee who refused to follow its sex-specific dress code because allowing her to wear women’s clothes at work would violate the religious beliefs of the corporation’s majority shareholder.

Background of the Transgender Discrimination Case

The case, EEOC v. R.G. &. G.R. Harris Funeral, was covered here (Religion and LGBT Discrimination – Who is Protected Under Title VII) and here (Corporate Religious Beliefs – A New Defense in Employment Discrimination Claims?). The EEOC filed a complaint in district court alleging that R.G.’s discharge of Stephens constituted unlawful discrimination because of Stephens’s transgender status, because of Stephens’s “transition from male to female,” and because of sex stereotyping. 

R.G. moved to dismiss the wrongful termination claim for failure to state a claim on which relief can be granted. The district court, by Judge Sean Cox, ruled that Title VII’s prohibition of discrimination “because of . . . sex” does not include discrimination based on transgender status. The district court further ruled that the EEOC’s complaint stated a claim for relief for impermissible sex stereotyping in violation of Title VII. However, the district court concluded that the Religious Freedom Restoration Act (RFRA) exempted R.G. from the enforcement of Title VII. 

The Funeral Home’s Argument on Appeal

On appeal, attorneys for the corporate funeral home argued on behalf of the majority shareholder, Thomas Rost, that

Allowing [the former employee] to contravene the dress code and wear a female uniform in the public-facing role of funeral director would have caused R.G. to convey a message in direct conflict with Rost’s religious belief that a person’s sex is an immutable, Godgiven gift, thus violating Rost’s religious convictions.

The corporation’s attorneys further argued that “Rost’s “faith compels [him]” to “serve grieving people” as he does through [the corporation].” 

Rost’s “faith compels [him]” to “serve grieving people” as he does through [the corporation] … In other words, R.G. is the embodiment of Rost’s religious exercise. Requiring R.G. to authorize a male funeral director to wear the uniform for female funeral directors would directly interfere with—and thus impose a substantial burden on—R.G.’s ability to carry out Rost’s religious exercise of caring for the grieving.  

This case should be closely watched by companies and their HR professionals. This is because of the potential implications this case has for Title VII and discrimination claims. Specifically, the corporation is arguing Title VII workplace protections against discrimination are not exempted from RFRA’s reach, meaning any employer or its owners, shareholders, or members could argue religious beliefs take priority over anti-discrimination laws.  

A copy of the corporation’s brief is available here, EEOC v. R.G. &. G.R. Harris Funeral, May 17, 2017). 

For more information about this case or federal and Michigan anti-discrimination employment law, contact attorney Jason Shinn. Mr. Shinn has been representing businesses and individuals when it comes to employment discrimination laws since 2001. 

The Risks of Relying on Free Online Legal Advice

The saying, “you get what you pay for,” is cliché. But it is no less true. And it is an accurate cliché when it comes to online legal advice.

The Danger of Relying on Legal Advice from Free Q&A Websites

Various websites offer answers to legal questions from attorneys who register with the Q&A site and sign up. And this is not entirely a bad thing. But it isn’t a good thing if you are relying exclusively on free, online legal advice. Case in point, earlier this week I saw an example of why you should be cautious about only using a free legal Q&A site to make decisions.

SpecifFree Legal Adviceically, a user in Livonia Michigan posted an employment law question about jury duty and disciplinary action. To be clear, this is public information and not a client of my law firm. The questioner explained that he had been summoned for jury duty, but was excused at 2:30 PM. The employee had been scheduled to work 6 PM to 9 PM. However, the employee called off prior to being excused from jury duty. The questioner disclosed that he was later disciplined for not working this shift.

A range of attorneys responded. The self-identified practice areas for these attorneys’ ranged from real estate to auto accident to employment attorneys. Further, they included attorneys licensed in Michigan and those license in other states.

But one response exemplifies the concerns about relying exclusively on “free” legal advice. The response, presumably from a well-intentioned attorney reads,

To my knowledge this is best answered by corporate policy .. not a law … I am afraid you are probably fighting a loosing battle.

The problem with this response is that the questioner’s issue is covered by a law. That law, MCL § 600.1348, makes it illegal for an employer to discipline an employee who complies with his or her jury duty obligations. Further, the statute expressly covers the situation presented by the questioner, i.e., serving jury duty when scheduled to work outside of jury duty hours.

I’m not saying that credible legal Q&A sites have no place. In fact, I frequently I contribute to the legal Q&A called Avvo. Mostly I consider my contribution to be a deposit towards “good karma.” To a lesser extent, it may be an investment in a new client. But my responses, however, are limited to the corner of the legal universe I focus on, e.g. employment and noncompete law. I don’t stray beyond these legal areas. And if I don’t know the answer, I won’t respond or I will provide points of consideration with a recommendation to consult with an attorney. I’m not saying my approach is unique. But it is not uncommon for attorneys to answer questions outside of their practice areas or the states where they are licensed to practice.

Recommendations for Using Free Legal Q&A Websites

So if you will use a Q&A legal site, here are a few points to consider:

  • First, using a legal Q&A site should be an initial step in addressing a legal issue. But it should be one of several steps in looking at a legal issue.
  • Second, consider the background of the attorney providing any answer. For example, if your question focuses on a whistleblower issue, disregard an answer from an attorney who identifies as practicing law in real estate or wills.
  • Third, be careful about how much information you disclose. When you consult directly with an attorney, your communications are protected by the attorney-client privilege. This is true even if you later decide not to work with that attorney. However, the same protections do not apply to online communications. Assume any information disclosed online is not privileged.
  • Fourth, no matter how good a legal Q&A site may be, it will not replace the experience and insight you will gain from consulting directly with an attorney. Often an initial consultation is free or capped at an agreed upon amount. So think of it as an investment in getting legal advice tailored to your situation.

For more information about employment and noncompete law, contact attorney Jason Shinn.

Proposed Legislation To Improve and Expand Michigan Business Courts

Noncompete lawProposed legislation would revise Michigan’s business courts. It would provide several revisions, including a change that will be important concerning non-compete disputes.

Michigan experimented with creating a “business court” docket in 2011 in Macomb County Circuit Court. The experiment expanded into Kent County in March 2012 and Oakland County in July 2012. Then in 2013, Michigan launched its business court program statewide in circuit courts.

The proposed legislation is Senate Bill 333. It focuses on expanding cases eligible for the business court docket and removing others not suited for the program.

Specifically, the legislation would amend the Revised Judicature Act to “specify that a business court would have jurisdiction over business and commercial disputes in which equitable or declaratory relief was sought or in which the matter otherwise met circuit court jurisdictional requirements, instead of business and commercial disputes in which the amount in controversy exceeds $25,000.” See the bill analysis by the Senate Fiscal Agency.

In our experience, the business court program has been very successful in streamlining and bringing consistency to cases meeting the definition of a “business dispute.” However, the proposed legislation would improve the resolution of noncompete disputes. This is because litigants will frequently seek declaratory relief as to the enforceability of noncompete restrictions. Often, this strategy is pursued before any damages have occurred. But without such damages, the noncompmete dispute may not be eligible to be heard by the business court. But if this proposed change becomes law, business courts can decide equitable or declaratory relief without reference to the monetary dispute.

Michigan Lawyer’s Weekly (by Lee Dryden), reports that the proposed bill has wide support from legislators and judges. Specifically, the Senate Judiciary Committee approved the bill May 2. Further, business court judges James M. Alexander of Oakland County and Christopher P. Yates of Kent County spoke in favor of it, along with Michigan Supreme Court Justice Bridget M. McCormack. The legislation also has support from the Michigan Judges Association and State Court Administrative Office.

We will continue to monitor this legislation.

Uber’s Autonomous Vehicle Program Continues but Without its Key Engineer

Trade secret self-driving carsOn Monday, May 15, 2017, Uber Technologies, Inc. narrowly sidestepped what could have been a complete shutdown of its autonomous vehicle program. Specifically, a federal district court judge declined to issue a temporary injunction against Uber and its self-driving car program. A copy of the order is available here, Waymo LLC v. Uber Technologies, Inc. (5-15-2107).

However, the District Court enjoined a key engineer leading Uber’s autonomous vehicle program from working on a critical component of the self-driving vehicle technology during the litigation.

The injunction arose out of a case filed in February 2017. The suit accused Uber and Google/Waymo’s former engineer of stealing trade secrets to develop an autonomous vehicle. The engineer, Anthony Levandowski, was an autonomous vehicle guru while at Waymo.

As we reported, Waymo alleged that Levandowski downloaded approximately 14,000 files comprising. According to the lawsuit, this amounted to 9.7 GB of confidential autonomous vehicle software data. The suit claims Levandowski missapropriated the data to help develop Uber’s autonomous vehicle program.

The New York Times reported on May 12, 2017 (by Mike Isaac) the judge previously referred the case to the United States Attorney’s office for possible theft of trade secrets. Such theft carries the possibility of criminal charges for those involved if the Department of Justice pursued the case. Anticipating as much, Mr. Levandowski decided to plead the Fifth Amendment to preserve the right against self-incrimination.

In today’s ruling, the judge reasoned,

Waymo L.L.C Has shown compelling evidence that its former star engineer, Anthony Levandowski, downloaded over 14,000 confidential files from Waymo immediately before leaving his employment there … Significantly, the evidence indicates that, during the acquisition, Uber likely knew or at least should have known that Levandowski had taken and retained possession of Waymo’s confidential files.

Having represented companies and engineers in pursuing and defending against trade secret litigation, the issues addressed in the court’s order are all too common. And while Uber can “spin” a partial victory from not having its autonomous vehicle program enjoined during the pendency of the litigation, this may prove to be a hollow victory.

First, Levandowski appears to be key to its self-driving car software development. Right now he is temporarily sidelined per the court’s order. But it would not be a surprise if Levandowski’s employment was eventually terminated (and likely sooner than later if criminal charges are pursued). Second, if there is evidence that Uber knew of the misappropriated trade secrets, its entire autonomous vehicle program could be enjoined, besides facing other civil or criminal sanctions.

We will continue to monitor this case. Meanwhile, the Waymo/Uber lawsuit is an important reminder to carefully evaluate measures to prevent new hires from wrongfully using trade secrets and confidential information of competitors. Such measures include having the right policies. They also include educating HR professionals and managers about the need to discourage and even police against such misappropriation.

For more information about trade secret misappropriation or the issues raised in this post, contact attorney Jason Shinn. Mr. Shinn routinely represents individuals and companies and trade secret and noncompete litigation in federal and Michigan lawsuits.

Revising Non-compete Law to Eliminate Unfair Competition

Noncompete Agreement and Unfair AdvantageNon-compete agreements are intended to prevent unfair competition. But they often create unfair advantages against employees and start-ups. And these unfair advantages adversely affect individuals and the overall economy. At least that is the take-away from a recent op-ed in the New York Times.

Noncompete Restrictions and the Economy

Specifically, Prof. Orly Lobel wrote in Companies Compete but Won’t Let Their Workers Do the Same

Noncompete agreements, like other anti­competitive practices, poison our economy in larger, less tangible ways. There is strong data showing they reduce employee motivation, entrepreneurship, and sharing of knowledge, the fundamental building blocks of innovation and economic growth.

In support, Professor Lobel cites to research from the Treasury Department:

The evidence shows wages in states that enforce noncompetes are 10 percent lower than in states that restrict their use. The Treasury Department concluded in its recent report that ‘by reducing workers’ job options, noncompete agreements force workers to accept lower wages in their current jobs, and may sometimes induce workers to leave their occupations entirely, forgoing accumulated human capital.’

Noncompete Agreements in Michigan

In Michigan, like many states, non-compete agreements may be enforceable if certain threshold requirements are met. Among these requirements:

  1. It must be reasonable as to its duration, geographical scope, and the type of employment or line of business restricted.
  2. The enforceability of a noncompete must protect against the employee’s gaining some unfair advantage in competition with the employer. However, the restrictions cannot prohibit the employee from using general knowledge or skill.
  3. It must protect an employer’s reasonable competitive business interests.

See St. Clair Medical, P.C. v. Borgiel, 270 Mich. App. 506 (2006).

In addition to the concerns raised by Professor Lobel, it should also be noted that former employers seldom need to actually establish these elements in order to prevent an individual from working for a competitor. Instead, it is often enough to send what is called a “cease and desist” letter to the individual and new employer that threatens to sue to enforce the post-employment restrictions. This, in turn, frequently results in termination or an unpaid leave to (hopefully) resolve the noncompete dispute. Thus, even where the enforceability of the noncompete agreement is questionable, a company can prevent the individual from working.

For example, we represented an engineer in a noncompete dispute. The engineer’s employer was closing the office in the state where the engineer worked. He was given the option to relocate him and his family to another state. Instead, he chose to accept a position with a state college. But the employer sought to enforce its non-compete restrictions to prevent this employment. Ultimately, the judge agreed with our position that the non-compete was not likely to be violated by accepting the college position. But by that time, the college had hired another engineer for the position.

This example shows how employees can win a non-compete dispute while still losing. Other issues remained to be resolved in that example, but, unfortunately, the employment opportunity was gone.

A modest Proposal to Revise Michigan’s Noncompete Law

In our experience representing employers and individuals in non-compete disputes, we believe such post-employment restrictions – if used appropriately – have a legitimate and important purpose. But all too often companies or their attorneys often overreach.

In those instances, Michigan would do well to revise its non-compete statute to include a bad-faith provision. Michigan’s trade secret statute already contains a provision that allows a defendant to recover attorney’s fees if a trade secret misappropriation claim was brought in bad faith. Adding a similar provision to Michigan’s noncompete statute could deter frivolous non-compete disputes or provide some measure of recovery to an individual subject to such a lawsuit.

For more information about this article or Michigan non-compete law, contact attorney Jason Shinn. Mr. Shinn has practiced in this area since 2001 on behalf of employers and employees.

Is a Noncompete Enforceable if an Employee is Laid-Off?

noncompete agreementLast week, ESPN laid off 100 employees. This included well-known SportsCenter anchors and popular writers who are subject to noncompete restrictions. A lot of ink has been spilled about the causes for these layoffs. See, for example,

A lot of ink has been spilled about the causes for these layoffs. See, for example, ESPN is Not Doomed. But one topic near-and-dear to our attorneys is what happens to the ESPN employees let go who are under noncompete restrictions.

John Ourand of Sports Business Daily touched upon this issue when he reported in Tough trend for Talent,

ESPN agreed to pay out full contracts, which in some cases lasted more than five years … Many have non-compete clauses in their deals, which means they can’t report their beats, even on social media, until their contracts end or they are released. In order to get around the non-compete clauses, they would have to report on entirely different beats than the ones they spent years developing at ESPN.

Now there are worse things in life than getting paid to not work for five years to comply with your noncompete obligations. But the reality is that many employees are not going to have this benefit. In fact, often employees are fortunate to get two-weeks severance. So what happens when you’re employment is restricted and you receive limited or no severance – is the noncompete still enforceable?

Enforcing Noncompete Agreements After the Employment Ends

Our law firm specializes in noncompete law when it comes to representing both companies and employees. A common question from both is what happens to a noncompete restriction if the employee is fired or laid-off due to no fault of the employee.

The short answer is that it depends on a few issues (I know, typical attorney answer). First, most states, including Michigan, do not preclude enforcement of a post-employment restriction in a noncompete agreement simply because the employee was fired, laid-off, or the employment ended due to no fault of the employee or for reasons outside the control of the employee.

Second, noncompete restrictions generally include a provision that it will be enforceable regardless of the reason the employment ended. In such an instance, the reasons for termination becomes irrelevant. From an employer’s perspective, it is important to carefully draft this provision to avoid litigating the reasons for an employee’s termination.

Now there are still significant threshold requirements that must be met to have an enforceable noncompete agreement. Such considerations include whether it protects an employer’s reasonable competitive interest, whether it is limited in duration and geographic scope, etc. But the reasons for the termination will not be a legal bar for enforcement if it is properly drafted.

For more information about noncompete agreements and best practices for enforcing them or strategies for challenging their enforceability, contact attorney Jason Shinn. Since 2001, he has worked with companies, executives, sales representatives, and other employees to address noncompete disputes. Mr. Shinn has extensive experience in obtaining and defending against temporary restraining orders and other remedies involved in noncompete litigation.

Also to obtain a free report, 10 Noncompete Mistakes You Can’t Afford to Make, follow this link and complete the contact form (include “noncompete mistakes” in the subject line).

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