CVS Pharmacy Inc. sued online pharmacy retailer Capital Rx Inc., claiming the web-based business is trying to keep a former employee from working for CVS. The lawsuit, filed on 9/16/2021, claims Capital Rx’s noncompete agreement violates Massachusetts law.
Why It Matters:
CVS’ lawsuit highlights an all-too-common issue new hires often face – the surprise non-compete restriction. Unfortunately, this surprise is often sprung after someone accepts a new job and gives their resignation notice to their employer. It is a bad situation for the person who now has little to no practical options. And it is not good for the new employer to start an employment relationship like this.
Suresh Yarlagadda, a pharmacist, briefly worked for Capital Rx from May until late July. The suit alleges Dr. Yarlagadda worked exclusively from Massachusetts. Captial Rx is based in New York.
In August, when he joined CVS, Capital Rx told him he could not work for CVS because of the noncompete restriction. According to the lawsuit, that restriction was “buried” in an 11-page document he signed just before he started working at Capital Rx.
The lawsuit claims the noncompete restriction is illegal under Massachusetts law for several reasons. Among those reasons, CVS argues Capital Rx gave it to Yarlagadda too late in the hiring process. The Massachusetts law requires a noncompete agreement to be provided to an employee when the job offer is made or 10 days before the employee starts, whichever is earlier. But Capital Rx gave Dr. Yarlagadda the noncompete restriction about a month after making the offer and one day before he started work for Capital Rx.
This case is pending in U.S. District Court for the District of Massachusetts, CVS Pharmacy Inc. et al. v. Capital Rx Inc., Case number 1:21-cv-11526.
What you can do:
Fortunately for Dr. Yarlagadda, CVS decided to sue to invalidate the noncompete restriction. Just as often, the job applicant in Dr. Yarlagadda’s position has the job offer rescinded or delayed (without pay) and is left to fend for themselves.
There are no requirements for when a noncompete agreement must be disclosed to a new hire under Michigan law. It is no wonder workers often feel they have been “trapped” – having accepted the offer and given notice of their resignation, they cannot go back to the old job. And their voluntary resignation means they won’t be eligible for unemployment. For employers, is this how you want to begin the new employment relationship?
Many noncompete disputes we become involved in begin with the facts described above. Yet it is unfortunate because many of those disputes could be avoided with better HR procedures; just disclose up-front that a job offer will require signing a noncompete or other post-employment restriction. For these reasons, a prescribed mandatory disclosure requirement like the Massachusetts law could make a lot of sense (but other provisions of the law not so much).
In the meantime, those considering new job offers should:
- Ask upfront if the position will require a noncompete or other post-employment restrictions.
- If a noncompete restriction will be required, get a copy early in the interview process.
- Take time to understand the restrictions. We routinely collaborate with job applicants on whether the restrictions are too onerous or otherwise problematic.
- Try to negotiate those restrictions into something more reasonable. If the restrictions can’t be scaled back, at least you know before effectively closing the door on your current job with a resignation notice.
Use this link to contact Michigan attorney Jason Shinn if you have questions about this article or Michigan’s noncompete law. Since 2001, Mr. Shinn has represented companies and individuals concerning the issues discussed above and other employment matters under federal and Michigan employment laws.