June 22, 2023

On June 7, 2023, the New York State Senate passed Senate Bill 3100A prohibiting most non-compete agreements in employment contracts. Shortly after on June 20, 2023, the bill passed in the New York State Assembly. This Bill has not been officially enacted yet, but if it is signed by Governor Hochul, it will become law and have a significant effect on business practices and employment contracts.

Subsection 1 of the Bill defines a non-compete agreement as “any agreement, or clause contained in any agreement, between an employer and a covered individual that prohibits or restricts such covered individual from obtaining employment, after the conclusion of employment with the employer”. It further declares “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void”.

In essence, this Bill prevents employers from restricting where a terminated employee can get employment after their employment ends. The New York State Senate stated the justifications for this Bill are:

  • Non-compete agreements have a negative effect on the labor market and economy of New York State. They prevent workers from seeking employment at entities that may be a better fit, and they provide employers from providing more competitive benefits and wages because their workforce cannot seek employment elsewhere.
  • In certain industries, they can have a detrimental impact on consumers.
  • Recently, the federal government has announced an interest in banning such agreements nationwide via an FTC regulation, so this bill would codify such a ban in state law.

The scope of S 3100A is solely the restrictions of the non-compete after the conclusion of employment. Any non-compete agreements related to the present duties of an employee or independent contractor currently employed are still valid and enforceable. This bill does not affect non-solicitation agreements or non-disclosure agreements. Further, otherwise valid contracts will be enforced notwithstanding an unenforceable non-compete provision.

These changes will only take effect if Governor Hochul signs the Bill and will not retroactively apply to any previous non-compete agreement agreed upon prior to enactment.

While other states have similarly restricted the scope of non-compete agreements for employment contracts, New York could now become the fifth state to ban nearly all non-compete agreements for employees, following Minnesota, Oklahoma, North Dakota, and California.

To read the S 3100A Bill, click here.

To read how Castaybert PLLC can assist you with Employment Counseling and Disputes, Executive Separation and Severance, Trade Secret Protection, and Noncompetes click the respective link.

 

August 23, 2022 — On May 26, 2022, the Appellate Division, First Judicial Department of New York granted an injunction prohibiting former Vice President of Basketball Partnerships at Excel Sports Management, LLC Eric Eways from working for Klutch Sports Group, LLC.

Eways had signed a contract with Excel that featured a restrictive non-compete clause barring him from working for specifically-named competitors for eight months post-separation. The Appellate Division reversed the Supreme Court of New York, Commercial Division’s denial of Excel’s motion for a preliminary injunction, with the Supreme Court having found that Excel’s interests could be protected by more precisely tailored non-solicitation and confidentiality provisions contained in Eways’s employment agreement.

Under New York law, the standard for the enforcement of a restrictive covenant in an employment agreement remains that the covenant is necessary to protect the employer’s legitimate business interests, “(2) does not impose unique hardships on the employee, and (3) is not injurious to the public.” The Appellate Division signaled with its ruling that New York likely will continue to enforce restrictive non-complete clauses in employment agreements.

To read more about Excel Sports Management, LLC’s action against Eric Eways and Klutch Sports Group, LLC, click here.

To read the Appellate Division’s decision, click here.

To learn more about how Castaybert PLLC can help you navigate employment law as well as non-competes and other restrictive covenants, click here and here.

June 6, 2022

The Department of Justice (DOJ) has recently updated its prosecutorial policy under the Computer Fraud and Abuse Act (CFAA). Enacted in 1984 and repeatedly amended since, the CFAA has produced a circuit split concerning the law’s reach, leading to recent attempts by the judiciary to restrict the open-ended language of the statute.

Definitions

The CFAA provides that a person who “intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains… information from any protected computer” has violated the law. 18 U.S.C. § 1030(a)(2)(C).

Exceeding authorized access is defined by the statute as accessing “a computer with authorization and to use such access to obtain or alter information in the computer that the accessor is not entitled so to obtain or alter.” 18 U.S.C. § 1030(e)(6).

Recent Jurisprudence

The DOJ’s new policy reflects both changing jurisprudence and changing technological and business practices.

Heeding the decisions by the Ninth Circuit in hiQ Labs, Inc. v. LinkedIn Corp., 17-16783 (9th Cir. 2019), and the Supreme Court ruling in Van Buren v. United States 19-783, 593 U.S. (June 3, 2021), the new DOJ policy will limit the scope of its investigations into CFAA violations relating to “web scraping” and departing employees accessing sensitive information.

  • In the hiQ case, the Ninth Circuit ruled that hiQ did not violate the CFAA by “scraping” large quantities of publicly available LinkedIn member profile data to create a competing product. LinkedIn argued that hiQ’s continued scraping practice constituted a violation of the CFAA. The Ninth Circuit ruled in hiQ’s favor, and did so again in April 2022.
  • In the Van Buren case, the Supreme Court sided against the government’s argument that a person authorized to access a protected computer system “exceeds” authorization by doing so with improper motives.

Policy shift

The DOJ has enumerated new conditions under which it will prosecute cases under the CFAA, defining what kinds of actions fall under the statute’s language.

  • The DOJ now says it will charge defendants for accessing “without authorization” in cases where the defendant was “not authorized to access the protected computer under any circumstances” and did so knowingly.

It defines “exceeding authorized access” as cases where:

  • a defendant knowingly accesses information from which they are “unconditionally prohibited” in a protected computer that has clear “computational” divisions of its contents.

In either case, DOJ says it will also weigh whether prosecution “would serve the Department’s goals for CFAA enforcement,” which it defines through several criteria, including:

  • the scale of the crime and harm committed, whether the crime impacts broad national or economic interests
  • the deterrent value of an investigation, if any other jurisdiction is likely to hold a defendant accountable if DOJ declines to prosecute
  • whether “the defendant’s conduct consisted of… good-faith security research.”

To read more about the DOJ’s new CFAA enforcement policy, click here for Jeffrey Neuberger’s detailed post in Proskauer’s New Media and Technology Law Blog.

To read the Department of Justice’s press release as well as its stated policy, click here and here.

To read how Castaybert PLLC can assist in employment disputes raising unauthorized access issues under the CFAA and in protecting trade secrets and company confidential information, click here.

May 17, 2022

The April 14th decision by the Delaware Court of Chancery sheds new light on the consequences for non-compliance with confidentiality provisions in employment contracts, mainly that there are few if any at all. The case, AlixPartners v. Mori, C.A. No. 2019-0392-KSJM (Del. Ch. April 14, 2022)., involves termination of the employment relationship and the subsequent measures the defendant took to copy thousands of documents belonging to the plaintiff onto his personal devices. The defendant, who lives and worked out of the plaintiff’s Milan office, was entitled to use the documents related to his lawsuit against the former employer, according to Italian Law, deemed applicable after a prior decision involving jurisdictional issues.

Central to the Italian court’s reasoning was Section 178(1) of the Restatement (Second) of Contracts, that a term of agreement is unenforceable in instances where the term conflicts with public policy. Italian law provided because Mori’s employment litigation required use of the AlixPartners documents to move forward, the conflicting confidentiality clause ultimately failed the public policy requirement.

The court found no violation of the contract’s non-solicitation clause and determined Italian law governed issues of trade secrets, which were also unviolated. Permanent injunction and damages were denied except for a nominal $7 compared to the defendant’s $2 million award in connection with his employment claims against the plaintiff. While the court warned its precedent-setting reasoning should be limited to the facts in this case, this will be an important case for corporate and commercial litigators to keep on hand for its persuasive analysis of noncompliance in the handling of confidential documents.

To read the full article from the Delaware Business Court Insider, click here.

To read how Castaybert PLLC can assist you with employment matters, click here.

May 6, 2021 – Proskauer recently issued an interesting article about the Federal Circuit’s reversal of a $66 million judgment in the District Court of Delaware in favor of Olaplex, Inc., which had alleged claims of patent infringement and trade secret misappropriation by L’Oréal USA, Inc. Through the course of negotiations for a possible acquisition of Olaplex by L’Oréal, Olaplex shared confidential information and asserted trade secrets. When the acquisition fell through, L’Oréal launched its own line of competing products, which Olaplex asserts exploited four categories of the company’s trade secrets. The Federal Court found despite the parties being subject to a non-disclosure agreement, Olaplex failed to prove its asserted trade secrets were in fact such. The NDA prohibiting L’Oréal from using Olaplex’s confidential information was ambiguously written. In fact, the Federal Circuit pointed to language explicitly contemplating L’Oréal’s use of the confidential information during negotiations for a possible acquisition. The reversal in Olaplex, Inc. v. L’Oréal USA, Inc. should serve as a cautionary reminder of the need for careful drafting of NDAs and the inclusion of unambiguous definitions for language pertaining to “trade secrets.” Extra care should be taken in Intellectual Property transactions that the obligations of each party, especially the party on the receiving end of confidential information, are adequately defined.

 

Find the full article here.

 

Find the decision here.

 

Learn how CASTAYBERT PLLC can assist you with Trade Secret Law and NDAs here.

April 06, 2021 -A recent decision by the Southern District of New York (SDNY) ruled that the non-disclosure and non-disparagement clauses in an employment contract for the Trump Campaign were unenforceable under New York law as they were too vague and too broad. In Jessica Denson v. Donald J. Trump for President, Inc., Judge Gardephe ruled that the categories of confidential information in the non-disclosure agreement were so broad that they encompassed any matter related to the campaign, and that the non-disparagement clause covered too many people and entities.

Saiber LLC’s Jennine DiSomma and Alexander C. Banzhaf break down the decision and its practical considerations. Specifically, they note that SDNY is showing less patience for broad restrictive covenants. They say “[t]his opinion signals to employers that restrictive covenants in employment contracts should be as definite as possible to increase the likelihood that they will be enforced by courts. It further signals to employers that they should be judicious when trying to enforce restrictive covenants because courts will evaluate whether employers are protecting legitimate interests or acting coercively.”

Find the full article here.

Find the full decision here.

Learn how CASTAYBERT PLLC can assist you with Employment Law needs here.

April 06, 2021-In a victory for business owners, the State of New York Court of Appeals decided that individual owners are not “employers” so are exempt from the New York City Human Rights Law’s (NYCHRL) vicarious liability provisions. An employee of Bloomberg L.P. brought claims of illegal discrimination, sexual harassment, and sexual abuse against her boss, who she claimed did the harassment, the company, and Michael Bloomberg as an individual owner and officer of the company.

The Court noted “the term ‘employer’ is undefined” when discussing NYCHRL vicarious liability provisions. In the end, the Court held that “where a plaintiff’s employer is a business entity, the shareholders, agents, limited partners, and employees of that entity are not employers within the meaning of the City HRL”. Rather, the liability is only for individual conduct. Even though the City Human Rights Law is expansive, the Court will only let plaintiffs go so far.

Find the full decision here

Learn how CASTAYBERT PLLC can assist you with Employment Law needs here.

March 17, 2021 – After the recent authorization of Coronavirus vaccines, the Equal Employment Opportunity Commission (EEOC) released guidance regarding the extent that an employer can require an employee to receive a COVID-19 vaccine. At its core, the guidance permits employers to require employees to be vaccinated before returning to the office. Nossaman LLP’s Patrick Crowl and Edward Meyer write about certain limitations and exceptions to a vaccine requirement, including: accommodations, disability-related inquires, and the Genetic Information Nondiscrimination Act.

 

Find the full Article here.

Learn about how CASTAYBERT PLLC can assist you with Employment Law needs  here.

Generally copyrights are only issued to the author of the original work. The Work Made for Hire doctrine is an exception to this rule where an employer is the owner of the work and the copyright, but this is contingent on whether the creator is an independent contractor or employee.
When an employer hires an independent contractor to produce an artistic work, the copyright remains with the independent contractor unless he or she agrees to license or transfer those rights. The Work Made for Hire exception as applied to independent contractors, on the other hand, specifically requires (1) for both parties to sign a written agreement; (2) the agreement must specifically state that the work is a Work Made for Hire; and (3) the artistic work must fall under one or more 9 specific types of work.
These types are:
• Contribution to a collective work,
• Part of a motion picture or other audiovisual work,
• A translation,
• A supplementary work,
• A compilation,
• An instructional text,
• A test,
• Answer material for a test, or
• An atlas.
Thus if an employer, instead of the independent contractor, provides an agreement that includes appropriate Work Made for Hire language, then it is imperative that the work itself still fits into one of the nine enumerated categories.
The Work Made for Hire exception as applied to employees requires that the work is created within the scope of their employment; either  created on the job or at the direction of their employer. While this seems to be more straightforward, there are of course gray areas – specifically, what is an employee? The Supreme Court has ruled that employment status is determined by weighing a number of factors examining how much control the employer has over a person’s work. In the case of freelancers, especially those with long-term contracts, it is best to clarify these things at the outset to avoid hiccups down the line.
For more information on how Castaybert PLLC can help you in securing, defending, or enforcing Works Made Hire Agreements with freelancers, please click here.

The ADA mandates that public accommodations must be accessible to everyone, including websites. With internet commerce on the rise, advocates for the blind and hearing impaired argue that websites must be just as accessible as their brick-and-mortar counterparts. There is no formal government standard for private businesses to ensure their websites are ADA compliant. A group of web innovators have created the Web Content Accessibility Guidelines for businesses to implement to make their websites more accessible to the disabled. Further, the Trump Administration decided to stop drafting rules for website ADA compliance and it is widely cited as the reason for an increase in compliance suits. 

For example, in just the first 6 months of 2018, there were nearly 5,000 ADA website lawsuits filed in federal court in the United States – a near 30% increase from the previous year. While advocates for the disabled find this uptick in lawsuits to be vital in achieving the necessary compliance with the ADA, critics have found these suits to be a ploy by lawyers and plaintiffs to pocket damages or hefty settlement agreements. 

The suits have targeted businesses in nearly every sector from supermarkets to restaurants to fitness boutiques to universities. The most recent target of these suits is Art Galleries. In January, artnet reported more than 75 New York galleries have been sued claiming their websites are in violation of the ADA. As New York is a hub for the origination of these suits, it is likely this will continue throughout the art world and beyond and thus even more important to safeguard your website against such claims.

For information on how Castaybert PLLC can help make your website more compliant or defend against an ADA compliance suit, please click here.

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