Businesses are constantly challenged by the ever-evolving landscape of labor and employment law, with new legislation and judicial developments occurring almost daily fueling a seemingly never-ending stream of litigation. For companies operating in multiple states, complying with this patchwork of federal, state, and local laws and developments can be daunting. Knowing these issues are a top concern for management and in-house counsel, Morrison Foerster keeps pace with this rapidly evolving landscape. MoFo ELC equips our clients with the most up-to-date and relevant information on employment and labor law issues covering key judicial, litigation and legislative developments, their implications for employers, and strategies to ensure compliance and avoid lawsuits.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Co-Chair, Global Employment and Labor Practice

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Andrew Turnbull represents companies on a broad range of labor and employment litigation and counseling matters. He has successfully defended clients in complex employment litigation before federal and state courts and administrative agencies. A primary focus of his practice involves helping companies navigate the unique employment issues that arise when doing business with the federal government, including advising on all aspects of OFCCP compliance, creating and implementing affirmative action plans, defending OFCCP audits and onsite investigations, conducting mock pay equity audits, drafting and developing business ethics policies and programs, and complying with the Service Contract Act, E-Verify, and the Drug Free Workplace Act.

Andrew Turnbull

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MoFo ELC equips our clients with the most up-to-date and relevant information on employment and labor law issues, covering key judicial, litigation, and legislative developments, their implications for employers, and strategies to ensure compliance and avoid lawsuits. To learn more about our capabilities, please visit the <a href="https://www.mofo.com/capabilities/employment-labor" target="_blank">Employment + Labor</a> practice page and read about our <a href="https://www.mofo.com/people?practices=Employment%20%2B%20Labor" target="_blank">Team</a>.

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The “Preventative Duty”: New Law Places Active Duty on Employers in the UK to Prevent Sexual Harassment in the Workplace

Good News for Employers: Texas Court Blocks FTC’s Non-Compete Ban

Potential Exceptions Under FTC’s Non-Compete Ban

FTC Issues Final Rule Banning Non-Competes

Maryland Poised to Continue Trend of Jurisdictions Mandating Pay Transparency in Job Postings

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On August 20, 2024, a judge in the U.S. District Court for the Northern District of Texas granted a nationwide injunction against the Federal Trade Commission’s (“FTC’s”) rule banning non-competes with employees (the “<a href="/topics/ftc-issues-final-rule-banning-non-competes" target="_self">Rule</a>”).  As we <a href="https://www.mofo.com/resources/insights/240815-the-impending-ftc-non-competition-final-rule" target="_blank">previously</a> reported, the court foreshadowed this ruling last month when it issued a limited injunction, barring the Rule from applying only to the plaintiffs in that case.  For now, employers can breathe a sigh of relief that the court has extended the injunction to all employers.Read the full <a href="https://www.mofo.com/resources/insights/240822-good-news-for-employers-texas-court-blocks" target="_blank">client alert</a>.

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Eric Akira Tate co-chairs the firm’s Global Employment and Labor Group. He represents technology and other companies in bet-the-company trade secrets and employee mobility cases.

Eric Akira Tate

Eric Tate chairs the firm’s Global Employment and Labor Group. He has represented technology and other companies in the biggest and most highly-publicized trade secrets and employee mobility cases across multiple industries. Eric also represents companies in whistleblower, wage and hour, and other employment litigation.

Eric Tate

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Co-chair Global Antitrust Law Practice Group

Alex Okuliar is Co-Chair of Morrison Foerster’s Global Antitrust Law Practice Group. He is the former Deputy Assistant Attorney General for Civil Antitrust Enforcement at the U.S. Department of Justice and a former advisor at the Federal Trade Commission.

Alexander Okuliar

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Lisa M. Phelan, former Chief of the National Criminal Enforcement and Washington Criminal I Sections of the Antitrust Division of the U.S. Department of Justice (DOJ), is a partner and Co-Chair of Mo

Lisa Phelan

Lisa M. Phelan

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Associate

Eric has experience defending class action, labor and employment, and intellectual property matters, including developing procedural strategies for clients preparing for trial, as well as examining in

Eric Gebert

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Helen He is an associate in the Litigation Department of Morrison Foerster’s San Francisco office.

Helen He

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On April 24, 2024, the U.S. Federal Trade Commission (FTC) promulgated its final rule prohibiting non-competes for most workers in the United States (the “Final Rule”).The Final Rule raises several issues, including enforceability, legal challenges, policy implications, how it interacts with other laws, and what may be some of its potential exceptions. This article focuses on the potential exceptions.Read the <a href="https://www.mofo.com/resources/insights/240501-potential-exceptions-under-ftc-s-non-compete-ban" target="_blank">full client alert</a>.

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Cooper Spinelli is a member of the Litigation Department and part of the firm’s Employment & Labor Group. His practice focuses on trade secrets and restrictive covenants, employee mobility and executive disputes, whistleblower claims, and general business litigation.

Cooper J. Spinelli

Cooper Spinelli

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David Shaw is a partner in Morrison Foerster’s Global Antitrust Law Practice group, where he draws upon his extensive experience across merger clearance litigation, cartel representations, counselin

David J. Shaw

David Shaw

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Megan E. Gerking is a partner in Morrison & Foerster’s Global Antitrust Law Practice, where she specializes in government-facing antitrust matters. Megan represents companies in criminal and civil con

Megan Gerking

Megan E. Gerking

On April 24, 2024, the U.S. Federal Trade Commission (FTC) promulgated its final rule prohibiting non-competes for most workers in the United States (the “Final Rule”).

On April 23, 2024, the Federal Trade Commission (the “Commission”) voted to issue its final rule (the “Final Rule”) barring non-competes for most workers in the United States, with exceptions for non-competes entered into in the context of a sale of business. The Final Rule will go into effect 120 days after its publication in the Federal Register. While we continue to digest the over 570 pages of the Final Rule, here are some initial observations.Read the <a href="https://www.mofo.com/resources/insights/240423-ftc-issues-final-rule-banning-non-competes" target="_blank">full client alert</a>.

Andrew co-chairs the firm’s Global Employment and Labor Group. He represents companies on a broad range of labor and employment litigation and counseling matters, successfully defending clients in number complex matters before federal and state courts and administrative agencies.

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Michael Schulman is a partner in the firm’s Global Employment and Labor Group. Michael has extensive employment and labor law experience, regularly advising clients in connection with workforce related counseling, investigation, transactional, and litigation matters. 

Michael Schulman

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Melissa Harclerode is an associate in Morrison Foerster’s Employment + Labor Group in the Washington, D.C. office.

Melissa M. Harclerode

Melissa Harclerode

FTC Issues Final Rule Banning Non-Competes

On April 23, 2024, the Federal Trade Commission (the “Commission”) voted to issue its final rule (the “Final Rule”) barring non-competes for most workers in the United States, with exceptions for non-competes entered into in the context of a sale of business.

While the FTC was relatively quiet in 2023 on the non-compete front, California forged ahead with two amendments to its non-compete statute (Business and Professions Code section 16600) that, depending on how courts interpret them, could be one of the most significant developments in the California employee-mobility space in the last 10 years. One of the amendments (SB 699) extends California’s non-compete ban to those signed by out-of-state employees under out-of-state law and creates a private right of action. The other (AB 1076) makes it “unlawful” to enter into a non-compete with an employee and required employers to notify their current and former employees by February 14, 2024, that any such non-competes are void. Each raises at least as many questions as they answer, including the effect, if any, on the Private Attorneys General Act (PAGA), employee non-solicits, and extraterritoriality. New York state, meanwhile, made news for what it did not enact—a total ban on non-competes. But although New York’s governor vetoed the total-ban bill, the New York City Council introduced a non-compete bill of its own in February 2024 that would ban all non-competes in the city without exception. Below we survey the latest on the FTC’s proposed rule, California’s new non-compete amendments, the New York state ban that was vetoed, and the proposed ban that was recently introduced in the New York City Council.FTC UPDATERecent reporting indicates that while the FTC may vote on the final version of its rule as early as April 2024, for various reasons such a vote may not happen until later in the year.Commissioner Lina Khan touched on the proposed rule on a panel at the American College of Emergency Physicians last October 2023, stating that the FTC had received far more feedback from individuals who work in healthcare than any other individual sector and an “overwhelming” number of comments supported total ban: “We’re looking at all those comments very closely and figuring out where to land,” she said. “But I’ll be honest, the overwhelming number of comments are firmly in support of the FTC proposal to ban non-competes across the board. And so, we take that very seriously.”[1]The FTC and DOL also entered into a Memorandum of Understanding (MOU) in September 2023 in furtherance of the President’s Executive Order on Competition. According to the press release, “[t]he new agreement enables the FTC and DOL to closely collaborate by sharing information, conducting cross-training for staff at each agency, and partnering on investigative efforts within each agency’s authority.”[2] Among the areas of mutual interest for the two agencies, the MOU identifies “the imposition of one-sided and restrictive contract provisions, such as non-compete and training repayment agreement provisions.” Id.And of course, it is unclear how the election year will affect these plans.CALIFORNIAKey Legislative DevelopmentsSB 699 and AB 1076 both took effect on January 1, 2024.SB 699SB 699 added section 16600.5 to the California Business and Professions Code, rendering unenforceable any contract that is void under the California framework. In relevant part, the law takes California’s expansive non-compete framework and further extends it to contracts that are signed and executed under laws outside California: “An employer or former employer shall not attempt to enforce a contract that is void under this chapter regardless of whether the contract was signed and the employment was maintained outside of California.” Cal. Bus. & Prof. Code § 16600.5(b). The amendment also creates a civil cause of action for any employee against an employer that enters into or attempts to enforce a contract that is void under this law, entitling such employee to injunctive relief, actual damages, or both, as well as reasonable attorneys’ fees and costs.AB 1076Making direct reference to Edwards v. Arthur Andersen LLP (2008) 44 Cal. 4th 937, AB 1076 amended section 16600 of the Business and Professions Code to void the application of any non-compete agreement in any employment context regardless of how narrowly tailored it may be, unless it meets an existing exception under California state law. It also added section 16600.1 to the California Business and Professions Code, providing that:<ul><li>It is “unlawful” to include a “noncompete clause in an employment contract, or to require an employee to enter a noncompete agreement, that does not satisfy an exception in this chapter.”</li><li>Employers who have non-compete clauses in contracts with current employees or former employees employed after January 1, 2022, were required to notify those employees by February 14, 2024, that the non-compete clause is void.</li><li>A violation of this section is an act of unfair competition under California law (section 17200), allowing for the relief and penalty provided therein.</li></ul>Section 16600.1 otherwise is silent on relief. Unlike SB 699, AB 1076 does not expressly authorize attorneys’ fees or actual damages.Rejected BillThe California legislature was considering but ultimately did not advance <a href="https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB747" target="_blank">A.B. 747</a>, which would have imposed, in addition to actual damages, a $5,000 penalty per employee for entering into or attempting to enforce a non-compete.Open Questions and ConsiderationsExtraterritorialityCalifornia has a general presumption against extraterritorial application of its laws that has been recognized by its Supreme Court. Sullivan v. Oracle Corp., 51 Cal. 4th 1191, 1207 (2011). SB 699 did not purport to overturn, and did not even reference, Sullivan.SB 699 provides that “An employer or former employer shall not attempt to enforce a contract that is void under this chapter regardless of whether the contract was signed and the employment was maintained outside of California.” Cal. Bus. & Prof. Code § 16600.5(b).But language found in the preamble to SB 699 (enacting section 16600.5) suggests that the amendment was intended to protect employees who are performing work in California and thus should not be applied to employees outside California:<ul><li>“(e) The California courts have been clear that California’s public policy against restraint of trade law trumps other state laws when an employee seeks employment in California, even if the employee had signed the contractual restraint while living outside of California and working for a non-California employer.”</li><li>“(f) California has a strong interest in protecting the freedom of movement of persons whom California-based employers wish to employ to provide services in California, regardless of the person’s state of residence. This freedom of employment is paramount to competitive business interests.”[3]</li></ul>Thus, one question that arises is to what extent does California’s ban apply to employees who remain and work outside California and remain there?PAGAPAGA applies only to violations of the Labor Code. The statutes that prohibit non-competes, including the newly enacted statutes in sections 16600.1 and 16600.5, are in the Business and Professions Code, not the Labor Code.But cases have been filed by California employees under PAGA challenging non-competition agreements purporting to rely on a catchall in the Labor Code—Labor Code section 432.5—which prohibits any employer or manager from requiring an employee or applicant for employment to agree in writing to a term or condition that know by such employer or manager to be “prohibited by law.” Cal. Labor Code § 432.5.[4]Whether a violation of Business and Professions Code section 16600 can be pursued under PAGA and warrant penalties under Labor Code section 432.5 are additional questions that may need to be resolved.Relief under Business and Professions Code section 17200Business and Professions Code section 16600.2 (AB 1076) on its face limits relief to what is available under section 17200, i.e., restitution, including restoring money to any person from whom the money has been obtained through unfair competition, for any unjust enrichment of an employer, injunctive relief, and possibly attorneys’ fees (by way of California Code of Civil Procedure section 1021.5).  Courts have generally held that damages are not available under section 17200. Section 17206 does provide for a civil penalty of $2,500 per violation, but only in an action brought by a public prosecutor, such as the state attorney general, any district attorney, or certain city attorneys. Assuming a public prosecutor brought a case and was awarded civil penalties, the statute is silent on how the penalty would be assessed other than the penalty is for “each violation.”Employee Non-Solicits and Fixed-Term AgreementsEach amendment is silent on employee non-solicits and fixed-term employment agreements.The new statutory subdivision, as amended by AB 1076, also requires section 16600 to be “read broadly” and states that this “does not constitute a change in, but is declaratory of, existing law.” Whether courts interpret the amendments to apply to these agreements remains to be seen.Labor Code Section 925(e)Before enactment of SB 699, some courts had, as we <a href="/topics/recent-non-compete-trends-courts-continue-to-enforce-non-competes-while-politicians-seek-to-narrow-them" target="_self">reported</a> in 2023,[5] construed California Labor Code section 925(e) as an exception of sorts to section 16600 if the employee is represented by the individual counsel of their choice. While AB 1076 expressly referred to Edwards, neither amendment mentioned Labor Code section 925 or 925(e) at all.What, if any, effect section 16600.5’s prohibition—that “an employer or former employer shall not attempt to enforce a contract that is void under this chapter regardless of whether the contract was signed and the employment was maintained outside of California”—will have on this issue remains an open question.NEW YORKOn December 22, 2023, New York Governor Kathy Hochul vetoed a bill that would have had a wide-ranging impact on employment contracts in the state.The New York state legislature passed State Senate Bill 2023-S3100A in June 2023, broadly limiting post-employment non-compete clauses. The bill defined “covered individuals” as “any other person who, whether or not employed under a contract of employment, performs work or services for another person on such terms and conditions that they are, in relation to that other person, in a position of economic dependence on, and under an obligation to perform duties for, that other person,” expanding to all employees or contractors regardless of position or income.The bill would have prohibited the use of non-compete agreements for all employers of any type. A non-compete was defined in S3100A 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 included as a party to the agreement.” The bill went on to render void “[e]very contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” S3100A had no express exceptions to the prohibition of post-employment non-compete agreements, but the ban would not have prohibited an employer from entering into a fixed-term employment agreement, prohibiting a “covered individual” from disclosing trade secrets and confidential or proprietary client information, or prohibiting solicitation of the employer’s clients that the former employee learned about during their employment.S3100A would have allowed “covered individuals” to bring a civil action to seek lost compensation, other damages, and reasonable attorneys’ fees and costs. Additionally, courts would have been directed to award liquidated damages of up to $10,000 per covered individual. In her veto memo, Governor Hochul expressed support for a restriction on non-compete agreements for middle-class and low-wage workers, likely signaling that she would sign a revised bill with a narrower scope into law.NEW YORK CITYThe New York City Council introduced a trio of bills on or around February 28, 2024, ranging from a total ban to a ban only for low-wage or freelance workers. The total-ban bill (Int. No. 140) includes a non-compete definition comparable to the New York state bill.[6] The same bill would prohibit New York City employers from entering into or maintaining a non-compete with a worker or representing to the worker that the worker is subject to a non-compete clause where the employer has no good-faith belief in its enforceability. It also would require covered employers to rescind any existing non-compete agreements. Unlike the New York state bill, New York City’s total-ban bill does not contain any exceptions (e.g., fixed-term employment agreements) on its face. Violators would be subject to a civil penalty of $500 per violation, enforced by the Office of Labor Policy & Standards. In its current form, it would not create a private right of action.[1] <a href="https://www.fiercehealthcare.com/regulatory/ftc-full-steam-ahead-sweeping-noncompete-ban-reinforcing-antitrust-chair-tells-docs" target="_blank">https://www.fiercehealthcare.com/regulatory/ftc-full-steam-ahead-sweeping-noncompete-ban-reinforcing-antitrust-chair-tells-docs</a>.[2] <a href="https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-department-labor-partner-protect-workers-anticompetitive-unfair-deceptive-practices?utm_source=govdelivery" target="_blank">https://www.ftc.gov/news-events/news/press-releases/2023/09/ftc-department-labor-partner-protect-workers-anticompetitive-unfair-deceptive-practices?</a>[3] Emphasis added. <a href="https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB699" target="_blank">https://leginfo.legislature.ca.gov/faces/bill</a>.[4] “No employer, or agent, manager, superintendent, or officer thereof, shall require any employee or applicant for employment to agree, in writing, to any term or condition which is known by such employer, or agent, manager, superintendent, or officer thereof to be prohibited by law.” Cal. Labor Code § 432.5.[5] <a href="https://elc.mofo.com/topics/recent-non-compete-trends-courts-continue-to-enforce-non-competes-while-politicians-seek-to-narrow-them?" target="_blank">https://elc.mofo.com/topics/recent-non-compete-trends-courts-continue-to-enforce-non-competes-while-politicians-seek-to-narrow-them?</a>[6] <a href="https://legistar.council.nyc.gov/LegislationDetail.aspx?ID=6557380&GUID=86B0DBB1-329A-46B9-9763-44062F71366C&Options=&Search=" target="_blank">The New York City Council - File #: Int 0140-2024 (nyc.gov)</a> (“The term “non-compete agreement” means an agreement between an employer and a worker that prevents, or effectively prevents, the worker from seeking or accepting work for a different employer, or from operating a business, after the worker no longer works for the employer.”).

While the FTC was relatively quiet in 2023 on the non-compete front, California forged ahead with two amendments to its non-compete statute (Business and Professions Code section 16600) that, depending on how courts interpret them, could be one of the most significant developments in the California employee-mobility space in the last 10 years.

Non-Compete Q1 2024 Round Up - FTC, California, and New York

New York State is expected to join the <a href="https://elc.mofo.com/topics/minnesota-passes-near-total-ban-of-non-compete-agreements" target="_blank">growing number of states</a> that significantly limit or prohibit non-compete agreements. On June 20, 2023, the New York State legislature passed S3100A, a bill broadly prohibiting post-employment non-compete restrictions. S3100A is expected to be signed by Governor Kathy Hochul and would take effect 30 days after her signature. Read the <a href="https://www.mofo.com/resources/insights/230622-new-york-state-non-compete-ban-bandwagon" target="_blank">full client alert</a>.

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Of Counsel

Kwan Park’s practice focuses on employment and labor litigation.
Kwan’s entire legal career has focused on representing employers. He seeks to understand each client’s unique business needs and objectives and relentlessly works to achieve them, whether in employment and labor litigation or in addressing novel legal issues.











Kwan Park

New York State is expected to join the growing number of states that significantly limit or prohibit non-compete agreements.

New York State Slated to Join Post-Employment Non-Compete Ban Bandwagon

On May 30, 2023, the National Labor Relations Board’s (the “NLRB’s”) General Counsel Jennifer Abruzzo (the “General Counsel”) issued <a href="https://www.nlrb.gov/news-outreach/news-story/nlrb-general-counsel-issues-memo-on-non-competes-violating-the-national" target="_blank">Memo General Counsel 23-08</a> (the “Memo”), expansively finding that non‑competes with employees violate the National Labor Relations Act (the “Act”), except in limited circumstances. As <a href="https://elc.mofo.com/topics/nlrb-gc-takes-broad-view-of-the-mclaren-macomb-decision" target="_blank">foreshadowed in her memo</a> on the NLRB’s enforcement against overbroad non‑disparagement and confidentiality clauses related to the McLaren Macomb decision, the General Counsel claims, without clear legal authority or other support, that offering, maintaining, or enforcing non‑competes and non-solicits with employees violates Section 7 of the Act where they reasonably tend to chill employees from engaging in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The Memo lists a variety of rationales, including non-competes with low-wage workers, to justify the General Counsel’s finding. The Memo, however, fails to articulate any clear examples of how non-competes interfere with traditional “concerted activities” protected by the Act, particularly in any manner to justify the sweeping scope of non-competes the Memo appears to find are unlawful. The Memo simply declares that non-competes are unlawful under the Act unless the employer can show that the non‑compete is “narrowly tailored to special circumstances justifying the infringement of employee rights.” Read the <a href="https://www.mofo.com/resources/insights/230605-nlrb-general-counsel-memo-seeks-aggressive-enforcement?utm_source=publication&utm_medium=email" target="_blank">full client alert</a>.

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On May 30, 2023, the National Labor Relations Board’s (the “NLRB’s”) General Counsel Jennifer Abruzzo (the “General Counsel”) issued Memo General Counsel 23-08 (the “Memo”), expansively finding that non‑competes with employees violate the National Labor Relations Act (the “Act”), except in limited circumstances.

NLRB General Counsel Memo Seeks Aggressive Enforcement Against Employee Non-Competes