How employers can prepare for a possible non-compete ban

Employee non-compete agreements have faced mounting scrutiny in recent years. Proponents say non-competes are indispensable for protecting trade secrets and other business interests. Critics say they hurt employee mobility and wage growth.

Now the federal government has stepped into the fray. On Jan. 5, the Federal Trade Commission proposed a new rule that would ban employee non-competes outright. A nationwide ban could take effect as early as September. Employers that rely on non-compete agreements should get ready now.

Trade secrets and non-competes

A non-compete forbids an employee from working for a competitor in a certain geographic area for a certain period after the employment ends. The idea is to keep the employee from using the employer’s own assets to compete against it.

Most notably, employers use non-compete agreements to protect trade secrets. Trade secrets — engineering plans, software, unreleased products, and customer lists, to take a few examples — can be among a company’s most treasured assets. Unfortunately, trade secrets can also be easy to steal. For example, a wayward employee may transfer company data to a flash drive in a matter of seconds.

Crucially, non-compete agreements are preventative. By prohibiting an employee from working for a competitor for a limited time, a non-compete can keep an employer’s trade secrets from winding up in a competitor’s hands in the first place.

By contrast, trade secret laws address misappropriation after the fact. These laws provide powerful remedies once a company discov-

See Page 26 ers that its secrets were stolen. The problem is that the horse is out of the barn at that point. The damage is done and often cannot be reversed. And in some cases, the company is unable to prove in court who stole its information — but its business is damaged all the same.

Businesses also use non-competes to protect customer relationships, investment in training, and company goodwill. Employers across a range of industries regard non-compete agreements as a vital tool for protecting innovation and investment.

Non-competes in the crosshairs

The law treats non-compete agreements as “restraints of trade.” That is, they are restrictions on free market competition that demand close scrutiny. Nevertheless, with a few exceptions — California being the most notable — most U.S. jurisdictions have decided that non-competes are acceptable under certain conditions.

Reasonableness is key. While requirements vary, states that allow non-compete agreements generally require them to be reasonable in scope and to protect a legitimate business interest. However, abuse is rampant. Too often, companies use overreaching non-competes to harass departing employees and squelch competition.

A famous example is Jimmy John’s. A few years ago, the attorneys general of Illinois and New York challenged the sandwich chain for allegedly imposing an unreasonable non-compete on all employees, even sandwich makers. For these and other hourly workers, there seemed to be no trade secrets or other genuine business interests at stake. Jimmy Johns reached a settlement with both states in 2016.

Since that time, critics have grown louder and many states have tightened or overhauled their non-compete laws. In the past two years alone, around a dozen states have enacted new statutes, and several more have bills currently pending.

Non-competes are now in the federal government’s crosshairs. In 2021, President Biden issued an executive order calling on the Federal Trade Commission to rein in non-compete agreements. While some doubted the FTC would seek to impose a total ban, it is now doing exactly that. This January, the agency proposed an administrative rule that would prohibit all employee non-compete agreements, with only negligible exceptions. This sweeping rule would also nullify all existing employee non-competes and require employers to tell this to their employees.

The FTC is taking public comment until early March. After that, it will publish a final version of the rule. Enforcement of the rule begins 180 days later.

What businesses should do to get ready

In could be months or years before the ultimate outcome of the FTC’s proposed rule is known. It faces fierce opposition, and it may or may not be published in its present form. Once the rule is published, legal challenges are likely to follow. Courts could potentially strike down the rule or limit its reach. But that is far from certain.

In the meantime, employers must make sure that their trade secrets and other legitimate interests are protected. Here are five actions employers should consider:

Review standard non-compete agreements and update them as needed to conform to current state law and best practices. Notably, the FTC has already begun taking legal action against employers it alleges are using non-competes unfairly. It has done so even without the proposed rule in place.

Review and revise non-solicitation agreements as appropriate. The FTC has excluded customer non-solicits from its proposed rule. But non-solicits must be carefully drafted to avoid being construed as de facto non-competes.

Review nondisclosure and confidentiality agreements with employees and revise them as appropriate. The FTC has warned that an overly broad NDA may constitute a de facto non-compete and run afoul of the rule.

Step up other protective measures. For trade secrets, employers might enhance their security measures, for example. Keep squarely in mind that existing non-compete agreements could be nullified or severely curtailed.

Stay informed of new legal developments and adjust as needed. Even before the FTC stepped in, non-compete law required close monitoring due to the constant changes in law and variation among states. With the proposed rule and challenges on the horizon, timely information is more important than ever.

One thing seems certain: Disruption is coming. Employers that act proactively and stay informed will be in the best position to handle whatever changes may come.

Maxwell Goss is a litigation partner with Fishman Stewart. He handles trade secret and intellectual property matters in Michigan and around the country.

$$7.5 MILLION SETTLEMENT 13-year-old shooting victim settles for $7.5M

Type of Action: Inadequate security and personal injury

Injuries Alleged: 13-year-old plaintiff suffered paraplegia with loss of bowel and bladder function

Name of Case: Withheld

Court: Withheld

Case #: Withheld

Verdict or Settlement: Settlement

Amount: $7.5 million

Date of Settlement: September 2022

Attorneys for Plaintiffs: John Jensen, Jensen Law Group (Chapel Hill) and Michele Cybulski, Guardian Ad Litem, Deuterman Law Group (Greensboro)

Attorneys for Defendant: Withheld

Were liability and/or damages contested: Yes

Was opposing party represented by legal counsel: Yes

Has the plaintiff been successful in collecting the judgment: Yes

By Haviland Stewart hstewart@nclawyersweekly.com

A teenager who was struck with a stray bullet and paralyzed has reached a $7.5 million settlement.

The plaintiff – who was 13 at the time – was visiting friends, when she was shot in their apartment complex parking lot. According to the plaintiff’s counsel, John Jensen, a stray bullet from a gang-related shooting severed her spinal cord, resulting in paraplegia.

According to Jensen, this was not the first record of violent crimes causing harm to innocent residents and visitors on apartment complex property.

The plaintiff brought claims against the apartment complex owners and property managers for inadequate security. Although defendants disputed liability for the plaintiff’s injuries caused by criminal acts of third persons, North Carolina law holds that if circumstances give the landowner reason to know that third persons were likely to endanger visitors to the property, a duty may exist to protect or warn the visitor, Jensen reported. The plaintiff’s counsel argued that the shooting was foreseeable based on prior criminal activity at the apartment complex and in the surrounding neighborhoods.

Jensen reported that there were nearly 10,000 calls for service reporting violent criminal activity and/or requesting police assistance from a half-mile radius surrounding the apartment complex during the four years prior to the plaintiff’s injury. Additionally, during the three years leading up to the events at issue, there had been numerous shootings that occurred in the apartment complex common areas that were tragically similar to this incident.

The plaintiff’s counsel reported, despite numerous violent crimes occurring on the property, the apartment owners and management took no steps to try to keep the complex safer for its residents or their visitors. According to Jensen, it was common for other apartment complexes in the area to have video cameras, security gates, perimeter fencing, a neighborhood watch program, security guards, and adequate lighting in the parking lots and around the buildings.

At the defendant apartment complex, these precautions were lacking, despite police officers considering the apartment property to be high crime area.

“Despite the fact that this was a gang related shooting, we felt very strongly that the apartment complex could have done more to protect the residents and their visitors,” Jensen said. “This was not a case where the apartment complex made efforts to keep the property safe and fell short. This was a case where the property management – despite the violent crime occurring in its common areas –chose to do nothing. Because of this cavalier attitude toward safety, our client’s life has been forever changed.”

In September 2022, the plaintiff settled for $7.5 million. ◆

$$3.03 MILLION SETTLEMENT Plaintiff hit by driver in construction zone settles for $3.03 M

Is this a verdict or settlement? Settlement

Type of Action: Automobile Accident in a Construction Zone

Amount: $3.03 million

• $3,000,000 – Construction Company

• $30,000 – Pickup Truck Driver

Injuries alleged: Brain injury

Case name: Withheld

Court: Withheld

Date of verdict or settlement: July 2022

Attorney for plaintiff: John Chilson and Zac Harris, of Comerford, Chilson & Moser, LLP, and Ben and Brian Royster, of Royster and Royster, PLLC

Attorneys for defendants: Withheld

Was the defendant represented by counsel? Yes

Were liability and damages contested? Yes

Was the judgment successfully collected? Yes

By Haviland Stewart hstewart@nclawyersweekly com

A 71-year-old pedestrian who was struck by a pickup truck has reached a $3.03 million seettlement. The plaintiff was struck by a pickup truck while crossing the street of a small-town intersection that was undergoing construction. The plaintiff, however, did not file suit against the pickup truck driver who hit her, but rather the construction company responsible for controlling traffic at the intersection.

At the time of the accident, a road construction crew was resurfacing the southbound lane just south of the intersection. According to plaintiff counsel John Chilson, southbound traffic was diverted to the middle turn lane while the southbound lane was closed. The northbound lane remained open for northbound traffic. After the plaintiff walked through the southbound and middle lanes, and just before she emerged on the other eastern side of the street, she was struck by a pickup truck that was traveling south in the northbound lane in the construction zone. The collision, which caused the plaintiff to violently strike her head on the roadway, was captured on nearby security videos.

According to Chilson, due to the accident, the plaintiff sustained many permanent injuries, including a traumatic brain bleed that has rendered her entirely dependent on her daughter and confined to an assisted living facility.

Rather than filing suit against the pickup truck driver, the plaintiff alleged that the construction company was at fault for the accident due to failure to properly manage traffic. The plaintiff’s counsel argued that the construction zone was confusing for both pedestrians and traffic, nor was it designed or controlled in accordance with applicable transportation regulations.

The defendant alleged contributory negligence by the plaintiff and asserted a third-party claim against the pickup truck driver. The case was mediated unsuccessfully before the case was filed, but the parties settled shortly before trial for a total of $3.03 million. ◆

$$6.2M MILLION SETTLEMENT Accident causing brain injury leads to $6.2M settlement

Is this a verdict or a settlement? Settlement

Type of case: Motor Vehicle wreck

Amount: $6.2 million

Injuries alleged: Traumatic Brain Injury and cognitive decline

Case name: Withheld

Court: Withheld

Case No.: Withheld

Judge: Withheld

Date of settlement: 2022

Attorney(s) for plaintiff and their firm(s): James Rainford, Jason Murphy, and Billy Massengale

Attorney(s) for defendant and their firm(s): Withheld

Was the opposing represented by counsel? Yes

Were liability and/or damages contested? Liability was contested

Has the judgment been successfully collected? Yes

By Haviland Stewart hstewart@nclawyersweekly com

Injuries caused by a vehicle accident have resulted in a $6.2 million settlement.

In 2018 the plaintiff suffered a traumatic brain injury after being struck by another motorist. The plaintiff was hospitalized for several weeks and had to undergo extensive rehabilitative care, with medical expenses totaling at $178,000.

“Our client has long term issues with short term memory and some cognitive decline although miraculously our client has made significant improvement to the point that our client now lives independently and has a daily schedule of meaningful activities,” plaintiff attorney James Rainsford said.

The plaintiff has been out of work since the accident but hopes to return to some employment in the future.

Loss of future earnings and future medical expenses was included in the settlement, which totaled $6.2 million.

Many details of the case have been withheld die to a confidentiality agreement. ◆

$$545K SETTLEMENT

Motorcyclist hit by drunk driver settles for $545K

Type of action: SUV v. Motorcycle Collision – Drunk Driver Verdict or settlement: Settlement

Amount: $544,872.50 ($505,000 – bodily injury and $39,872.50 property damage)

Injuries: Left Hip Fracture (Comminuted Intertrochanteric fracture), subsequent trochanteric bursitis and the femoral shaft fracture. The hip fracture required surgery (Intramedullary nail fixation).

Permanent Partial Disability Ratings: 10% whole person / 25% left leg.

Name of case: Withheld

Venue: Buncombe County

Case #: Pre-suit

Date of settlement: January 2023

Insurance carriers: Nationwide – Liability ; GEICO – Primary UIM (Delaware policy – No Offset for Liability Coverage; USAA – Excess UIM (Delaware policy – No Offset for Liability Coverage

Attorney for plaintiff: C. Douglas Maynard Jr. of Law Offices of C. Douglas Maynard Jr., PLLC and Larry Kimmel of Kimmel Carter

Was the defendant represented by council: No

By Haviland Stewart hstewart@nclawyersweekly.com

A motorcyclist hit by a drunk driver has reached a $545,000 settlement. A 72-year-old plaintiff was riding his motorcycle on the Blue Ridge Parkway, when he was struck by a drunk driver. According to the plain- tiff’s council, Douglas Maynard, the plaintiff turned left on a green light, when the defendant, driving an SUV, ran a red light and slammed into left side of the plaintiff’s body and motorcycle.

The defendant blood alcohol level was determined to be significantly over the legal limit, with a BAC of 0.33. According to Maynard, an hour prior to the accident with the plaintiff, the defendant had driven into the side of a hotel and fled the scene.

The plaintiff suffered significant injuries upon impact, including a comminuted intertrochanteric fracture to his left hip, trochanteric bursitis, and a femoral shaft fracture. He was transported to the hospital where he underwent internal fixation surgery on his hip the following day. The plaintiff was hospitalized for four days before moving to a rehabilitation facility, Maynard reported.

While in recovery, the plaintiff fell descending the staircase at his residence, which required additional hospitalization and rehabilitation. After the fall, his doctor found a new fracture on the mid-shaft of the femur with stable fixation from previous internal fixation, Maynard reported. The plaintiff’s doctor determined this additional fracture to be directly related to the accident.

According to Maynard, the plaintiff’s permanent injuries have had a significantly impact on his lifestyle, that previously included motorcycle riding and golf.

The plaintiff was awarded approximately $545,000 in January 2023. ◆

$$450K SETTLEMENT Party bus passenger settles for $450K

Is this a verdict or a settlement? Settlement

Type of case: Motor vehicle accident

Amount: $450,000

Injuries alleged: Broken tibia/fibula (rod inserted during surgery), fractured clavicle, fractured scapular, fractured mandible, fractured pelvis, torn ACL

Case name: Tripp v. Williams

Court: Durham County

Case No.: 19 CVS 4027

Date: Jan. 3, 2023

Insurance carrier: Allstate

Attorney(s) for plaintiff and their firm(s): Mark Gray II, Gray Legal Group

Defense Attorney: Walter Burton, WK Burton Law Was the opposing represented by counsel? Yes Attorney(s) for defendant and their firm(s): Walter Burton, WK Burton Law

Were liability and/or damages contested? Yes

By Haviland Stewart hstewart@nclawyersweekly com

In October 2016, the plaintiff was a guest on a Raleigh based party bus, celebrating a friend’s birthday traveling from Raleigh to Durham, and back.

According to the plaintiff’s attorney Mark Gray II, on the group’s drive back to Raleigh, the bus driver requested the plaintiff to get off the bus for unexplained reasons.

The plaintiff exited the bus on an unlit portion of Highway 147 and was then struck by a vehicle traveling at highway speeds.

“As a result of the accident, the plaintiff sustained several fractures including fractures to his tibia, fibula, mandible, scapular, clavicle, transverse pubic and teeth,” Gray said.

“The plaintiff also sustained a torn ACL and meniscus. After months of rehab, the plaintiff learned how to walk again and has had an excellent recovery.”

Following the accident, the party bus company denied liability for the plaintiff’s injuries. Their insurance company also stated that they would not provide coverage for the incident, because the accident did not occur on the bus, Gray reported.

In September 2021, Gray got a summary judgment motion granted on the issue of negligence on the bus and a dismissal of contributory negligence for the defendant.

Defense attorney Walter Burton sought to have the summary judgment overturned but was unsuccessful and the court upheld the finding of liability for the bus.

“Some of the issues of liability could not be contested,” Burton said. “Because the court had already ruled on that, without the carrier being able to contest.”

Upon learning the liability was established against the party bus company, the defendants sought a mediation to settle the case.

Settlement was reached in January 2023 for a total of $450,000.◆

$$15M SETTLEMENT

Families of passengers killed in a plane crash settle for $15M

Is this a verdict or a settlement? Settlement

Type of case: Wrongful death - plane crash

Amount: $15,000,000.00

Injuries alleged: Death

Case name: Estate of Stephanie Fulcher, Estate of Noah Styron, Estate of Jacob Taylor, Estate of Michael Shepherd, Estate of Kole McInnis v. EDP Management Group, LLC et al.

Court: Carteret County Superior Court

Case No.: 22 CVS 443, 22 CVS 444, 22 CVS 445, 22 CVS 446 & 22 CVS 698

Date of verdict or settlement: Nov. 30, 2022

Attorney(s) for plaintiff and their firm(s): Will Owen of Musselwhite, Musselwhite, Branch & Grantham (Lumberton, N.C.), Gary Robb (Robb & Robb, Kansas City, Mo., Admitted Pro Hac Vice), Andrew Robb (Robb & Robb, Kansas City, Mo.,

Admitted Pro Hac Vice)

Attorney(s) for defendant and their firm(s): James S. Strawinski and Nicole Wolfe Stout of Strawinski & Scout, John P. Marshall of White & Allen, P.A., and Susan Hofer of Cranfil Sumner LLP.

Was the opposing represented by counsel? Yes

Were liability and/or damages contested? Yes

Has the judgment been successfully collected? Yes

By Haviland Stewart hstewart@nclawyersweekly.com

On Feb. 13, 2022, a Pilatus PC-12 crashed into the Atlantic Ocean near Beaufort, N.C., killing all eight onboard. North Carolina attorney Will Owen, along with Gary and Andrew Robb of MO, represented five of the families affected by the tragedy.

The passengers had been duck hunting in Hyde County prior to the crash and were traveling back to Beauford, Owen reported. The plaintiff council represented the estates of passengers, Stephanie Fulcher, Noah Styron, Jacob Taylor, Michael Shepherd and Kole McInnis.

After an investigation, the plaintiff’s council determined the probable cause of the crash to be the pilot’s unrecognized spatial disorientation, failure to use flight instruments in Instrument Meteorological Conditions (IMC) weather conditions, and disregard for clear and direct instructions from Air Traffic Control.

According to Owen, spatial disorientation almost always occurs when a pilot encounters cloudy and/or foggy weather conditions while flying under Visual Flight Rules (VFR).

The flight path and the cloud patterns demonstrate that the pilot was attempting to “hole hunt” – pierce through cloud patterns and back into VFR conditions – when the crash occurred. “Hole hunting” is a piloting decision that occurs after a pilot loses visual connection with the horizon line and seeks to regain visual horizon-line connection by hand-flying the aircraft into VFR conditions. According to Owen, “hole hunting” is extremely dangerous and a clear violation of the standard of care.

The flight path and radar data indicate that towards the end of the flight, the pilot failed to engage autopilot. Failure to properly use the flight instruments is another condition of unrecognized spatial disorientation, Owen reported.

On November 30, 2022, the plaintiff’s settled for a total of $15 million.

“Through this, my clients were hoping that we can prevent this from happening to other experienced pilots in the future,” Owen said. “Maybe additional or reinforcement of training on what to do when you encounter Instrument Flight Rules conditions, and when you need to rely on your instruments and your autopilot.” ◆

$$250K SETTLEMENT

Rear-ended driver settles for $250K

Is this a verdict or a settlement? Settlement

Type of case: Motor Vehicle accident

Amount: $250,000

Injuries alleged: Spinal injuries (aggravation of pre-existing spinal stenosis condition)

Case name: Williams v. Laws

Court: Alamance County

Case No.: 21 CVS 1309

VERDICTS & SETTLEMENTS

Date of settlement: Dec. 20, 2022

Most helpful experts: Dr. Vinay Reddy, UNC Health

Attorney(s) for plaintiff and their firm(s): Mark Gray, II , Gray Legal Group

Was the opposing represented by counsel? Yes

Attorney(s) for defendant and their firm(s): James D. McAlister, McAngus, Goudelock, & Courie

Were liability and/or damages contested? Yes

Has the judgment been successfully collected? Yes

Has the judgment been successfully collected? Yes

By Haviland Stewart hstewart@nclawyersweekly.com

In June 2018, a plaintiff’s vehicle was stopped at a stop sign when he was rear ended by the defendant. Over four years later, the plaintiff settled for $250,000.

According to plaintiff’s attorney, Mark Gray II, several issues arose during the plaintiff’s case regarding damages: that the property damage impact of the accident was only listed as $250 on the accident report, and that the plaintiff had pre-existing injuries and was recommended to have surgery for the exact same injuries caused by the accident years prior.

Following the accident, the plaintiff was considered disabled by the Social Security Administration and was unable to continue working as a truck driver, which resulted in loss of income.

“When I got a copy of his SSA report, I changed the focus of our case,” Gray said. “Instead of arguing the medical damages which were clearly muddled by his pre-existing condition. I simply argued about his inability to work. By narrowing down our focus we were able to get a meaningful settlement. Prior to the final mediation the highest offer was $70,000.”

The defense attorney did not respond for comment. ◆