NY AG Reins in WeWork’s Non-Compete Agreements

Print Friendly, PDF & Email

September 27, 2018

Non-Compete Agreements

The Attorney General for the State of New York (“NY AG”) recently announced a settlement with WeWork Companies, Inc. that will revamp WeWork’s use of employee non-compete agreements.  The announcement comes amid wide-ranging legal challenges to various labor practices employed by the shared-office space company, one of New York’s largest private office tenants.

Why were WeWork’s non-compete agreements unenforceable?

Non-compete agreements are meant to protect legitimate interests of employers.  In general, New York law allows for enforcement of non-compete agreements in employment contracts.  For example, common scenarios in which non-compete agreements are likely to be deemed enforceable are to protect an employer’s trade secrets and to prevent employees that developed specialized skills while working for an employer from taking those skills to a competitor.  However, there are exceptions that are intended to limit the restrictive nature of such agreements.

The NY AG began an investigation into WeWork’s employment practices after receiving a tip that WeWork required all employees to sign employment agreements that contained non-compete provisions.  WeWork’s practice was determined to be indiscriminate, impermissibly requiring every employee, from the most senior executive to the janitorial staff, to agree to the non-compete restriction as a condition of employment.  Because WeWork’s non-compete agreements were more restrictive than required to protect its legitimate business interests, the NY AG was able to procure a non-financial settlement agreement from WeWork in which the company will entirely revamp its use of non-compete provisions.  Such changes include:

  • Shortening the non-compete period from 1 year to 6 months;
  • Narrowing the geographic restriction to a 15-mile radius from those WeWork locations engaged in the business line in which the employee worked, in contrast to the former restrictive location of any geographic area in which WeWork operated; and
  • Narrowing the scope of competition and limiting the restriction to specific lines of business in which the employee worked while with WeWork.

In addition to the nearly 1,800 WeWork employees whose employment agreements will be revised, the settlement with the NY AG will also require that WeWork release some 1,400 employees from the terms of their existing non-compete agreements entirely.

How to Properly Employ Non-Compete Agreements

When narrowly-tailored or reserved strictly for key personnel or others that have access to valuable trade secrets or confidential company information, companies can effectively use non-compete agreements to protect their interests.  However, as the WeWork settlement demonstrates, widespread use of over-broad agreements carries with it the very real risk of drawing the scrutiny of regulatory authorities.  As a result, it is imperative that employers seek the advice of knowledgeable counsel to ensure that non-compete agreements currently in use, or those that are being contemplated, are properly drafted and enforceable.

If you are interested in learning more about this topic or are the subject of a regulatory investigation, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

Attorney Advertising

Related blog posts:

Non-Compete Clauses: Don’t Make Your Non-Compete Clauses Non-Enforceable

Work-For-Hire Clauses and Agreements: One Key to Intellectual Property Ownership

Independent Contractor or Employee: How to Classify the People that Work for You

David O. Klein

David O. Klein

David Klein is one of the most recognized attorneys in the telemarketing, technology, Internet marketing, sweepstakes and telecommunications fields. Skilled at counseling clients on a broad range of technology-related matters, David Klein has substantial experience in negotiating and drafting complex licensing, marketing and Internet agreements.

Schedule a Call
In The Know

Trending Topics

Creating a Viral and Legally Compliant "Pin to Win" Contest- Klein Moynihan Turco

Creating a Viral (And Legally Compliant) “Pin to Win” Contest

Print Friendly, PDF & Email

We have frequently written about the marketing benefits associated with the use of promotional contests and sweepstakes.  Promotional contests and sweepstakes often appear on social media platforms, which provide companies with a free and effective means to increase the number of consumers participating in their respective contests. While companies must

Facebook Decision defines a TCPA Autodialer- Klein Moynihan Turco LLP

Facebook Aftermath: Courts Clarify Definition of TCPA Autodialer

Print Friendly, PDF & Email

On April 1st, the U.S. Supreme Court released its opinion in Facebook, Inc. v. Duguid, marking a newly clarified definition of “autodialer” within the meaning of the Telephone Consumer Protection Act (“TCPA”). In the two weeks that followed, two federal courts have directly addressed the definition of TCPA autodialer as

Critical Role that TCPA Plays in Outbound Telemarketing- KMT

The Critical Role that the TCPA Plays in Outbound Telemarketing

Print Friendly, PDF & Email

If you’re running any sort of outbound telemarketing campaign – phone calls, voicemail drops, or text messaging – you need to understand the Telephone Consumer Protection Act (TCPA) and its enabling regulations. Call center operators are not the only businesses that employ outbound telemarketing to reach out to consumers. Using

How to Use Promotional Marketing the Legal Way: Klein Moynihan Turco LLP

How To Use Promotional Marketing The Legal Way

Print Friendly, PDF & Email

The use of promotional contests, games and sweepstakes marketing can be a dynamic and cost-effective way to increase sales, build a database of interested consumers and otherwise increase brand awareness and buzz. Consumers are more easily attracted to your marketing message by the opportunity to win prizes than with more

Share on facebook
Share on google
Share on twitter
Share on linkedin