40 | Weil, Gotshal & Manges LLP LITIGATION TRENDS 2024 | 41 T O C E M P A N T I I P C A P R O W C C O N T A C T I N T A P P P A T C C L S E C continues for two years or less from the end of the business owner’s relationship with the entity. Similarly, the statute presumes enforceable an agreement not to solicit customers with whom an owner dealt if the restriction is “reasonable” and does not continue for greater than five years from the end of the owner’s relationship with the entity. The statute directs that courts “shall” modify such covenants if they are overbroad and enforce the covenant as modified. The statute does not otherwise affect the enforceability of non-competition agreements or other types of restrictive covenants. ■ Washington amended its statute governing noncompetition covenants effective June 6, 2024. The existing statute already requires, among other things, employers to satisfy notice obligations and compensation thresholds in order to enter into and enforce non-competes with employees and independent contractors. The amendments, among other changes, now also cover covenants restricting an employee’s ability to accept or transact business with a former employer’s customers as well as covenants prohibiting the solicitation of former or prospective customers of an employer. The amendments also expand the private right of action available under the statute to non-parties to a covered noncompetition agreement (such as, potentially, a restricted employee’s prospective employer), and more strictly mandate that Washington law govern restrictive covenants between employers and Washington-based workers. Weil’s forthcoming client alert on Washington’s amended statute will provide further details regarding the existing Washington statute and its amendments. We expect legislative efforts to rein in the use of post-employment restrictive covenants to continue in 2024. For example, on December 22, 2023, New York Governor Kathy Hochul vetoed a bill passed by the New York legislature that would have become the nation’s most sweeping non-compete ban. Employers should expect a modified bill to likely be introduced sometime in 2024. Further, several states limit the ability of employers to enter into certain restrictive covenants with employees whose earnings fall below a specified amount, and those threshold earnings amount are expected to increase in 2024 by operation of statute. Judicial Treatment of Restrictive Covenants In 2023, numerous judges nationwide declined to enforce overbroad restrictive covenants in their entirety rather than exercising discretion to enforce a modified narrower covenant. E.g., Admiin Inc. v. Kohan, No. 23-cv04430, 2023 WL 4625897 (N.D. Ill. July 19, 2023); Hoist & Crane Service Group, Inc. v. Standard Crane & Hoist, LLC, 360 So.3d 918 (La. Ct. App. 2023). In particular, multiple Delaware Chancery Court judges declined to exercise their discretion to reform overbroad noncompetes – both in the employment and in the sale of business contexts – and instead refused to enforce the covenants. See, e.g., Sunder Energy, LLC v. Jackson, No. 2023-0988-JTL, 2023 WL 8166517 (Del. Ch. Nov. 22, 2023) (Vice Chancellor Laster); Intertek Testing Servs. NA, Inc. v. Eastman, No. 2022-0853-LWW, 2023 WL 2544236 (Del. Ch. Mar. 16, 2023) (Vice Chancellor Will); Ainslie v. Cantor Fitzgerald, L.P., No. 9436-VCZ, 2023 WL 106924 (Del. Ch. Jan. 4, 2023) (Vice Chancellor Zurn) (reversed on other grounds). The Delaware Supreme Court did, however, recently issue a favorable decision for employers on forfeiturefor-competition provisions in Cantor Fitzgerald, L.P. v. Ainslie, No. 162, 2023, 2024 WL 315193 (Del. Jan. 29, 2024). The Delaware Supreme Court overturned a Delaware Chancery Court decision that invalidated a forfeiturefor-competition provision contained in a limited partnership agreement on the basis that the restriction at issue was not “reasonable” and therefore unenforceable. Instead, the Delaware high court held that forfeiture-forcompetition provisions, i.e., provisions providing for monetary consequences as opposed to equitable injunctive relief, are not restraints of trade subject to a reasonableness review. Rather, Employment E M P
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