Dive Brief:

• A pharmaceutical company cannot enforce a noncompete agreement against an employee it laid off and then rehired, the 1st U.S. Circuit Court of Appeals held (Russomano v. Novo Nordisk v. BioMarin Pharmaceutical, No. 20-1173 (1st Cir. June 2, 2020)).
• When Novo Nordisk hired Thomas A. Russomano, it had him sign confidentiality and noncompete agreements. Later, as part of a restructuring, Novo Nordisk informed Russomano that it was eliminating his position and that in a few weeks, his employment would end. It also invited him to apply for other vacant positions with the company. Russomano applied for and received a different position with Novo Nordisk and began work immediately following the layoff; he was not required to sign a new noncompete. He later quit to join a new company and, during related litigation, Novo Nordisk alleged his new employment violated the agreement.
• A district court declined to prohibit Russomano from working for the competitor, finding that the noncompete applied only to the earlier position at Novo Nordisk and that its 12-month restriction had already expired. On appeal, the 1st Circuit agreed that Russomano was not continuously employed; rather, he was laid off and rehired.

Dive Insight:

Noncompetes are notoriously difficult to enforce, and employment experts often recommend that employers use them sparingly.

Alleged overuse has garnered national attention for reportedly suppressing wages and driving workers across state lines. Jimmy Johns, for example, previously required sandwich shop employees to sign them; following a lawsuit, the company ended the practice. During the Obama administration, the federal government called on states to limit employers’ ability to use such agreements, and many responded with laws doing so.

Still, experts say noncompetes have their place, like protecting certain intellectual property. But to be enforceable, they need to balance the employer’s and employee’s interests.

Among other things, employers may need to consider appropriate time limits. “For a CEO, a five-year non-compete might be legitimate. For a sales representative, one year might be more appropriate," Autumn Gentry, attorney with Dickinson Wright, previously told HR Dive. "There has to be a balance between the business interest and the employee’s right to work. An agreement cannot be so broad it would prevent someone from working elsewhere for the remainder of their career."