Restrictive covenants in agreements between entrepreneurs and their employees under the law of foreign countries. Part one: United Kingdom and United States of America

Authors

DOI:

https://doi.org/10.21638/spbu14.2023.209

Abstract

This review article is devoted to restrictive covenants, which are widely used in contracts between entrepreneurs and their employees in many countries. In Russia, these covenants are not supported by the courts. It is believed that such restrictions are contrary to the constitutional and other norms of Russian law. The purpose of this study is to analyze the foundations of legal regulation in a number of countries of such restrictive covenants as non-competition agreements, non-solicitation agreements, non-dealing agreements and non-disclosure agreements. This analysis is necessary for a reasonable answer to the question of the advisability of recognizing in Russia the legality of such agreements. The first part of this article provides an overview of the law on non-competition and other similar covenants of the United Kingdom and the United States, in the second part — Germany, France, Japan, China and the Eurasian Economic Union (EAEU). Due to the particularly widespread distribution of such covenants in the United States, the analysis of the foundations of their legal regulation in this country is central to the present study. In jurisdictions where non-competition agreements and other similar restrictive covenants are not prohibited, the “rule of reason” acts as a legal mechanism for balancing the competing interests of employers, employees and public interests. This rule allows the courts in each specific dispute to assess the specified conditions for their compliance with the protected business interest of the employer and other criteria. The conclusion is made about the advisability of legalizing agreements on non-competition, non-engagement and non-entrepreneurship in Russia, taking into account the positive foreign experience of legal regulation in this area. In this regard, it will be necessary to legislate in Russian law an analogue of the rule of reason.

Keywords:

restrictive covenant, non-competition agreements, non-solicitation agreements, non-dealing agreements, non-disclosure agreements, freedom of contract, freedom of labor, trade secrets, confidential information

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References

Библиография

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References

Amir, On, Orly Lobel. 2013. “Driving performance: A growth theory of noncompete law”. Stanford Technology Law Review 16 (30): 833–874.

Argenbright Rioux, Rachel. 2018. “The necessity for employer liability in unenforceable non-compete agreements”. University of Missouri-Kansas City Law Review 86 (4): 995–1018.

Arnow-Richman, Rachel S. 2001. “Bargaining for loyalty in the information age: A reconsideration of the role of substantive fairness in enforcing employee noncompetes”. Oregon Law Review 80 (4): 1163–1244.

Arnow-Richman, Rachel. 2020. “The new enforcement regime: Revisiting the law of employee competition(and the scholarship of Professor Charles Sullivan) with 2020 vision”. Seton Hall Law Review 50 (5): 1223–1259.

Barnett, Jonathan M., Ted Sichelman. 2020. “The case for noncompetes”. University of Chicago Law Review 87 (4): 953–1049.

Bishara, Norman D., Evan Starr. 2016. “The incomplete noncompete picture”. Lewis & Clark Law Review 20 (2): 497–547.

Bishara, Norman D., Kenneth J. Martin, Randall S. Thomas. 2015. “An empirical analysis of noncompetition clauses and other restrictive postemployment covenants”. Vanderbilt Law Review 68 (1): 1–51.

Bishara, Norman D., Michelle Westermann-Behaylo. 2012. “The law and ethics of restrictions on an employee’s post-employment mobility”. American Business Law Journal 49 (1): 1–61.

Davis, Angie, Eric D. Reicin, Marisa Warren. 2015. “Developing trends in non-compete agreements and other restrictive covenants”. The American Bar Association Journal of Labor & Employment Law 30 (2): 255–272.

Ehrlich, Craig P., Leslie Garbarino. 2020. “Do secrets stop progress? Optimizing the law of non-disclosure agreements to promote innovation”. New York University Journal of Law & Business 16 (2): 279–316.

Flanagan, Jane, Terri Gerstein. 2020. “Sign on the dotted line”: How coercive employment contracts are bringing back the Lochner era and what we can do about it”. University of San Francisco Law Review 54: 441–472.

Flowers, M. Claire. 2018. “Facing the inevitable: The inevitable disclosure doctrine and the Defend Trade Secrets Act of 2016”. Washington and Lee Law Review 75 (4): 2207–2263.

Gilson, Ronald J. 1999. “The legal infrastructure of high technology industrial districts: Silicon Valley, Route 128, and covenants not to compete”. New York University Law Review 74 (3): 575–629.

Gomulkiewicz, Robert W. 2015. “Leaky covenants-not-to-compete as the legal infrastructure for innovation”. University of California Davis Law Review 49 (1): 251–304.

Hafiz, Hiba, Ioana Marinescu. 2023. “Labor market regulation and worker power”. University of Chicago Law Review 90 (2): 469–509.

Krause, Kelly. 2019. “Turning Wisconn Valley into the next Silicon Valley: Reforming Wisconsin Non-Compete Law to attract high-tech employers”. Marquette Law Review 103 (1): 237–266.

Lazar, Wendi S. 2008. “Employment agreements and cross border employment — confidentiality, trade secret, and other restrictive covenants in a global economy”. The Labor Lawyer 24 (2): 195–211.

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Lobel, Orly. 2015. “The new cognitive property: Human Capital Law and the reach of intellectual property”. Texas Law Review 93 (4): 789–851.

Lobel, Orly. 2020a. “Gentlemen prefer bonds: How employers fix the talent market”. Santa Clara Law Review 59 (3): 663–700.

Lobel, Orly. 2020b. “Exit, voice & innovation: How human capital policy impacts equality (& how inequality hurts growth)”. Houston Law Review 57 (4): 781–812.

Moffat, Viva R. 2013. “Making non-competes unenforceable”. Arizona Law Review 54 (4): 939–984.

Murphy, Tonia H. 2015. “Covenants not to compete in employment contracts: Worth a closer look in the classroom”. Journal of Legal Studies Education 32 (1): 131–171.

Naidu, Suresh, Eric A. Posner. 2022. “Labor monopsony and the limits of the law”. Journal of Human Resources 57 (S): S284–S323.

O’Neill, Kate. 2010. “Should I stay or should I go? Covenants not to compete in a down economy: A proposal for better advocacy and better judicial opinions”. Hastings Business Law Journal 6 (1): 83–143.

Obukhova, Evgeniia V. 2016. “Restrictive conditions in employment agreements”. Pravo. Zhurnal Vysshei shkoly ekonomiki 2: 27–35. https://doi.org/10.17323/2072-8166.2016.2.27.35 (In Russian)

Pivateau, Griffin T. 2007. “Putting the blue pencil down: An argument for specificity in noncompete agreements”. Nebraska Law Review 86 (3): 672–707.

Pivateau, Griffin T. 2019. “An argument for restricting the blue pencil doctrine”. Belmont Law Review 7 (1): 1–46.

Polden, Donald J. 2020. “Restraints on workers’ wages and mobility: No-poach agreements and the antitrust laws”. Santa Clara Law Review 59 (3): 579–613.

Prescott, James J., Norman D. Bishara, Evan Starr. 2016. “Understanding noncompetition agreements: The 2014 Noncompete Survey Project”. Michigan State Law Review 2: 369–464.

Raza, Saleem W. 2011. “Non-compete agreements in the United States, Europe and Australia”. Association of Corporate Counsel Docket 29 (3): 79–88.

Samila, Sampsa, Olav Sorenson. 2011. “Noncompete covenants: Incentives to innovate or impediments to growth”. Management Science 57 (3): 425–438.

Shangguan, Hui. 2016. “A comparative study of non-compete agreements for trade secret protection in the United States and China”. Washington Journal of Law, Technology & Arts 11 (5): 405–438.

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Starr, Evan, James J. Prescott, Norman D. Bishara. 2020. “The behavioral effects of (unenforceable) contracts”. Journal of Law, Economics, and Organization 36 (3): 633–687. https://doi.org/10.1093/jleo/ewaa018

Starr, Evan, James J. Prescott, Norman D. Bishara. 2021. “Noncompete agreements in the US labor force”. The Journal of Law and Economics 64 (1): 53–84. https://doi.org/10.1086/712206

Stone, Katherine V. W. 2002. “Knowledge at work: Disputes over the ownership of human capital in the changing workplace”. Connecticut Law Review 34 (3): 721–763.

Sullivan, Charles A. 2009. “The puzzling persistence of unenforceable contract terms”. Ohio State Law Journal 70 (5): 1127–1177.

Sullivan, Charles A. 2016. “Tending the garden: Restricting competition via “Garden Leave”. Berkeley Journal of Employment and Labor Law 37 (2): 293–325. http://dx.doi.org/10.15779/Z38TZ87

Swift, Kenneth R. 2007. “Void agreements, knocked-out terms, and Blue Pencils: Judicial and legislative handing of unreasonable terms in noncompete agreements”. Hofstra Labor & Employment Law Journal 24 (2): 223–259.

Ueda, Toru. 2019. “Restrictions on post-employment competition: Comparing the United States with Japan”. Connecticut Journal of International Law 34 (2): 169–221.

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Published

2023-05-11

How to Cite

Chukreyev, A. A. (2023). Restrictive covenants in agreements between entrepreneurs and their employees under the law of foreign countries. Part one: United Kingdom and United States of America. Vestnik of Saint Petersburg University. Law, 14(2), 423–440. https://doi.org/10.21638/spbu14.2023.209

Issue

Section

Foreign and International Law