At Cabela`s LLC v. Highby, 362 F. Supp.3d 208 (D. Del. 2019), the court had to rule on the validity of a Delaware law choice in which the worker lived and worked in Nebraska. Nebraska non-competitors are more restrictive than Delaware law. The court ruled that Nebraska non-competitions “may restrict competition by inappropriate and unfair methods, but should not restrict normal competition,” while in Delaware, “an agreement prohibiting customary competition is enforced as long as it is not oppressive for a worker.” Id. to 217-18 (quotes omitted). The Tribunal found that the non-competition clause at issue involved normal competition and was therefore unenforceable under Nebraska law, but would be applicable under Delaware law. The court therefore found that “the application of Delaware law would be contrary to a fundamental Nebraska policy” and refused to apply Delaware`s choice clause. Id. to 219. Employers should keep these issues in mind when asking workers to sign restrictive agreements.
It is also important to know whether potential new recruits have a non-compete agreement with a former employer. In some cases, the new employer may be held liable to the former employer if the worker`s hiring was contrary to the agreement. Different rules may apply to situations in which a business is sold in whole or in part and where the buyer and seller are entitled to a restrictive agreement. Nevertheless, the NuVasive Court finally authorized the choice of delaware`s provision under an important distinctive sign – the former collaborator was represented by a lawyer when negotiating the non-competition agreement. The Court found that the California Labor Code Section 925 generally prohibited parties from entering into contracts around California material laws and court forums, but that they developed an exemption for employees represented by their own lawyer during contract negotiations. This exception, according to the Court`s judgment, shows the recognition of the California legislative branch, “that in the narrow subgroup of cases where the unequal treatment between the parties to an employment contract is due to the fact that the worker is represented by an independent lawyer and where the lawyer participated in the negotiation of the terms of a provision relating to the election of the law California`s interest in contractual freedom prevails. On that basis, the Court held that the application of Delaware`s rule of choice would not be contrary to California`s public interest. The Chancery Court conducted a legal analysis to determine whether the law would be Delaware or California enforcement. The court found that the relationship between the parties was concentrated in California, that the various contracts were negotiated and concluded, and that the area in which the respondent employee would be restricted was there. The Tribunal recognized that “respect for contractual freedom is a fundamental policy of [Delaware],” but rejected the complainant employer`s argument that Delaware`s interest in this policy outweighed California`s interest in not imposing non-competition on its citizens. The Delaware court recognized that, under current California law, competitiveness under the asset acquisition contract would be applicable to protect the acquired goodwill, but explained that the contract in the employment contract was geared towards another employer interest; to prohibit the limitation of the employment contract under California law. He stated that “the possibility for parties to circumvent government prohibitions based on the policy of justice through the promiscutive application of the [right to vote] provisions would remove the state`s late-to-theft right to contracts affecting its citizens.” On this basis, the Chancery rejected the employer`s application for an injunction.