Layoffs have become commonplace in the COVID-19 era as employers are forced to trim staff levels amid shelter-in-place orders. Many of these employers intend to rehire their former employees when the economy picks back up. Employers should be aware, however, of the impact, these gaps in employment can have on the enforceability of non-compete agreements and other restrictive covenants the employer and employee may have previously entered into.
The U.S. Circuit Court of Appeals for the First Circuit recently considered a similar situation and ultimately held that the employer could not enforce a non-compete agreement against a former employee that had been fired and then rehired. The legal saga started when Novo Nordisk, a pharmaceutical company, sought entry of a temporary restraining order and preliminary injunction against Thomas Russomano, one of its former employees, seeking to enforce the terms of a confidentiality and non-compete agreement that Russomano signed when he began his employment with Novo Nordisk. The District Court denied Novo Nordisk’s motion because it found that Novo Nordisk failed to show a likelihood of success on the merits, a necessary requirement to obtain injunctive relief.
Russomano began his employment with Novo Nordisk in January 2016. As a condition of his employment, he signed confidentiality and non-compete agreement which prohibited him from working for a competitor during his employment and for a period of twelve months following the end of his employment. In October 2016, Novo Nordisk informed Russomano that his position was being eliminated, and he was terminated in mid-November. After an approximately three-week period, the company rehired Russomano to another position. Russomano signed second confidentiality and non-compete upon being rehired. Continue reading ›