Rogers Attorney Sees Benefit to Non-Compete Act

There’s two sides to every coin, right?

In our last Whispers column, we outlined the reasons why Rogers attorney Bryce Crawford is leery of Act 921, the non-compete act recently passed by the Arkansas General Assembly.

Crawford said the act, among other things, eases the restriction on the geographic scope of non-competes, and that it opens the door for employers to slap their employees with non-compete agreements during their term of employment. 

But Rogers attorney Marshall Ney, the author of the act, disagrees. He said the provision is just what Arkansas needs — a codification of what’s been practiced in this state’s courts for years.

“The act provides clarity and accessibility to employers and employees alike by compiling decades of Arkansas appellate decisions,” he said.

Specifically, the new law allows a judge to “reform” a non-compete between two parties, should that non-compete ever trigger a lawsuit. Prior to the new law, if a non-compete was deemed too restrictive, it was thrown out. Period.

“Under the new law, a court can strike a balance,” Ney said.

He also said that over 40 states already have such non-compete laws, and that Arkansas is really just catching up to what the rest of the country is already doing.

At the core of the debate is the case of Nanomech Inc., a Springdale-based manufacturer of nano-lubricants. In 2013, Nanomech sued a former employee and tried to keep her from working at chemical company BASF, the largest chemical producer in the world. But last year the U.S. Eighth Circuit Court of Appeals upheld a lower court’s ruling that the Nanomech non-compete was too restrictive because it applied “in any capacity, anywhere in the world.”

The non-compete was thrown out, and Nanomech lost the case. But under the new law, Ney said, the court could have worked out a non-compete protective of both Nanomech and the former employee. 

Of interest is the fact that the Nanomech case was picked up by Trade Secrets Watch, a blog sponsored by Orrick, Herrington & Sutcliffe LLP, a global law firm based in San Francisco.

According to Orrick’s blog post, the Nanomech case is important, as it represents one of the conundrums faced by employers and employees in the modern world of global commerce.

“If it’s necessary to require employees to sign non-competes that apply on a worldwide basis, then look for ways to narrowly tailor the scope of the prohibited activities,” advises the blog post, written by attorneys Robert Isackson and Diana Szego.

In other words, when writing or signing a non-compete, be careful, and make sure your attorney knows a thing or two about intellectual property.