New York Blows Up Company’s Non-Compete Policy in Warning to Employers

Stefanie Russell-Kraft, a young journalist was working at legal news site Law360, when she got a big career break in the form of a job offer last year from the global news agency Reuters.

Shortly after starting, however, she got an unpleasant surprise: A lawyer from her former employer, owned by corporate behemoth Lexis-Nexis, had sent a threatening letter to Reuters (TRI) informing them that Russell-Kraft was bound by a non-compete agreement. Even though the terms of the agreement was probably unenforceable, Reuters chose to fire her instead.

This week, she won some vindication when Eric Schneiderman, New York’s Attorney General, announced a legal settlement with Law360 that will force the company to stop using non-compete agreements like the one it imposed on Russell-Kraft. In a blistering statement, Schneiderman called out employers for abuse of non-competes, which have become so ubiquitous that even fast-food places are requiring workers to sign them.

“Unless an individual has highly unique skills or access to trade secrets, non-compete clauses have no place in a worker’s employment contract,” said Schneiderman. “Unscrupulous non-compete agreements not only threaten workers seeking to change jobs, they also serve as a veiled threat … Workers like the reporters at Law360 should be able to change jobs and advance their careers without fear of being sued by their prior employer.”

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The terms of the Law360 settlement, which you can read here, describe the nature of the non-compete agreements, which forbade anyone on the editorial staff from accepting a job for a period of one year anywhere the company operated. Given that Law360 is a national publication, the contract effectively prevented even the most junior employee from taking another job anywhere.

Law360, in a statement to the Wall Street Journal, simply stated it had “voluntarily collaborated with the New York attorney general’s office and reached a mutual agreement regarding the best possible outcome.” The deal requires Law360 to notify former employees that its non-competes are now void, but does not require the company to acknowledge wrong-doing or pay compensation for the illegal contracts. It also permits the company to continue imposing non-competes on senior executive positions.

Russell-Kraft, who is still looking for a new full-time position, responded to the news on Twitter:

Meanwhile, the issue of non-compete agreements continues to be a contentious issue across the country. Earlier this year, politicians in Massachusetts pledged to rein the scope of the agreements in that state, partly to remain competitive with California, where the tech industry is concentrated and where non-compete clauses are illegal. And in Illinois, the state Attorney General is trying to force sandwich chain Jimmy John’s to stop using non-competes.

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