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Are Noncompetes the New SOX?

A Financial Week article on the rise of noncompete litigation directed at top executives piqued Jay Shepherd of the blog Gruntled Employees to do some research. What he found was that, over the last decade, the number of published noncompete decisions in state and federal courts nationwide has doubled. In just the last two years, the number of decisions surged 37 percent. If that many noncompete cases are being decided in written opinions, he notes, then the number being filed has to be significantly greater.

Why this surge in noncompete cases? One reason, Shepherd says, is the increasing number of employees who are signing noncompete agreements. Another is the fiercer competition for top-level talent. Whatever the reason, there is irony in these numbers, as Shepherd sees it. Many in-house counsel view their biggest employment-law concern as the rise in Sarbanes-Oxley whistleblower lawsuits. But given the numbers, perhaps they should reconsider, Shepherd suggests.

"[C]ompare the number of cases filed under SOX's Section 806 (the only part of the Act that allows an individual to sue) with the noncompete statistics above. According to the U.S. Department of Labor, only 130 SOX whistleblower cases were decided in 2006. ... And while that number has risen over the four years since the Act was introduced, the number of those cases pales when compared to noncompetes."

For Shepherd, the conclusion is this: "Maybe noncompetes are the new Sarbanes-Oxley whistleblower bogeyman."

Posted by Robert J. Ambrogi on March 8, 2007 at 03:09 PM | Permalink | Comments (0)


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