Amidst nationwide anticipation of the Federal Trade Commission’s Ban on Non-Compete Agreements, the United States Court of Appeals for the 8th Circuit upheld a non-compete agreement on June 5, 2024.
KingSpry’s Employment Law Chair, Avery E. Smith, Esq., discusses the 8th Circuit’s recent ruling and what it means for non-compete agreements across the nation as the Federal Trade Commission’s ban approaches.
Case Details
In January of 2023, Cigna Corporation (“Cigna”) sued CVS Health Corporation (“CVS”) and its newly hired chief product officer, Amy Bricker (“Bricker”), for allegedly violating her non-compete agreement with Cigna.
Bricker signed a non-compete agreement while employed by Cigna, which restricted her employment by “any Business Competitor [of Cigna] in the United States” for two (2) years. In 2022, CVS offered Bricker a senior leadership position, which she accepted and resigned from Cigna.
Initial Findings
Cigna argued that the non-compete was valid and sought a temporary restraining order and preliminary injunction to prevent Bricker from starting her new position at CVS. The federal district court found in favor of Cigna.
CVS and Bricker appealed to the United States Court of Appeals for the 8th Circuit (the “Court”), arguing that the non-compete was overbroad, unreasonable, and unenforceable under Missouri law.
The 8th Circuit’s Ruling
The Court held that the federal district court correctly interpreted Missouri law and that it did not abuse its broad discretion when it issued the temporary restraining order and preliminary injunction.
In support of its ruling, the Court discussed that Cigna and CVS were each other’s largest direct competitors and that Bricker knew of a Cigna trade secret.
Ultimately, the Court determined that the potential harm(s) that Cigna could suffer from the trade secret being disclosed was substantial in comparison to the harm(s) that CVS and/or Bricker would suffer under the injunction.
What About the FTC’s Ban on Non-Competes?
The lawsuit was filed only three (3) weeks after the Federal Trade Commission (“FTC”) announced its proposal to ban non-competes. The FTC later issued its Final Rule in April of 2024, which takes effect on September 4, 2024.
The FTC’s ban on non-competes is inapplicable in this case, because its Final Rule provides an exception for senior executives in policy-making positions who earn a least $151,164 in the preceding year.
Jurisdiction
This case holds precedent in the 8th Circuit, which covers Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota. While this decision does not impact all states, it may serve as persuasive precedent in other Circuits, should similar disputes arise.
