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The balance appears to have shifted toward workers in new economy lawsuits, sending a message to technology companies: Be fair, or your employee noncompete covenants will be unenforceable. Massachusetts Superior Court Justice Leila R. Kern on Aug. 15 denied a preliminary injunction request in Cambridge Technology Partners Inc. v. Sims, No. 00-1687, to prevent former Cambridge Technology Chief Executive Officer James K. Sims and seven other one-time Cambridge Technology workers from continued employment at consulting rival Gen3Partners of Boston. In another recent Massachusetts case, Lucent Technologies Inc. v. Tymann, No. 00-11205-EFH, U.S. District Judge Edward F. Harrington ruled on Aug. 1 that “the plaintiff’s interest in enforcing specific performance of its employment contracts . . . prior to a trial on the merits does not outweigh the defendants’ interests in pursuing and obtaining gainful employment up to their full earning capacity.” And in EarthWeb v. Schlack, No. 9909302, U.S. District Judge Willam H. Pauley III, in New York, last October refused to grant an injunction on Massachusetts resident Mark Schlack preventing him from working for South-borough-based ITWorld.com, despite a clause in Schlack’s contract with previous employer EarthWeb precluding him from joining a rival for a year after his departure from the New York-based Internet technology company, the plaintiff in the lawsuit. Judge Pauley’s decision was upheld at the federal appellate level on May 18. “The courts are showing an unwillingness to give a knee-jerk reaction to these clauses,” said lawyer Nancy Shilepsky, chairwoman of Boston’s Perkins, Smith & Cohen’s employment department. SIMILAR BUT DIFFERENT In Cambridge Technology Partners, Judge Kern said that Cambridge Technology had failed to prove it and Gen3Partners provide the same services to their clients, despite marketing materials used by both incorporating much of the same terminology to describe the services they provide. Judge Kern highlighted the different uses of the word “launch.” Cambridge Technology’s use: “Preparation of activities necessary to install the solution in a production environment, market the solution based on the product vision, market positioning and complete installation of the application in the production environment.” Gen3Parners’: “The steps necessary to establish a functioning operation, secure the funding for the venture, the execution of a plan and establishment of a business.” The judge also deemed the two tech firms’ use of the term “business plan” to be dissimilar. In her decision, she wrote, “It is at best unclear whether such similar terminology describes competing processes and services.” Judge Kern looked beyond the language of the marketing materials to probe the services the companies actually provide, said Shilepsky. In EarthWeb v. Schlack, Justice William H. Pauley III declined to issue an injunction against the defendant. He reasoned that the one-year period of Schlack’s noncompete covenant with EarthWeb would effectively force him out of his line of work. He would be forced to spend a year in exile from the fast-paced changes in cutting-edge technology that are fueling the success of Internet-based businesses. Defense attorneys Catherine Reuben and Elizabeth C. Sackett of the Boston office of Hartford, Conn.’s Robinson & Cole argued successfully that enforcement of the covenant would cause more harm to Schlack than its nonenforcement would to EarthWeb. STALE INFORMATION If forced to honor the noncompete covenant, Schlack would have trouble finding a job in his field in the future, Sackett said. “Any information that Mark knows is 9 months old, and it’s stale,” she said. Judge Pauley’s comments in his decision on the equity of the one-year clause specifically addressed the perils of any time spent out of commission from employment in the new economy. “He really was talking about the [information technology] world,” said Sackett. The harm to Internet-based and other technology firms of allowing fair competition from former employees that move to other ventures, even those considered to be rivals, does not trump the equity of allowing the workers to continue with gainful employment, Shilepsky said. “It’s the idea that we still are a free-market economy,” she said. Attorney Joseph Vrabel, an employment law specialist at the Worcester, Mass., firm Bowditch & Dewey, said that the career-ending — rather than merely stalling — effects of overreaching noncompete covenants on new economy workers are a clear reason for the recent injunction denials. UNENFORCEABLE PROHIBITION “If you try to prohibit someone generally from working in a field of employment, that is almost always found to be unenforceable,” Vrabel said. In the new economy, judges must consider, “Is it more fair to restrict the employee, or is it more fair to let the employee work because the employer has overreached” in its noncompete covenant?” he asked. The CTI, Lucent and EarthWeb cases appear to indicate that in cases involving the new economy, the answer may be the latter.

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