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Fifth Circuit Decision Highlights Judicial Focus on Adequacy of Consideration and Choice of Law Provisions in Employee Non-Competes

Client memorandum | June 8, 2020

In a recent decision affirming the issuance of a preliminary injunction to enforce an employee’s covenant not to compete, the U.S. Court of Appeals for the Fifth Circuit in Realogy Holdings Corp. v. Jongebloed underscored for employers the importance of ensuring adequate consideration is provided to employees in exchange for their covenants not to compete.
Additionally, the Fifth Circuit’s rejection of the parties’ contractual agreement to apply Delaware law in this decision highlights an increasing willingness by courts to disregard choice of law clauses in non-compete agreements in favor of applying the often-more-restrictive law of the state where the employment relationship is based.

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