Former DraftKings Executive Takes Non-compete Policy to Court

A legal battle has erupted between a former DraftKings executive and his former employer over the enforcement of non-compete agreements. Michael Z. Hermalyn, the president of Fanatics VIP and former senior vice president of growth at DraftKings, filed a lawsuit challenging the validity of the non-compete policies he had agreed to with his former employer. The lawsuit, filed on Thursday, argues that these non-compete policies are overly restrictive and unenforceable in California.

Hermalyn had joined DraftKings in September 2020, and his former employer became aware of the lawsuit shortly after he resigned. According to his non-compete agreement, Hermalyn is prohibited from pursuing employment within the gaming and betting vertical, where he has spent nearly two decades of his career. Additionally, he is also barred from working in gaming and fantasy sports, as well as communicating with former co-workers or clients, for a 12-month period.

In response to the lawsuit, DraftKings argued that the lawsuit was not properly filed in California, citing a clause in Hermalyn’s contract that stipulated Massachusetts as the jurisdiction for litigation disputes. Consequently, the gambling operator moved the case to the US District Court for the Central District of California and requested the court to deny Hermalyn’s claims while disputing his “factual allegations.”

To support his argument that the non-compete clause is unenforceable, Hermalyn revealed that he had relocated to Los Angeles, California, where he entered into a rental agreement for an apartment and purchased a car. He also expressed his intention to relocate his children to Los Angeles, emphasizing his commitment to establishing roots in the state.

The legal dispute highlights the growing tensions between companies and their former employees over the enforcement of non-compete agreements, particularly in states like California where such agreements are often viewed as overly restrictive. The outcome of this case could have significant implications for the enforceability of non-compete agreements in the state and beyond.