Former DraftKings Executive Challenges Non-Compete Agreement in Legal Case
A former DraftKings executive, Michael Z. Hermalyn, has filed a lawsuit challenging the non-compete agreements he signed with the company. Hermalyn, who is now the president of Fanatics VIP and formerly served as senior vice president of growth at DraftKings, filed the lawsuit on Thursday, arguing that the non-compete policies are unenforceable and overly restrictive in California.
Hermalyn initially joined DraftKings in September 2020, but his former employer only learned about the lawsuit after he recently submitted his resignation. According to Hermalyn’s non-compete agreement with DraftKings, he is prohibited from engaging in employment within the gaming and betting vertical, an industry in which he has worked for nearly two decades.
In addition to the restrictions on working in gaming and fantasy sports, Hermalyn is also unable to work in related industries or communicate with former co-workers or clients due to a 12-month non-compete clause in his contract. Hermalyn is seeking a court decision that would invalidate these non-compete clauses and allow him to pursue further employment in the sector.
In his lawsuit, Hermalyn highlighted the sweeping nature of the provisions that prohibit him from working in the betting and gaming space and engaging in work related to fantasy sports, betting, gaming, and other various industries, as well as communicating with former clients and co-workers.
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 plans to relocate his children to Los Angeles.
In response to the lawsuit, DraftKings argued that the lawsuit was not properly filed in California, citing a clause in Hermalyn’s contract that stipulates that a Massachusetts court would handle any litigation of disputes. As a result, 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 request while disputing his factual allegations.
In addition to the legal battle between Hermalyn and DraftKings, a separate incident involving a 19-year-old who engaged in cyber fraud against DraftKings in 2022 resulted in an 18-month prison sentence after the individual pleaded guilty.