Non-Compete Agreements

As we previously reported, the Colorado General Assembly passed a bill in May making substantial amendments to Colorado’s noncompete statute, C.R.S. § 8-2-113. Governor Jared Polis signed the bill on June 8, 2022, meaning the amendments will go into effect at 12:01 a.m. on August 10, 2022, which is only four weeks away. That may sound like a long time, but it will go by quickly.

Continue Reading Only One Month Until Dramatic Changes in Colorado’s Restrictive Covenants Law

Several states over the past few years have passed legislation prohibiting the use in noncompete agreements (and other employment-related agreements) of out-of-state choice-of-law and forum selection provisions. A few of these states’ laws include enforcement mechanisms with stringent penalties, such as California, which provides for injunctive relief and attorneys’ fees to an aggrieved employee; Washington, which entitles aggrieved employees to actual damages or statutory penalties of $5,000, as well as their attorneys’ fees; and, beginning in August, Colorado, where any violation of that state’s noncompete statute (including the prohibition on out-of-state choice-of-law and forum selection provisions) could lead to civil and criminal penalties.

Continue Reading Virginia Federal Court Rejects Massachusetts’ Statutory Prohibition on Out-of-State Forum Selection Clauses in Noncompete Agreements – Sort Of

As readers of this blog are aware, many states now require employers to provide prospective employees with copies of any noncompetes (and, in some cases, other restrictive covenants) they will be required to sign as a condition of employment. For example, Massachusetts requires that noncompetes be provided at the earlier of when an offer is made or 10 business days before the first day of employment; in Illinois it is 14 calendar days before employment begins; in Maine it is three days; in New Hampshire and Washington a noncompete must simply be provided before an employee’s acceptance of an offer; in Oregon and Rhode Island it is two weeks before employment begins; and beginning August 9, 2022, Colorado will require not only that both noncompete and non-solicitation covenants be provided to employees at least 14 days before the effective date of employment, but a separate standalone notice must be provided as well.

Continue Reading Advance Notice of Restrictive Covenants May Be Required, but They Should Not Be Executed Before Employment Begins

You don’t hear much positive news these days about noncompete agreements. Instead, most national media outlets take cases of extreme abuse and frame them as the norm instead of the outliers that they are. And the national media also often portrays employers in a negative light for allegedly forcing noncompetes on employees who purportedly have no choice in the matter and receive no benefit from the transaction. The data does not bear this out—indeed, according to reputable studies, workers who are presented with noncompetes before accepting jobs receive higher wages and more training, and are more satisfied in their jobs than those who are not bound by noncompetes—but that is beside the point when there is an attention-grabbing story to be written.

Continue Reading Can a Noncompete Increase Competitiveness? Arkansas Football Sure Hopes So.

Microsoft Corp. announced last week that it is immediately eliminating noncompetes for all employees below the partner and executive levels, including doing away with all existing noncompetes for covered employees. In a June 8, 2022 blog post, Microsoft’s Deputy General Counsel and Vice President of Human Resources said the following:

Empowering employee mobility: Microsoft believes that all employees should be empowered to work at a company they love and in a role where they thrive. We work hard to retain our world-class talent by making people the priority, and creating a culture that attracts and inspires world-class talent to unlock innovation aligned to our mission. While our existing employee agreements have noncompete obligations, we do not endorse the use of such provisions as a retention tool. We have heard concerns that the noncompetition clauses in some U.S. employee agreements, even when rarely and reasonably enforced, feel at odds with our talent principles. With these concerns in mind, we are announcing that we are removing noncompetition clauses from our U.S. employee agreements, and will not enforce existing noncompetition clauses in the U.S., with the exception of Microsoft’s most senior leadership (Partners and Executives), effective today. In practice, what this means is those U.S. employees will not be restricted by a noncompete clause in seeking employment with another company who may be considered a Microsoft competitor. All employees remain accountable to our standards of business conduct and other obligations to protect Microsoft’s confidential information. (Emphasis added).

Continue Reading Microsoft to Eliminate Noncompetes for Most Employees – a Harbinger of Things to Come?

According to a report in the Wall Street Journal last week, the Federal Trade Commission is considering new regulations to prohibit the use of noncompetes and to target their use in individual cases through enforcement actions. Although President Biden issued a vague Executive Order early in his administration that “encourage[d]” the FTC to “consider” exercising its statutory rulemaking authority “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility,” no concrete action has been taken to date. That is not entirely surprising given that, until last month, the Commission was split 2-2 along partisan lines. What has since changed that may now make federal noncompete regulation a real possibility, however, is the appointment last month of Alvaro Bedoya to the FTC, giving the Democrats a 3-2 majority.

Lina Khan, the 33-year-old Biden-appointed Chair of the FTC, told the Wall Street Journal, “We feel an enormous amount of urgency given how much harm is happening against the workers. This is the type of practice that falls squarely in our wheelhouse.” Other Commissioners disagree. Commissioner Noah Phillips has said the agency doesn’t have legal authority to impose such rules, and Commissioner Christine Wilson said last year it was “premature” to pass a federal rule because many states had taken their own actions to address noncompetes. Indeed, noncompete regulation has been the province of the states for over 200 years.

Continue Reading FTC Signals New Action on Noncompetes – but Is That the Will of the People?

We have written recently about legislative action in various states concerning their restrictive covenant laws, including Washington state’s prohibitions on nondisclosure and nondisparagement provisions in employment agreements, a proposal in Connecticut to codify limitations on noncompetes, and a law passed in Colorado that would limit the use and enforcement of noncompetes and non-solicitation provisions. Another state that is considering new noncompete legislation is New Hampshire.

Continue Reading “Material Changes” to New Hampshire’s Noncompete Law Proposed

On March 24, 2022, Washington State signed into law the Silenced No More Act (the “Act”), greatly restricting the scope of nondisclosure and nondisparagement provisions employers may enter into with employees who either work or reside in Washington State. Effective June 9, 2022, the Act prohibits employers from requiring or requesting that an employment agreement contain a provision:

not to disclose or discuss conduct, or the existence of a settlement involving conduct, that the employee reasonably believed under Washington state, federal or common law to be illegal discrimination, illegal harassment, illegal retaliation, a wage and hour violation, or sexual assault, or that is recognized as against a clear mandate of public policy….

Continue Reading Washington State’s Silenced No More Act, Which Largely Prohibits Nondisclosure and Nondisparagement Provisions in Employment Agreements, to Go Into Effect June 9, 2022

We wrote recently about a proposed bill that was introduced in the New Jersey State Assembly on May 2, 2022, which would limit certain provisions in restrictive covenants, and a bill that was passed the following day by the Colorado Senate and is expected to go into effect in August that would likewise limit the enforceability of noncompetes and other post-employment restrictive covenants. Not to be left out, members of the Connecticut General Assembly recently introduced House Bill 5249, which would limit the applicability of noncompete agreements in that state as well. The bill is very similar in many respects to the noncompete law passed in 2018 in Massachusetts, and likely borrowed heavily from that law. Here are the details:

Continue Reading Connecticut Legislature Seeks to Codify Limitations on Noncompetes

We wrote in January about a small change in Colorado law that could have large effects because it criminalized the enforcement of noncompete agreements that violate its general noncompete statute, C.R.S. § 8-2-113. Well, the Colorado General Assembly is at it again. Passed by the Colorado Senate on May 3, 2022, and now awaiting Governor Jared Polis’s signature, HB 22-1317 would further amend C.R.S. § 8-2-113 to substantially limit the enforceability of noncompetes and other restrictive covenants for any workers other than those who are “highly compensated,” as well as imposing new, stringent notice requirements and penalties for noncompliance. This
Continue Reading Colorado Continues Its Crackdown on Restrictive Covenants