On July 9, 2021, President Biden signed the Executive Order on Promoting Competition in the American Economy, which encourages the Federal Trade Commission (“FTC”) to employ its statutory rulemaking authority “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”  Executive Order, Section 5(g).  While the language in the Executive Order refers to the “unfair” use of non-compete clauses, the Administration’s explanatory statement makes clear that “the President encourages the FTC to ban or limit non-compete agreements” altogether.

A comprehensive rule governing non-competes would be an unprecedented move by
Continue Reading Biden Issues Executive Order Encouraging Federal Action to Limit or Ban Non-Compete Agreements

Oregon’s Senate Bill 169, signed May 21, 2021 strengthens Oregon’s existing restrictions on noncompete agreements.  Unlike Oregon’s 2019 law which imposed new notice requirements on employers seeking to enter into enforceable noncompetes, Senate Bill 169’s changes are more subtle though just as impactful.

Previously, noncompete agreements which failed to comply with Oregon’s statutory requirements were “voidable.”  Senate Bill 169 declares noncompliant noncompetes entered into after January 1, 2022 “void” ab initio.  This seemingly minor change may carry significant legal consequence if it ends up reducing the circumstances in which a former employer can sue for tortious interference.

Other
Continue Reading Oregon Law Refines Restrictions on Noncompete Agreements

New Jersey may be poised to become the latest state to adopt strict procedural and substantive requirements on post-employment non-compete agreements. Assembly Bill No. 1650, if passed, would substantially overhaul New Jersey’s laws regarding post-employment non-compete agreements by, among other things, limiting the types of employees against whom a non-compete agreement is enforceable, as well as limiting the time, scope and geographic region of a non-compete agreement. Assembly Bill No. 1650 still permits post-employment non-compete agreements so long as the agreements are “not broader than necessary to protect the legitimate business interests of the employer.” The bill suggests that
Continue Reading New Jersey Legislature Considering Strict Procedural and Substantive Requirements for Post-Employment Non-Compete Agreements

On February 25, 2021, the Workforce Mobility Act, a bipartisan bill to limit the use of non-compete agreements, was introduced in the U.S. Senate by Senators Chris Murphy (D-Conn.), Todd Young (R-Ind.), Kevin Cramer (R-N.D.) and Tim Kaine (D-Va.), and in the U.S. House of Representatives by Scott Peters (D-Cal.).

This year’s Workforce Mobility Act is the latest of several attempts in recent years at the federal level to restrict non-compete agreements through legislation.  Despite bipartisan support at times, none has passed either the Senate or the House.  Will there be a different result this time around?

There may be
Continue Reading Another Bill in Congress Seeks to Limit Non-Competes – Will This One Go Anywhere?

Non-compete agreements may all but disappear from the Washington, D.C. employment landscape in 2021.  On December 15, 2020, the District of Columbia Council voted 12-0 to approve the Ban on Non-Compete Agreements Amendment Act of 2020 (B23-0494) (the “Bill”), which would prohibit the use and enforcement of non-compete agreements for all employees except certain highly paid physicians.  If enacted into law, Washington, D.C. will have adopted a much stricter policy than several other states  that have recently restricted the use of non-compete agreements—including its neighbors Maryland and Virginia.  The Bill is currently awaiting approval by the Mayor before, absent
Continue Reading Washington, D.C., Poised to Ban Most Non-Compete Agreements

The Illinois legislature is once again setting its sights on covenants not to compete.  In 2016, Illinois enacted the “Illinois Freedom to Work Act,” prohibiting employers from entering into covenants not to compete with “low wage” employees.  In February 2020, Illinois legislators filed four bills targeting covenants not to compete for all Illinois employees.

SB 3021 and HB 4699 are identical in substance, and the most drastic.  These bills seek to prohibit all covenants not to compete in Illinois:  “… no employer shall enter into a covenant not to compete with any employee of the employer.”  [Emphasis added]. 
Continue Reading Multiple Illinois Bills Seek to Govern Covenants Not to Compete

A recently passed Florida law, Florida Statutes 542.336 seeks to prevent medical providers from using restrictive covenants to monopolize medical specialties in rural counties.  The law bars the enforcement of “restrictive covenants” against physicians who practice “a medical specialty in a county wherein one entity employs or contracts with, either directly or through related or affiliated entities, all physicians who practice such specialty in that county.”  Once a second provider enters the market for a particular specialty in a county, restrictive covenants remain unenforceable in that county for a period of three years.

Although the purpose of the law is
Continue Reading Florida Law Limits Physician Restrictive Covenants in Rural Counties

The 2019 legal landscape of employee mobility continues to evolve, at times drastically. Courts and legislatures are giving increased scrutiny to employers’ claims to protect the confidentiality of their trade secrets and attempts to enforce their employees’ restrictive covenants, including non-competition and non-solicitation agreements. It can be hard for employers to prevent their confidential information and client goodwill from following certain departing employees.

With greater knowledge of the latest legal theories, decisions, statutes, and other developments in this area, employers can better protect and defend their interests—even preemptively—including in the ways they draft their employee agreements, design their compensation structures,
Continue Reading Take Five Newsletter – Managing Employee Mobility Today: Are You Succeeding or Scrambling?

Employers sometimes ask whether it matters if they are inconsistent in their enforcement of non-competes.  Typically, the issue is analyzed in terms of whether inconsistent enforcement undercuts the legitimate business interest justifying the restriction.  However, in a pending lawsuit, Miller v. Canadian National Railway Co., the issue is being raised in a different context: whether alleged inconsistent enforcement was racially motivated.  Specifically, the plaintiff in that case alleges that “[b]y enforcing the non-compete against Miller and not against similarly situated white employees, Defendants are interfering with Miller’s future employment relationships because of his race.”

Enforcement of non-competes rarely comes
Continue Reading Alleged Inconsistent Enforcement of Non-Compete Agreements Raised in Discrimination Case

The State of Utah on March 22, 2019 returned to the topic of non-competes for the third time in three years. It had passed that statute in 2016 (as we noted), and then amended in 2018 (as we also discussed here earlier), and now is at it again, by amending it once more. Maybe they are hoping that the third time’s a charm, as they say.

It seems that, like Goldilocks, the broadcasting industry found the original 2016 statutory bed to be a little too hard for it to sleep in. As we discussed
Continue Reading Utah Hopes That Third Time’s a Charm for Non-Compete Statute