Non-Compete Agreement Landscape Continues to Shift

Current Landscape

The legal landscape for non-compete agreements continues to evolve rapidly. Multiple states have enacted new restrictions or outright bans, and employers must ensure their restrictive covenant practices comply with the laws in every jurisdiction where they operate.

What's Changing

Several states have recently:

• Banned non-competes for most employees, although some states have exceptions or specific conditions under which non-competes may still be enforced.
• Limited non-competes to employees above certain salary thresholds; for example, states like California and Massachusetts have specific salary thresholds that may apply.
• Required advance notice or additional consideration for non-compete agreements.
• Imposed penalties on employers who use unenforceable non-competes, with some states, such as Illinois and Washington, enacting specific penalties for such practices.
• Narrowed the definition of enforceable restrictive covenants.

Practical Steps for Employers

1. Inventory existing agreements: Identify all employees with non-compete or restrictive covenant agreements.
2. Review enforceability: Assess each agreement against current law in the relevant jurisdiction.
3. Update templates: Revise standard agreements to comply with the most restrictive applicable law.
4. Consider alternatives: Non-solicitation and confidentiality agreements may provide adequate protection with fewer legal restrictions.
5. Train hiring managers: Ensure managers understand what they can and cannot require.
6. Document legitimate interests: Be prepared to demonstrate the business interest each agreement protects.