Non-Compete Agreements Face Continued Legislative Hostility, and Coupled with Remote Work, Employers Should Take Heed

An important, and perhaps overlooked, trend from 2021 is legislative hostility toward the enforceability of employment non-compete agreements. Over the past year, multiple state legislatures passed strict restrictions, many more considered it, and members of Congress introduced at least two bills that would significantly restrict or prohibit non-competes across the county. And so far, 2022 seems like it will be more of the same.

It can’t be that bad, you say? Let’s look at the numbers. In 2021, more than 50 different state bills were introduced relating to non-competes, and four states enacted serious restrictions. For example, Washington, D.C. banned non-competes outright for private employers employing a worker in the district. D.C.’s act contained only limited exceptions, such as in the sale of a busines. Oregon, on the other hand, statutorily limited all non-compete agreements to 12 months.  

Three states implemented compensation thresholds for enforcement—Oregon, Illinois and Nevada. In Nevada, for example, the state banned non-competes for “low wage” employees, or in other words, employees paid solely on an hourly basis, exclusive of tips or gratuities. Illinois and Oregon each established dollar figure thresholds so that, in Illinois, an employee must earn more than $75,000 annually in order to be subject to a non-compete, whereas Oregon decided that an employee’s gross annual salary must exceed $100,533 to face non-compete enforcement.  

This year is trending in the same direction with legislation pending in multiple states, including New York, New Jersey, and Wyoming.  

What does this mean for employers? If non-competes are a regular tool you use, I suggest the following:
 

• Conduct a thorough analysis of where your employees reside and work.
• Review your standard language to be sure it complies with the state law where your employee works, meaning you could have multiple forms.
• If you need to make changes, consider whether you also have to offer additional consideration, such as a small bonus or other employment benefit for the modification.
• If you are in the position of enforcement, review the agreement and current law for things like attorney-fee provisions and other roadblocks to enforcement. 
• Consult your legal counsel to be sure you are drafting or modifying an agreement to comply with the applicable and current law.

Employers with multi-state operations or single-state salespersons should pay particular attention to the changing laws, in conjunction with conducting a deep analysis of the purpose and strategy behind the non-compete agreement. Does the non-compete still serve its purpose, are you likely to enforce it, do you have a legally protectable interest, can your team meet all of the compliance bogeys and continue to stay on top of ever-changing laws, among other questions? If you ask your teams these questions, and are committed to the use of non-competes, please call Catherine Strauss at 614.462.1069 or contact another member of Ice Miller’s Workplace Solutions Group to further discuss your options.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.