Access a comprehensive collection of employment-related legal resources, including guides and checklists created by our experienced copywriters Non-competition clauses are just one type of clause in an employment contract that can restrict worker mobility. Other restrictive covenants include non-poach agreements for employees; non-solicitation of clients; the client`s non-commercial agreements; non-disclosure agreements; non-derogatory clauses; and assignment clauses prior to the invention.  Mandatory arbitration agreements prevent workers from filing claims for violations of employee rights in state or federal courts. These agreements have reduced the number of complaints of discrimination brought before the courts.  There may also be a number of procedural clauses relating to choice of forum, choice of law, non-aggregation of claims, severability or reform or damages in lieu of law.  Contracts containing several of these generic copy and paste clauses are sometimes referred to as „one-size-fits-all contracts“ and cover 80% of private sector workers.  When courts decide a case, they usually begin by considering whether the combination of restrictive agreements in a standard contract renders it unscrupulous and therefore unenforceable. There is a growing movement to prohibit non-compete obligations at the state level. Studies have shown that women are also less willing to violate the terms of the non-compete obligation.  In countries with stricter non-compete obligations, women are less likely than men to quit their jobs or start competing firms if they are subject to a non-compete obligation.  The fact that a State generally applies these agreements also does not mean that all non-compete obligations are met. Any agreement could always be declared invalid if a court finds that the restrictions imposed are not reasonable.
Often, courts will not apply non-compete obligations if the duration of the non-compete obligation is too long, if the geographical scope in which the worker is prevented from working is too broad, or if the types of prohibited work are too broad. Another issue workers face during the pandemic is whether their employer can still enforce their non-compete clause once they have been put on leave. In these cases, courts reluctant to keep people unemployed have generally found that non-compete clauses are unenforceable.  While the legislative movement to eliminate non-competition existed prior to the pandemic, some jurisdictions are creating pandemic-specific enforcement protections for non-competition. For example, Illinois recently prohibited employers from entering into a non-compete agreement with an employee who has been laid off or furloughed due to the pandemic.  More than 30 million workers – at least 18% of the U.S. workforce – must sign non-compete agreements as a condition of accepting employment. Non-competition clauses were originally created to protect trade secrets and other confidential information. While still widely used for well-paid and educated workers, these agreements are becoming increasingly common in underpaid industries, regardless of job obligations or access to confidential information.
 Currently, nearly 30% of non-competitors cover workers earning less than $13 per hour.  Almost 30% of non-compete agreements cover workers earning less than $13 per hour. The use of non-competition dates back to the Reconstruction era, when former slave owners used non-competitors to make freed black workers work and maintain the master-slave relationship. Non-compete obligations cannot be enforced in North Dakota and Oklahoma. California does not recognize non-compete obligations at all, and an employer who ties an employee to an employee after termination of employment can be sued. Hawaii banned noncompete agreements for tech companies in 2015. In 2016, Utah changed its legislation and limited the new non-compete clauses to just one year. This article is provided for informational purposes only and does not constitute legal advice. Talk to a licensed attorney about your own specific situation. There is no national prohibition of non-compete obligations. However, on July 5, 2021, President Biden issued an executive order aimed at promoting competition in the U.S. economy, encouraging the Federal Trade Commission to prohibit or restrict the use of non-compete clauses.
 In addition, the Labour Mobility Act and the Freedom of Competition Act were introduced in 2021 to prevent the application and creation of non-competition clauses.  Non-compete obligations are disproportionately harmful to women and people of colour and have a history of racial injustice. The protection of undertakings against possible breaches of trade secrets is not a reason to restrict the mobility of workers, in particular where such undertakings have legal remedies. During the pandemic, many workers have filed lawsuits challenging the enforceability of non-competition clauses. While the courts continue to apply these clauses, some have increased the level of scrutiny with which they have been analyzed and have expanded their investigation.  For example, one court considered the increasing number of businesses that have adopted telework practices during the pandemic to determine whether a geographic restriction is appropriate.  Non-compete obligations hurt workers. Originally intended to protect a company`s trade secrets and other confidential information, non-compete obligations are increasingly being used by companies in low-wage industries to prevent workers from changing jobs, thereby limiting workers` economic opportunities and suppressing their income.
Workers in underpaid industries often make more money by changing jobs, so non-compete obligations prevent these workers from improving their wages and working conditions. Limits job mobility: Signing non-compete agreements also makes it harder for workers to get better, higher-paying jobs.  Changing jobs is one of the most common ways for workers to receive higher wages.  „Job change,“ especially early in one`s career, is correlated with higher lifetime earnings.  By restricting working conditions, non-compete obligations reduce competition between industries and, consequently, total wages.  With few employers to compete for, workers have fewer opportunities to negotiate higher wages and demand better jobs.  Are the non-compete obligations therefore enforceable? I mentioned that a lawyer will say, „It depends,“ and that`s the annoying truth about non-competitors. Here are some suggestions.
There is also a growing movement to prohibit non-compete obligations at the state level. State laws prohibiting non-competition generally fall into one of three categories: (1) laws eliminating non-compete laws for all; (2) laws eliminating non-compete obligations for some, based on occupation or income level; and (3) legislation codifying stricter enforcement requirements.  Some examples of states that have issued progressive bans on non-competitions include California, Connecticut, Illinois, Maine, Maryland, Massachusetts, New Hampshire, Oregon, and Washington.  Even in countries where non-compete obligations exist, some workers must sign them. In California, for example, non-compete obligations have been unenforceable for more than 100 years, but research has shown that 19% of workers have signed unenforceable non-compete clauses.  In 2017, the California Labor Code was amended to prohibit non-compete practices that use a choice of law to circumvent the state prohibition.  Use the list below to determine whether non-compete obligations or clauses are enforceable for some, some, or all types of labor relationships governed by the laws of your state. If certain professions are listed, only those professions are exempt from non-compete obligations in that state, and non-compete practices will likely continue to apply to all other professions that are not listed. Note that even if the non-challenges are unenforceable in your state or against certain professionals you employ, your state likely allows you to enter into a non-disclosure agreement to prevent the disclosure or use of confidential information and trade secrets by employees. The content of this website is not intended to be legal advice and should not be relied upon as such.
It is general in nature and may not reflect all recent legal developments.