Earlier this week, two U.S. Senators, Chris Murphy (D-Conn.) and Al Franken (D-Minn.), announced plans to introduce a bill that would ban companies from asking employees that make less than $15 an hour (or $31,200 annually) to agree to non-compete provisions that would hinder those employees' efforts at securing subsequent employment.
The prospective bill would seek to address the practice of requiring low-wage, low-skilled workers to agree to overly-broad non-compete provisions. For example, evidence has surfaced that ". . . Jimmy John's sandwich shops requires some of its low-wage workers to sign two-year non-compete agreements prohibiting them from working at retail stores that make at least 10% of their sales from sandwiches."
While the proposed bill would help to remove any doubt about the enforceability of certain non-compete agreements, and assuage the concerns of targeted employees that might be unwilling to challenge such agreements, most courts would likely strike the "Jimmy Johns" type of non-compete provisions.
Are Non-Compete Provisions Enforceable?
Keep Your Non-Compete Provisions Sensible
As a general rule, non-compete provisions are enforceable when they apply to high-level employees with unique skill sets who have access to sensitive employer information and trade secrets. Even then, courts require the specific non-compete provisions to be limited to a reasonable duration and geographical scope. It also helps with respect to enforceability if the employee in question is compensated in some fashion during the required period of non-competition.
The reasons for this judicial approach to non-compete clauses is simple: courts are reluctant to enforce obstacles to an individual finding gainful employment.
Many of these same sentiments were echoed in a letter sent by 35 members of Congress in October 2014, to Federal Trade Commission Chairwoman Edith Ramirez and Labor Secretary Thomas Perez regarding this issue:
"Non-competition agreements may sometimes make sense for well-compensated core company leadership, who are privy to company secrets and strategies . . . . However, applying them to a company's entire workforce looks more like bullying under color of law, as well as a violation of labor rights."
Non-Compete Agreements: A Scalpel, not A Hacksaw
Without narrowly tailored non-compete provisions, reserved for key employees and others that might have access to valuable trade secrets, a company may be unable to enforce non-compete protections that are necessary for its continued success.
Accordingly, it is highly recommended that you retain qualified legal counsel to ensure that any non-compete provisions that you intend to use, or currently use, are drafted and/or revised, as applicable, in order to ensure that they will be enforceable in a court of law.
If you are interested in learning more about this topic or require the preparation, revision and/or negotiation, of non-compete provisions, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.