Massachusetts employers and employees have enough to contend with trying to keep abreast of the judicial and legislative fits and starts of non-compete reform within the state, let alone developments in other states. It is important to remember that non-compete law varies widely from state to state, and these variations may come into play if employees are in different states or if a former employee is moving to a new state. Below you will find just a few of the many variances in state non-compete law.
Outright Bans
California and North Dakota have statutory prohibitions on almost
all non-competition agreements. Employees working in those
states—or in some cases even employees leaving work to secure
new employment in those states—cannot be subject to
traditional non-competes. In Colorado, non-competes are enforceable
only in very limited circumstances, such as for the protection of
trade secrets. Even in states that ban non-competes, however, trade
secret or traditional common law claims may be available to protect
business interests.
Idiosyncrasies
Other states have quirks that unwary employers may find devastating
to their ability to enforce non-competes. For example, an Illinois appellate court recently held that an
employee who has not worked for the employer for at least two years
has not received sufficient consideration to justify a non-compete.
Meanwhile, in Louisiana, which differs from the other 49 states as
it follows a French-influenced Civil Code, a non-compete is invalid
unless it contains a listing of the specific parishes from which
the employee is restricted.
Reformation
One of the most significant variations in state non-compete law is
whether judges are permitted to reform overbroad agreements. For
example, in Massachusetts, a judge is permitted to "blue
pencil," or rewrite a non-compete so that it is reasonable.
Thus, a judge could reduce a three-year non-compete to a one-year
non-compete and enforce the remainder of the agreement. However, in
other states such as Wisconsin or North Carolina, a judge is only
permitted to "red pencil," or strike overbroad language
from the agreement. Thus, although a judge could not reduce a
three-year non-compete to a one-year non-compete, the judge could
completely strike an overly broad non-compete provision while
enforcing a reasonable non-solicitation provision.
These examples illustrate just a few of the major variances in state non-compete law. For a more comprehensive analysis, you may find it useful to review Beck Reed Riden's 50-State Non-Compete Survey, or similar resources.
This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.