Non-compete agreements have long been used by employers as an
effective tool to protect their valuable trade secrets and
confidential information. However, employers' overuse of
non-compete agreements and employers' practice of requiring all
of their employees to sign non-compete agreements recently has come
under significant attack by federal and state governments. In July,
Trade Secrets Watch discussed some of those recent attacks.
Since July, there have been a number of additional efforts by
government to prohibit the overuse of non-compete agreements.
On August 19, 2016, Illinois enacted the Illinois Freedom to Work
Act, which prohibits employers from entering into non-compete
agreements with "low-wage employees" and declares such
agreements "illegal and void." The Act applies to
employees who earn $13 per hour or less and to agreements that
restrict: (1) working for another employer for a specified period
of time; (2) working in a specified geographical area; and (3)
performing similar work for another employer. Significantly, the
Act, which becomes effective on January 1, 2017, does not impact an
employer's ability to continue to enter into non-disclosure and
confidentiality agreements with its "low-wage
In August, New York's Attorney General (the
"NYAG") announced that it had entered into a settlement
agreement with a medical information services provider, which had
required all of its employees to enter into non-compete agreements,
including non-senior employees who did not have access to trade
secrets and who traveled around New York to conduct routine
physical examinations, draw blood, and collect bodily specimens for
lab testing. Following an investigation by the NYAG under Section
63(12) of the New York Executive Law, which authorizes the NYAG to
investigate "unconscionable contract provisions," the
employer agreed to stop requiring its New York employees (other
than top executives) to sign non-compete agreements. The NYAG
recently has entered into similar settlement agreement with other
These continued efforts by governments should serve as a
reminder to employers that, before requiring their employees to
sign non-compete agreements, employers should carefully consider on
an individualized basis which employees should be required to sign
a non-compete agreements. Depending on the employer's business,
a "one size fits all" approach may not be the best
approach for entering into non-compete agreements.
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