In Seyfarth's fourth installment in its 2019 Trade Secrets Webinar Series, Seyfarth attorneys Kristine Argentine, Eric Barton, and Katelyn Miller focused on the enforcement of non-competes and how the difficulty of enforcement of these restrictive covenants vary by state, especially based on recent legislation in various states.
As a conclusion to this webinar, we compiled a summary of takeaways:
- While restrictive covenants are an important piece of many employment agreements in order to protect the company's relationships and proprietary information, the restrictions should be narrowly constructed in time, geography, and activity or customers limitations to the extent possible. Requirements for the enforceability of restrictive covenants varies greatly by state and sometimes industry, so be sure to carefully consider the laws of any states where employees work when crafting restrictive covenants or looking into whether to enforce restrictive covenants against a particular employee.
- Effective January 1, 2020, in order for a non-compete to be valid in Oregon, an employer must provide a terminated employee with a signed, written copy of their non-compete agreement within 30-days of their termination.
- Extensive revisions to Washington's non-compete law will be going into effect January 1, 2020, including, but not limited to, penalties for overbroad restrictions, income thresholds, and mandatory "garden leave" payments. While non-competes will still be allowed in Washington, these substantial changes will greatly curtail how and when they can be used.
- North Dakota, which generally prohibits non-competes, recently modified its law to expand situations in which a non-compete can be used in the sale (or partial sale) of limited liability companies, corporations, and partnerships.
- Effective January 15, 2020, non-compete provisions in Rhode Island will no longer be effective against low-wage earners, undergraduate or graduate students in an internship or short-term employment relationship, non-exempt employees, or employees 18 years old or younger.
- Massachusetts recently passed legislation regulating non-compete agreements by limiting enforceability and codifying express requirements that must be met, including but not limited to, time, geography and activity restrictions, notice requirements, and either "garden leave" or other mutually-agreed upon consideration provisions. Further, non-compete agreements are not enforceable against certain types of employees. While non-competes are still allowed in Massachusetts, this new law curtails how and when such agreements may be used.
- Maine recently passed legislation barring employers from entering into non-compete agreements with lower wage employees, limiting an employer's ability to enforce non-compete agreements, mandating advanced disclosure obligations, and imposing a time delay between when an employee agrees to the terms of a non-compete agreement and when the non-compete goes into effect.
- Maryland and New Hampshire recently joined a growing number of states by restricting enforceability of non-compete agreements against lower wage employees.
- Minor changes to non-compete laws have also been made in Utah, Idaho, and Colorado. Utah has placed specific limitations on non-compete provisions in the broadcasting industry and imposes a one-year limit on all non-compete provisions except in limited circumstances. Idaho repealed its rebuttable presumption of irreparable harm, placing the burden back on the employer to establish irreparable harm in order to obtain an injunction. Colorado law provides that irrespective of a non-compete provision, physicians may continue to treat patients with rare disorders without liability.
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.