{"id":13799,"date":"2023-08-01T19:40:30","date_gmt":"2023-08-01T19:40:30","guid":{"rendered":"https:\/\/insulation.org\/io\/?post_type=articles&p=13799"},"modified":"2023-09-05T19:40:43","modified_gmt":"2023-09-05T19:40:43","slug":"states-outlaw-noncompete-agreements","status":"publish","type":"articles","link":"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/","title":{"rendered":"States Outlaw Noncompete Agreements"},"content":{"rendered":"

\"\"<\/a><\/p>\n

A growing number of states have banned noncompete agreements, leaving employers to grapple with a patchwork of different state-level requirements and federal actions.<\/p>\n

\u201cWe are seeing a very clear trend of increasing hostility to the use of noncompete agreements,\u201d said Daniel Kadish, an attorney with Morgan Lewis in New York. \u201cIt has been a significantly growing trend over the last 4 or 5 years. We have seen this pick up speed.\u201d<\/p>\n

Noncompetes prohibit employees from working for corporate competitors or opening their own competing business within a geographic area for a certain period of time after they leave a company. Traditionally, employers have used noncompete agreements to stop employees from taking trade secrets and proprietary information to a competitor. Noncompete agreements may boost an employer\u2019s retention rate if they prevent workers from seeking similar jobs at competitors.<\/p>\n

The trend of banning noncompetes is likely to spread to more states in the near future, said Dan Prokott, an attorney with Faegre Drinker in Minneapolis.<\/p>\n

States tend to follow each other, and \u201cit becomes a bit of a bandwagon effect,\u201d said Julie Werner, an attorney with Lowenstein Sandler in New York.<\/p>\n

State-Level Restrictions<\/h2>\n

Four states\u2014California, Minnesota, North Dakota, and Oklahoma1<\/sup>\u2014have banned noncompete agreements entirely, and many other states have enacted restrictions, such as setting a compensation threshold or requiring advance notice.<\/p>\n

The New York Legislature recently passed a bill2 <\/sup>that would ban noncompete agreements, but Governor Kathy Hochul has not signed it yet. The legislation\u2019s \u201cscope is very broad, and its details are very little,\u201d said Larry Del Rossi, an attorney with Faegre Drinker in Florham Park, New Jersey. If enacted, it might make companies think twice about having their chief executives based in New York, Werner said.<\/p>\n

The state laws primarily targeted noncompete agreements that apply to low-wage workers. \u201cIt is an effort to solve for those situations,\u201d Werner said.<\/p>\n

Some state laws allow noncompete agreements for employees whose salary is above a certain threshold, and others do not. Some state laws permit noncompete agreements in connection with the sale of a business, and others do not.<\/p>\n

Some states also stipulate that you cannot have a noncompete in certain professions, like medicine or law, Del Rossi said.<\/p>\n

The state laws do not clearly define what a business competitor is, which can make things confusing for employers that use noncompetes, Prokott said.<\/p>\n

The variation in state laws \u201ccreates difficulties for organizations that have to comply with different rules in different places,\u201d Kadish said.<\/p>\n

\u201cThe trend is that every state is handling these things differently. The idea of just using a standard template form does not work anymore,\u201d Werner said.<\/p>\n

Federal Action<\/h2>\n

The Federal Trade Commission (FTC) released a proposal on January 5, 2023, to prohibit
\nnoncompetes. The FTC said noncompetes constitute an unfair method of competition and
\ntherefore violate Section 5 of the Federal Trade Commission Act. It concluded that noncompetes suppress wages, stifle innovation, and make it harder for entrepreneurs to start new businesses. The agency has not released a final rule yet.<\/p>\n

\u201cWe still suspect there will be some final rule by roughly April or May 2024 from the FTC,\u201d Kadish said.<\/p>\n

Corporations are likely to challenge any state or federal bans in the next year or two. \u201cInevitably, there is going to be legal challenges in the courts,\u201d said Mark Goldstein, an attorney with Reed Smith in New York. \u201cEmployers need to brace for some uncertainty on this front.\u201d<\/p>\n

In a memo3 <\/sup>released on May 30, 2023, National Labor Relations Board General Counsel Jennifer Abruzzo announced that some noncompete agreements violate the National Labor Relations Act 5. The announcement, which applies to nonunionized and unionized employers, may result in unfair labor practice charges for employers that use noncompetes.<\/p>\n

The Society for Human Resources Management (SHRM) urged4 <\/sup>the FTC to allow employers to continue using noncompete agreements with certain employees.<\/p>\n

In comments to the FTC, Emily M. Dickens, Chief of Staff and head of government affairs at SHRM, said the FTC\u2019s proposal would \u201cimpede SHRM members\u2019 ability to balance the needs of workers and employers and will reduce the contractual capabilities of reasonable and consenting parties. The sweeping proposal significantly complicates HR professionals\u2019 responsibility to protect their workforces\u2019 intellectual property.\u201d<\/p>\n

Tips for Employers<\/h2>\n

Human resources professionals should stay up-to-date on state laws around noncompete agreements and have accurate records of where their employees work, Del Rossi said.<\/p>\n

\u201cIt makes sense for organizations to review their current noncompete agreement and see if the way they are using those agreements are still aligned with their business goals,\u201d Kadish said. For example, companies could consider tailoring the noncompete agreement to the job, adjusting the duration of the agreement, or tightening the scope of new hires who are required to sign a noncompete.<\/p>\n

Noncompete agreements often name the state where the contract applies, based on where the business is incorporated, where the employee lives, or where the work takes place. Employers should \u201cbe thoughtful\u201d about this choice, Werner said, and \u201cuse the right agreements for the right people,\u201d which can include not giving noncompetes to junior employees.<\/p>\n

In the meantime, businesses should \u201cstart planning for alternatives to noncompetes,\u201d such as nondisclosure and nonsolicitation agreements, which can protect trade secrets, said John Siegal, an attorney with BakerHostetler in New York. \u201cBe more flexible and creatively use less restrictive employee agreements, including customer nonsolicitation agreements and notice or garden leave provisions,\u201d where employees are instructed to stay away from work during the notice period while still remaining on the payroll.<\/p>\n

In a tight labor market, state prohibitions on noncompetes might make it easier for some businesses when they need to attract certain types of workers who were previously under noncompetes, said Rob Whitman, an attorney at Seyfarth in New York.<\/p>\n

Eighteen percent of U.S. workers are subject to noncompete agreements now, and 38% of workers have been subject to noncompete agreements at some time in their careers, according to a new report5 <\/sup>from the U.S. Government Accountability Office. About 55% of employers said they used noncompete agreements.<\/p>\n

\u201cFew workers who sign noncompete agreements negotiate the terms because they are unaware of what noncompete agreements are, they want the job regardless, or the noncompete agreement is introduced after a job is accepted,\u201d the report stated. Noncompete agreements have particularly high use in the health-care, financial services, and IT industries, according to Prokott.<\/p>\n

References
\n1. https:\/\/www.shrm.org\/resourcesandtools\/legal-and-compliance\/state-and-local-updates\/pages\/states-restrict-noncompete-agreements-colorado.aspx<\/a>
\n2. https:\/\/www.nysenate.gov\/legislation\/bills\/2023\/S3100\/amendment\/A<\/a>
\n3. https:\/\/www.shrm.org\/resourcesandtools\/legal-and-compliance\/employment-law\/pages\/nlrb-noncompetes-often-violate-nlra.aspx<\/a>
\n4. https:\/\/www.shrm.org\/resourcesandtools\/legal-and-compliance\/employment-law\/pages\/shrm-opposes-noncompete-ban.aspx<\/a>
\n5. https:\/\/www.gao.gov\/assets\/gao-23-103785.pdf<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

What does the growing trend of banning noncompete agreements at the state level mean for your business going forward?<\/p>\n","protected":false},"author":[627],"featured_media":0,"template":"","categories":[21,624],"class_list":["post-13799","articles","type-articles","status-publish","hentry","category-business-managment","category-august-2023","author-leah-shepherd"],"acf":[],"yoast_head":"\nStates Outlaw Noncompete Agreements - Insulation Outlook Magazine<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"States Outlaw Noncompete Agreements\" \/>\n<meta property=\"og:description\" content=\"What does the growing trend of banning noncompete agreements at the state level mean for your business going forward?\" \/>\n<meta property=\"og:url\" content=\"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/\" \/>\n<meta property=\"og:site_name\" content=\"Insulation Outlook Magazine\" \/>\n<meta property=\"article:modified_time\" content=\"2023-09-05T19:40:43+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/insulation.org\/io\/wp-content\/uploads\/sites\/3\/2023\/09\/IO230802_01-300x191.jpg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/\",\"url\":\"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/\",\"name\":\"States Outlaw Noncompete Agreements - Insulation Outlook Magazine\",\"isPartOf\":{\"@id\":\"https:\/\/insulation.org\/io\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/insulation.org\/io\/wp-content\/uploads\/sites\/3\/2023\/09\/IO230802_01-300x191.jpg\",\"datePublished\":\"2023-08-01T19:40:30+00:00\",\"dateModified\":\"2023-09-05T19:40:43+00:00\",\"breadcrumb\":{\"@id\":\"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/#primaryimage\",\"url\":\"https:\/\/insulation.org\/io\/wp-content\/uploads\/sites\/3\/2023\/09\/IO230802_01.jpg\",\"contentUrl\":\"https:\/\/insulation.org\/io\/wp-content\/uploads\/sites\/3\/2023\/09\/IO230802_01.jpg\",\"width\":1788,\"height\":1141},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/insulation.org\/io\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"States Outlaw Noncompete Agreements\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/insulation.org\/io\/#website\",\"url\":\"https:\/\/insulation.org\/io\/\",\"name\":\"Insulation Outlook Magazine\",\"description\":\"The only global magazine dedicated to insulation.\",\"publisher\":{\"@id\":\"https:\/\/insulation.org\/io\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/insulation.org\/io\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/insulation.org\/io\/#organization\",\"name\":\"National Insulation Association\",\"url\":\"https:\/\/insulation.org\/io\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/insulation.org\/io\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/insulation.org\/io\/wp-content\/uploads\/sites\/3\/2016\/10\/insulation-outlook-logo.png\",\"contentUrl\":\"https:\/\/insulation.org\/io\/wp-content\/uploads\/sites\/3\/2016\/10\/insulation-outlook-logo.png\",\"width\":229,\"height\":90,\"caption\":\"National Insulation Association\"},\"image\":{\"@id\":\"https:\/\/insulation.org\/io\/#\/schema\/logo\/image\/\"}}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"States Outlaw Noncompete Agreements - Insulation Outlook Magazine","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/","og_locale":"en_US","og_type":"article","og_title":"States Outlaw Noncompete Agreements","og_description":"What does the growing trend of banning noncompete agreements at the state level mean for your business going forward?","og_url":"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/","og_site_name":"Insulation Outlook Magazine","article_modified_time":"2023-09-05T19:40:43+00:00","og_image":[{"url":"https:\/\/insulation.org\/io\/wp-content\/uploads\/sites\/3\/2023\/09\/IO230802_01-300x191.jpg","type":"","width":"","height":""}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/","url":"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/","name":"States Outlaw Noncompete Agreements - Insulation Outlook Magazine","isPartOf":{"@id":"https:\/\/insulation.org\/io\/#website"},"primaryImageOfPage":{"@id":"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/#primaryimage"},"image":{"@id":"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/#primaryimage"},"thumbnailUrl":"https:\/\/insulation.org\/io\/wp-content\/uploads\/sites\/3\/2023\/09\/IO230802_01-300x191.jpg","datePublished":"2023-08-01T19:40:30+00:00","dateModified":"2023-09-05T19:40:43+00:00","breadcrumb":{"@id":"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/#primaryimage","url":"https:\/\/insulation.org\/io\/wp-content\/uploads\/sites\/3\/2023\/09\/IO230802_01.jpg","contentUrl":"https:\/\/insulation.org\/io\/wp-content\/uploads\/sites\/3\/2023\/09\/IO230802_01.jpg","width":1788,"height":1141},{"@type":"BreadcrumbList","@id":"https:\/\/insulation.org\/io\/articles\/states-outlaw-noncompete-agreements\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/insulation.org\/io\/"},{"@type":"ListItem","position":2,"name":"States Outlaw Noncompete Agreements"}]},{"@type":"WebSite","@id":"https:\/\/insulation.org\/io\/#website","url":"https:\/\/insulation.org\/io\/","name":"Insulation Outlook Magazine","description":"The only global magazine dedicated to insulation.","publisher":{"@id":"https:\/\/insulation.org\/io\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/insulation.org\/io\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/insulation.org\/io\/#organization","name":"National Insulation Association","url":"https:\/\/insulation.org\/io\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/insulation.org\/io\/#\/schema\/logo\/image\/","url":"https:\/\/insulation.org\/io\/wp-content\/uploads\/sites\/3\/2016\/10\/insulation-outlook-logo.png","contentUrl":"https:\/\/insulation.org\/io\/wp-content\/uploads\/sites\/3\/2016\/10\/insulation-outlook-logo.png","width":229,"height":90,"caption":"National Insulation Association"},"image":{"@id":"https:\/\/insulation.org\/io\/#\/schema\/logo\/image\/"}}]}},"_links":{"self":[{"href":"https:\/\/insulation.org\/io\/wp-json\/wp\/v2\/articles\/13799","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/insulation.org\/io\/wp-json\/wp\/v2\/articles"}],"about":[{"href":"https:\/\/insulation.org\/io\/wp-json\/wp\/v2\/types\/articles"}],"wp:attachment":[{"href":"https:\/\/insulation.org\/io\/wp-json\/wp\/v2\/media?parent=13799"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/insulation.org\/io\/wp-json\/wp\/v2\/categories?post=13799"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/insulation.org\/io\/wp-json\/wp\/v2\/author?post=13799"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}