Joining the wave of jurisdictions limiting the competitive restraints employers may place on low-wage employees is Maryland. Maryland’s Noncompete and Conflict of Interest Clauses Act (the “Act”)―which passed without Governor Larry Hogan’s signature on May 28, 2019―will take effect on October 1, 2019. Recognizing that certain non-compete and conflict-of-interest clauses violate Maryland’s public policy and are therefore null and void, the Act prohibits employers from mandating that certain employees not join another employer or become self-employed in a same or similar business area. The covered employees are those who earn equal to or less than $15 per hour or $31,200 annually. This prohibition applies even if the parties entered into the employment agreement outside of Maryland and is not restricted to only post-employment actions. That is, a qualified employee may work for a competitor even during the term of employment.
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Maine Governor Restricts Restrictive Covenants
On June 28, 2019, Governor Mills signed LD 733, An Act To Promote Keeping Workers in Maine, into law. The Act places limits on non-compete agreements and bans restrictive employment agreements.
Non-Compete Agreements
The Act defines a non-compete agreement as one restricting the employee “from working in the same or similar profession or in a specified geographic area for a certain period of time following termination of employment.”
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Upcoming Webinar! Enforcement of Non-Competes: Increasing Difficulty Depending on State
On Tuesday, August 20, 2019, at 12:00 p.m. Central Time, in Seyfarth’s fourth installment of its 2019 Trade Secrets Webinar Series, Seyfarth attorneys will focus on the enforcement of non-competes and how the difficulty of enforcement of these restrictive covenants vary by state. Any company that seeks to use non-compete and non-solicitation agreements to protect
First UK Supreme Court Decision on Restrictive Covenants for 100 years
The Supreme Court in the UK, the highest court in the country, last week ruled on a restrictive covenant case for the first time in 100 years [Tillman v Egon Zehnder Ltd [2019] UKSC 32 (3 July 2019)]. It has clarified important points on interpretation, the key takeaway being it will now be easier for employers to enforce covenants against departing employees.
Covenants Must Be Necessary to Protect Employer’s Interests
It has long been established in the UK, that restrictive covenants are an unlawful restraint of trade unless they go no further than is necessary to protect the employer’s legitimate proprietary interests. The Supreme Court recognized as such in quoting the colorful language of a court decision from the 15th century criticizing a plaintiff employer looking to enforce a covenant:
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New Hampshire Governor Bans Non-Compete Agreements for Low-Wage Employees
On July 11, 2019, Governor Sununu signed S.B. 197 into law. S.B. 197 prohibits an employer from requiring an employee who makes 200% of the federal minimum wage ($14.50) to sign a non-compete agreement restricting the employee from working for another employer for a specified period of time or within a specific geographic area. Any
Oregon Adds Employee-Friendly Requirement to Existing Non-Compete Law… But Also Produces Company-Friendly Trade Secrets Law in Recent Court of Appeals Case
On May 14, 2019, Oregon Governor Kate Brown signed into law HB 2992, which, as of January 1, 2020, requires an employer to provide a terminated employee with a signed, written copy of his or her non-competition agreement within 30 days of his or her termination date. Failure to do so will render the agreement voidable and unenforceable in the state of Oregon.
Backdrop for HB 2992
Under current Oregon law (ORS 653.295), a non-competition agreement is not enforceable unless the following four requirements are met: (1) the employer informs the employee of the non-competition agreement in a written employment offer received at least two weeks before the employee’s first day, or the agreement is entered into upon promotion; (2) the employee is engaged in administrative, executive, or professional level work; (3) the employer has a protectable interest in requiring the non-competition agreement; and (4) the employee’s gross annual salary and commissions at the time of termination exceeds the median family income for a four-person family. Furthermore, the term of a non-competition agreement may not exceed 18 months from the date of the employee’s termination. Any time remaining on a non-competition agreement beyond 18 months is voidable and precluded from enforcement by any Oregon court.
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“A Very Tortured Argument”—Lawyer Cannot Use Bar Membership to Skirt a Bargained-For Restrictive Covenant in the Sale of a Non-Legal Business
While it is well-settled law that an attorney cannot be bound by an agreement restricting the right to practice law, that does not insulate attorneys from all restrictive covenants. As we have previously discussed, there are exceptions to this rule, as a Massachusetts attorney recently learned the hard way.
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Not All Is Lost for California Employers: Enforce Non-Compete Forfeiture Provisions through ERISA Top Hat Plans?
Even before the California Supreme Court decided Edwards in 2008, employers knew all too well the woes of attempting to enforce non-competes against California employees. Edwards simply reaffirmed California’s long-standing policy in favor of employee mobility, finding that employee non-competition agreements are typically void in California unless they fall within one of the exceptions to Business and Professions Code section 16600. But this need not become the fate of every non-compete; notwithstanding Edwards and recent California decisions applying the state’s notorious statute, section 16600, it may be possible for employers to enforce non-competition forfeiture provisions by including them in deferred compensation top hat plans subject to the Employee Retirement Income Security Act of 1974 (ERISA).
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Federal Judge Confirms That Massachusetts’ New Non-Compete Law Does Not Require Garden Leave or Massachusetts Choice of Law
As we’ve previously written about on this blog, last summer the Massachusetts legislature passed a non-compete reform bill which went into effect on October 1, 2018. Readers of this blog will recall our concerns that the new law is in many ways confusing and may lead to unpredictable results. Now, more than six months after its effective date, we have a second published decision out of the United States District Court for the District of Massachusetts citing the new Massachusetts Noncompetition Agreement Act (“MNCA”), Mass. Gen. Laws ch. 149, § 24L. Like the first published decision, this decision does not directly analyze an agreement that is subject to the Act, but it is still instructive for employers with personnel who may be subject to the MNCA.
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Washington State Governor Signs Law Severely Limiting Non-Competes
Washington state has joined the ranks of an ever-growing number of states that impose significant restrictions on employee non-compete agreements. On May 9, 2019, Governor Jay Inslee signed House Bill 1450, titled “An Act Relating to restraints, including noncompetition covenants, on persons engaging in lawful professions, trades, or businesses,” into law. The Act will go into effect on January 1, 2020. We reported on the bill in detail in March.
This change to Washington law is significant. Businesses with employees or independent contractors in the state should revisit their non-compete agreements and take the necessary steps to ensure compliance with the Act by the end of this year. Among other things:
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