Non-Compete Trends

Non-Compete Agreements  that would also include non-solicitation agreements and trade secret protections have become part of the territory in employment and trade secret law for the past two decades or so as an aid to employers to protect sensitive information, investment in employee training and customer relationships, but what are the trends now that non-compete agreements have been around for a while.

The trends in recent years suggest the pendulum is swinging in favor of placing more limitations on the enforcement of non-compete agreements.  In response to more pervasive use of non-compete agreements including company policies which compel lower level employees to execute non-compete agreements state legislatures have introduced legislation of the past several years seeking to restrict non-compete agreements in response to their overuse.   Six states including Alabama, Hawaii, Illinois, New Mexico, Oregon, and Utah have passed legislation restricting or otherwise limiting the enforceability  of non-compete agreements.  Legislatures in seven other states have introduced but not passed legislation with the same focus including Idaho, Massachusetts, Missouri, Maryland, Michigan, New Jersey and Washington.  Likewise, there is a growing trend among courts with discretion on the issue of enforceability to curb what is being perceived as the overuse or abuse of non-compete agreements beyond their intended purposes.  Not so recently, California and Oklahoma have enacted laws to prohibit non-competes except in very limited circumstances and generally related to the sale of a business.

It will be up to employers in states where non-competes remain valid and enforceable to utilize the non-compete tools in a responsible manner consistent with their intended purposes and not to over utilize non-compete agreements, otherwise the trend toward limiting or eliminating enforcement of non-compete agreements will continue.  Consultation with qualified legal counsel is an effective way to determine the judicious use of non-competes tailored to your business or industry.