Following the “Call to Action”[1] that was issued by the White House and the U.S. Department of Treasury in October, 2016 concerning what the Obama Administration perceived as overuse of non-compete agreements, a number of states have revised their laws regarding non-competes.
In 2016, prior to the “Call to Action,” Idaho passed a law that established a presumption that an employee’s breach of a non-compete agreement caused irreparable harm to the employer. However, the legislature reconsidered that move. In July of this year, the Idaho legislature repealed the presumption, placing the burden back on the employer to prove that it suffered harm to a legitimate business interest.
In 2016, Utah imposed numerous requirements and restrictions on non-compete agreements. Rather than the previous common law requirement that the agreement only restrict a former employee for a reasonable time, the new law voids any agreement that restricts a former employee for longer than one year. Now, two years later, Utah continues to reassess its non-compete law. Earlier this year, the state enacted a law prohibiting non-competes for employees working in the broadcasting field and making less than $913 per week or $47,476 per year, aside from a few exceptions.
Massachusetts has also taken action. Earlier this month, Massachusetts enacted a law bill regulating non-competes, which will go into effect on October 1, 2018. The new law requires that certain criteria be met or the agreement will not be enforced. The agreement must be in writing, must be signed by both parties to the agreement, and must state that the employee has the right to have the agreement reviewed by counsel. The law also establishes when the agreement must be presented to the employee. A new employee must be given the agreement before an offer is made or ten days before the employee starts work, whichever is sooner. A current employee must be provided with the agreement at least ten business days before the agreement’s effective date. Further, the new law sets limits regarding the duration, geographic area, and the services covered.
State non-compete law is rapidly changing and will undoubtedly continue to change in the coming months and years. It is important that employers remain up-to-date and understand the developments in state law regarding non-compete agreements to ensure that their non-competes comply with the various state statutes and common law principles where they operate. One form of non-compete agreement cannot be used for all employees regardless of where the employee works. Instead, non-compete agreements must be tailored to satisfy the specific requirements of the state where the employee is working.
[1] https://obamawhitehouse.archives.gov/sites/default/files/competition/state-by-statenoncompetesexplainer_unembargoedfinal.pdf
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