[5] In March 2019, Democratic officials, labor unions, and workers' advocacy groups urged the U.S. FTC to ban non-compete clauses.
[11] The commission noted that the existing legal frameworks governing non-compete clauses—formed decades ago, without the benefit of this evidence—allow serious anticompetitive harm to labor, product, and service markets to go unchecked.
[15] Non-compete agreements are automatically void as a matter of law in California, except for a small set of specific situations expressly authorized by statute.
[17] A leading court decision discussing the conflict between California law and the laws of other states is the 1998 California 4th District Court of Appeal decision Application Group, Inc. v. Hunter Group, Inc.[18] In Hunter, a Maryland company required that its Maryland-based employee agree to a one-year non-compete agreement.
[citation needed] Whether California courts are required by the Full Faith and Credit Clause of the United States Constitution to enforce equitable judgments from courts of other states, having personal jurisdiction over the defendant, that enjoin competition or are contrary to important public interests in California is an issue that has not yet been decided.
[23] Those exceptions include "(a) Any contract for the purchase and sale of a business or the assets of a business; (b) Any contract for the protection of trade secrets; (c) Any contractual provision providing for recovery of the expense of educating and training an employee who has served an employer for a period of less than two years; and (d) Executive and management personnel and officers and employees who constitute professional staff to executive and management personnel.
Instead, under Florida law, courts are required to "blue pencil" an impermissibly broad or lengthy non-compete agreement to make it reasonable within the limits of Fla. Stat.
and (1) must be no greater in scope than is required to protect a legitimate business interest of the employer, (2) must not impose an undue hardship on the employee, and (3) cannot be injurious to the public.
[31] The majority of courts will require at least two years of continued at-will employment to support a non-compete agreement (or any other type of restrictive covenant).
While Illinois courts state the rule above, logically the analytical steps should be in reverse order—because inadequate consideration is fatal to the claim.
Thus, under McInnis v. OAG Motorcycle Ventures, Inc.[32] there are three requirements in order for a post employment restrictive covenant limiting a former employee's right to work for a competitor to be enforceable under Illinois law: The McInnis decision interpreted the Fifield decision, above, to mandate two years' employment in order for consideration to be adequate.
Before January 1, 2021, the Illinois Freedom to Work Act prohibited employers from entering into a covenant not to compete with Illinois employees earning the greater of (1) the hourly rate equal to the minimum wage required by the applicable federal, State, or local minimum wage law or (2) $13.00 per hour.
733 considers non-compete clauses contrary to public policy and valid only to protect employers' legitimate business interests, such as trade secrets, confidential information and goodwill.
Additionally, with mixed exceptions for physicians, non-competes can only take effect after one year from the employee's start date or six months after being signed, whichever is later.
201-219; (ii) undergraduate or graduate students that partake in an internship or otherwise enter a short-term employment relationship with an employer, whether paid or unpaid, while enrolled in a full-time or part-time undergraduate or graduate educational institution; (iii) employees that have been terminated without cause or laid off; or (iv) employees age 18 or younger.
[55] Thereafter, Appellate Courts in Michigan began outlining and defining the "reasonableness" rule in terms of duration, geographic scope, and the type of employment prohibited, but to also consider the competitive business interest justifying the clause.
4399, were introduced[58] and if passed, would shift the "reasonableness" rule burden squarely on the employer, narrow antitrust law to permit non-competition agreements only when they are disclosed prior to hiring, and a complete prohibition of non-competes with "low-wage" employees.
This law applies to all forms of professional relationships with physicians, including partnerships and employment, and does not affect or invalidate other non-geographic post-employment restrictions.
[61] Under Texas law, a covenant not to compete is enforceable if it is ancillary to or part of an otherwise enforceable agreement at the time the agreement is made to the extent that it contains limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.
[65] Several Texas Supreme Court opinions from 2006 onwards have broadened the nature of the consideration necessary to render a noncompete covenant enforceable.
This case required that the employer actually perform the promise it made at the time that it secured the non-competition agreement, for example by providing access to certain proprietary information or training.
In Virginia, a plaintiff must prove by a preponderance of the evidence that the covenant is reasonable in the sense that it is: (1) no greater than necessary to protect its legitimate business interests, such as a trade secret; (2) not unduly harsh or oppressive in restricting the employee's ability to earn a living; and (3) not against public policy.
[70] In Virginia, courts weigh the (1) function, (2) geographic scope and (3) duration of the CNC against the employer's legitimate business interests to determine their reasonableness.
[73] Second, to enforce the CNC, a plaintiff must show that it is not unduly harsh or oppressive in restricting the employee's ability to earn a living.
Virginia does not favor restrictions on employment and therefore CNCs are generally held against public policy unless they are narrowly drafted as enumerated above.
[76] There are exceptions, like in Labriola v. Pollard Group, Inc., where the Washington Supreme Court invalidated a CNC not supported by independent consideration by strictly enforcing the pre-existing duty rule.