In 2008, Oregon was the first state to expressly ban noncompetes for low-wage workers. That exemption was (and remains) based on the median family income for a four-person family. Accordingly, noncompetes are banned for anyone at or below that level in Oregon (although there is an exception for employees who are paid statutorily prescribed amounts during the restricted period). Conversely, anyone earning more than that amount may be subject to a noncompete (assuming the other statutory criteria are satisfied).
In 2016, the Obama Administration issued a Call to Action, suggesting that states consider amending their noncompete laws to follow suit and ban noncompetes for “workers under a certain wage threshold . . . .” The thresholds were not defined, but instead, left to the states to decide.
Eight states have since done so: Illinois (in 20161), Massachusetts (in 2018), Maine (in 2019), Maryland (in 2019), New Hampshire (in 2019), Rhode Island (in 2020), Virginia, (in 2020), and Washington (in 2020).
The criteria for who qualifies as a low-wage worker varies by state. The standards for each are in the chart below.
As indicated above, while Massachusetts and Rhode Island have based their criteria on the Fair Labor Standards Act (which has minimum dollar criteria coupled with job duty criteria), the other states have used just a minimum dollar threshold (although Oregon has a separate section in the statute that specifically addresses job criteria).
Given that the federal government is considering noncompete legislation (see President-elect Biden’s plans and prior Congressional and regulatory efforts) and many other states are considering modifying their noncompete laws, perhaps a uniform standard will emerge over time. Of course, to the extent based on dollar thresholds, it bears noting that different dollar thresholds can have significantly different implications in different locations, depending on the region’s prevailing cost of living and median income.
We will keep you posted if and as things develop.
Photo credit: Peggy und Marco Lachmann-Anke