Since last month’s update, we’ve added 8 new state bills, 3 new states, and 1 new federal bill.
So far this year, five of the bills have already failed, one bill in Kentucky has passed, and one bill in Maryland is awaiting the Governor’s signature. (The Kentucky and Maryland bills are discussed below.)
Reminder: Last year, there were 98 noncompete bills in 29 states, plus D.C. and seven federal bills. As previously noted, given that it’s still early in the legislative cycle (most sessions are two years, and only started this year), we are well on our way to surpassing last year’s numbers — despite the FTC’s proposed ban to wipe out all employee noncompetes and render all of this moot.
On the state side, we’re up to 73 noncompete bills in each the following 27 states (new states are bolded; states with dead bills are red; states with bills that have passed are green):
- New Hampshire
- New Jersey
- New York
- Rhode Island
- South Carolina
- Utah (2 bills)
- West Virginia
Before turning to the specific developments, it’s worth noting that 10 of the bills that have been pending this session include low-wage thresholds or criteria, 9 propose a complete ban, and 27 relate to the healthcare industry.
Turning then to the developments…
California wins for the state that keeps people up at night.
Although California does not have a new bill, one of its bills (AB.747) has passed the Assembly and been referred to the Committee on the Judiciary. As previously noted, the bill would amend require that for the sale-of-business exception to the ban on noncompetes to apply, the seller must own at least a 10 percent interest and narrow Labor Code § 925 (which allows employees to agree to non-California law and forum if they are in fact represented by counsel in the negotiation) to not apply “if the counsel is paid for by, or was selected based upon the suggestion of, the employee’s employer.” (The bill would have also added a financial penalty for violating the noncompete ban.)
Amendments added along the way include the following:
- The selection of non-California law and forum need to be have been designed by the employee at the option of the employee.
- “An employer shall not impose any penalty, fee, or cost on an employee or independent contractor for terminating the employment relationship, including, but not limited to, replacement hire fee, retraining fee, reimbursement for immigration or visa-related costs, liquidated damages, lost goodwill, or lost profit.”
- “An employer shall not require an employee to reimburse, pay, or repay, including upon termination of employment, costs for any training related to the employee’s responsibilities and duties related to their employment.”
- “[A] contract or contract term that requires a debtor to pay for a debt if the debtor’s employment or work relationship with a specific employer is terminated is a contract restraining a person from engaging in a lawful profession, trade, or business under this chapter.” (There are a few limited exceptions.)
- The Labor Commissioner is authorized (and required) to enforce the statute.
It’s also important to note that if passed, the bill would also make it “cause for suspension, disbarment, or other discipline for any licensee to enter into with an employee, prospective employee, or former employee, present an employee, prospective employee, or former employee as a term of employment, or attempt to enforce any employee contract or other agreement that violates” the attorney licensure statute.
Georgia, with a bill that was largely dead on arrival, wins for fasted to kill a bill. In addition to unrelated changes, the bill (which has in fact died) primarily would have banned all restrictive covenants for “any physician, nurse, or other healthcare staff or contractor providing healthcare services” at a hospital.
Kentucky, having quickly introduced and passed a new law that amends a law passed just last year, wins for fastest to correct a mistake. As you may recall, Kentucky passed a law last year that prohibited healthcare services agencies from “[r]estrict[ing] in any manner the employment opportunities of any direct care staff that is contracted with or employed by the agency including but not limited to . . . contract non-compete clauses.” This year’s law amends that by law by making clear that it applies only to temporary staff, not “to contracts with permanent direct care staff or with an assisted living community, a long-term care facility, or a hospital for the placement of permanent direct care staff.”
Louisiana, with one new bill, wins for least interesting: The bill would render unenforceable all noncompetes between a healthcare provider and an employing healthcare provider entity, but only following an acquisition of the employing entity.
Maine, with a bill to ban all noncompetes, ties for latest states to join the “let’s ban noncompetes” party.
Maryland, with a bill sitting on the Governor’s desk waiting for approval, wins for most recent to legislatively update its low-wage threshold.
As you may recall, Maryland was a (relatively) early adopter of a low-wage threshold for noncompetes (and contractual conflict of interest provisions). That was 2019. If passed, the bill will set new minimum wage thresholds (which will increase annually and vary by size of the employer) and will change existing low-wage thresholds for the use of noncompetes to cover employees earning less than 150 percent of the minimum wage (simultaneously eliminating the $31,200 annual salary threshold).
Given that the bill is likely to become law, it is important to note that it will take effect on October 1, 2023, and the threshold for 2023 will be $19.88 per hour ($13.25/hour x 1.5) generally, and $19.20 per hour ($12.80/hour x 1.5) for small employers (i.e., those employing 14 or few employees).
Those thresholds will increase (as set out in the statute) until each reaches $22.50 ($15/hour x 1.5). The increases will start in 2024, and will increase to $21/hour ($14/hour x 1.5) generally and $20.10 ($13.40/hour x 1.5) for small employers.
Michigan, with one new bill, wins again for most comprehensive: The bill would add advance notice and posting requirements; ban noncompetes for low-wage workers (defined as a minor or “138% of the last published federal poverty line for a family of 3 individuals”); establish presumptions; make the requirements of the statute non-waivable; prohibit choice of law clauses that would eliminate the protections of the statute; impose fines for violations; and entitle employees to legal fees if the agreement is found to be unenforceable or (like Washington) if it is reformed.
Missouri, with its eighth bill this session, retains its award for most noncompete bills. The new bill would prohibit healthcare facilities in Missouri from requiring a noncompete from any healthcare professional in a nonresearch role.
New Hampshire wins nothing. It did not introduce a new bill; it only killed its earlier bill that would have banned noncompetes for employees contributing to a “free software project.”
Pennsylvania, with a new bill, wins for the low-wage threshold with the most options: The bill would ban noncompetes for low-wage employees, defined as those earning the greater of (1) “an hourly rate equal to the minimum wage required by the applicable Federal, State or local minimum wage law”; (2) “a wage 30% or more below the Pennsylvania median wage for all workers as calculated by the United States Department of Labor”; or (3) “$20 or less per hour.”
Rhode Island, with a bill to ban noncompetes, wins for most likely to follow Massachusetts then change course. Having adopted most of the 2018 Massachusetts exemptions (and some extras), Rhode Island now plans to ban all noncompetes, even when entered into in connection with the cessation of or separation from employment. Those banned noncompetes will also now apparently include “[c]ovenants not to solicit or transact business with customers, clients, or vendors of the employer,” which had previously been excluded from Rhode Island’s low-wage ban. Only noncompetes in the context of the sale of a business will be spared. Violations can result in punitive damages and attorneys’ fees.
West Virginia ties New Hampshire, also winning nothing. It also did not introduce a new bill; it only killed its earlier bill that would have banned noncompetes for employees contributing to a “free software project.”
New Mexico receives honorable mention: no noncompete bills, but it recently killed its bill to ban nonsolicitation agreements for healthcare practitioners.
We have a brand new bill on the federal side, one never seen before: Senators Klobuchar, Collins, Rosen, Tillis, King, Thune, Merkley, Capito, Coons, Paul, Durbin, Moran, Shaheen, Wicker, Smith, Marshall, Blumenthal, Cramer, and Boozman have introduced the Conrad State 30 and Physician Access Reauthorization Act, which primarily addresses immigration issues for physicians in underserved communities, but would also ban the use of noncompetes for those covered by the Act.
As a reminder, the other four federal bills are as follows:
(1) Senators Young and Murphy (along with the support of two other co-sponsors) filed the Workforce Mobility Act of 2023, again proposing a ban on all employee noncompetes (i.e., permitting sale of business noncompetes).
(2) Representative Scott Peters (along with the support of two other co-sponsors) filed the Workforce Mobility Act of 2023, which is the House version of the same re-proposed ban.
(3) Representative Claudia Tenney reintroduced her Ensure Vaccine Mandates Eliminate Non-Competes Act (the “EVEN Act”) “[t]o void existing non-compete agreements for any employee who is fired for not complying with an employer’s COVID-19 vaccine mandate, and for other purposes.”
(4) Senators Marco Rubio and Maggie Hansen reintroduced the Freedom to Compete Act. Like the prior versions, the bill would ban noncompetes for anyonenot exempt under the Fair Labor Standards Act of 1938 (29 U.S.C. 201, et seq.) — the approach taken first by Massachusetts and later by Rhode Island.
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Resources to help
We know first hand how hard it is to keep up with the ever-changing requirements around the country. To help, we have created the following resources (available for free):
- 50-State Noncompete Law Chart, the first of its kind and regularly updated (downloadable PDF);
- Chart of Noncompete “Low Wage” Thresholds and Criteria (downloadable PDF);
- Notice requirements summary chart, providing details for each of the 8 states (plus D.C.) that has notice requirements related to noncompetes (downloadable PDF);
- “Changing Trade Secrets | Noncompete Laws” (dedicated blog page) now provides a current detailed summary of the changing landscape of trade secret laws and noncompete laws around the country, state by state and at the federal level; and
- Trade secret and other legitimate business interest protection plan strategy and checklist.
We also have a 50-State and Federal Trade Secret Law Chart, providing a comparison of the trade secrets laws nationally to the Uniform Trade Secrets Act (downloadable PDF).
We hope you find all of these resources useful.
And please note that we are grateful for all of the input we’ve received over the years, and welcome any suggestions for improvements that you may be willing to share.
*A huge thank you to Erika Hahn for all of her extraordinary help in monitoring all of the bills filed around then country!