This year is starting like many others over the past decade or so: with a handful of noncompete bills.
We are already aware of 14 noncompete bills pending in seven states.
Five of the bills focus on healthcare workers, one relates to low-wage workers, two propose full bans, and two include fines.
They breakdown as follows:
- Connecticut: a bill to eliminate the prohibitions on noncompetes. This bill is super-interesting insofar as it highlights that the broad-brush public perception that all states are trying to restrict or ban noncompetes is a bit more nuanced. While there is no doubt that that the trend is to restrict the use of noncompetes (not to ban them), some states have been pushing back along the way — going back to 2011, when Georgia passed a constitutional amendment to make noncompetes more enforceable. (I did love the referendum, which Professor Matt Marx had called to my attention at the time: “Shall the Constitution of Georgia be amended so as to make Georgia more economically competitive by authorizing legislation to uphold reasonable competitive agreements?” Not quite the picture of clarity for informing people that they were voting to make noncompetes more enforceable.)
- Missouri has two bills:
- One bill would impose significant limitations on the use of noncompetes with physicians. Specifically, noncompetes could be used for physicians, but only if the physician is providing healthcare services in a clinical setting for an employer that is not a health care entity owned or operated by a nonprofit corporation. And, when such agreements are allowed (1) they must extend no further than 50 miles from the physician’s office and (2), taking a page out of Washington, D.C.’s playbook, they can last no longer than 365 days. That is a trap for the unwary insofar as a one-year noncompete would presumably be invalid every four years (in a leap year). The way the bill is written, it (presumably unintentionally) can be read to restrict the duration even during employment, meaning that if the physician works for the employer for 365 days, he or she would be free to leave without the constraints of a noncompete. I am sure, if this bill moves forward, that will be fixed.
- The other bill would ban noncompetes for physicians entirely.
- New Hampshire: a bill “prohibiting nursing agencies from including non-compete clauses in contracts with health care entities.”
- New Jersey: a bill placing restrictions on the use of physician noncompetes. Interesting about this bill, it expressly allows physician noncompetes in several different circumstances, including where the physician was paid a $50,000 signing bonus to join the practice or hospital.
- New Jersey also has a bill to ban training repayment agreements. This is another misplaced fad we’re seeing in noncompete-adjacent legislation. Once again, well-intentioned legislators are being sold a cure that is worse than the disease. More on that at another time.
- New York has two state bills and three bills in New York City:
- One bill tackles noncompetes through adding monopsonies (single buyers that substantially control a market) to its antitrust law. It affects noncompetes primarily through this series of provisions:
It shall be unlawful for any person or persons with a dominant position in the conduct of any business, trade or commerce, in any labor market, or in the furnishing of any service in this state to abuse that dominant position. This paragraph shall not apply to a person or persons that are independently owned and operated and employ one hundred or fewer persons.
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In labor markets, abuse may include, but is not limited to, imposing restraints, direct or indirect, on the mobility of workers between employers or on the ability of workers to seek employment from multiple employers . . .
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Any restraint on a person’s ability to engage in a profession, trade, or business of any kind, including any restraint on a person’s ability to employ another person;
- Another bill proposes something that seems to track the Massachusetts approach. Essentially, it follows the fairness and transparency trends harkening back to Oregon’s 2007 change and President Obama’s Call to Action on noncompetes and incorporates many of the additional concepts in the Massachusetts’ 2018 law. For example, it would require noncompetes (and other restrictive covenants) to be signed by both parties and that the employee be told they have a right to consult counsel. It would also prohibit enforcement where employees are let go without cause — though unlike in Massachusetts, it defines those circumstances. And, although it requires companies to provide advance notice that a noncompete will be required, it goes far beyond anything reasonable, requiring a minimum of 30 business days, i.e., about six weeks — even if the employee wants to start immediately. It also imposes fines for failure to comply.
- In Massachusetts, we had not considered how to handle that situation when we used 10 business days as our standard. Illinois addressed the issue in their 2022 noncompete law, expressly allowing for an employee to waive the notice period. New York, in contrast, doubled down on the mistake of not (expressly) allowing for flexibility.
- Interestingly, the New York bill would also eliminate no-service/nonaccept agreements (agreements prohibiting employees from accepting business from clients or servicing clients without any solicitation by the employee) and agreements restricting employees from working with former colleagues (whether by use of no-hire agreements or related restrictions).
- One of the bills proposed by the NYC council follows the FTC’s original approach: noncompete ban, coupled with a requirement to rescind, and a prohibition (probably unconstitutional) on telling an employee that they have a noncompete. It also imposes fines for failure to comply
- Another of the NYC bills prohibits noncompetes for “low-wage workers” (meaning “a clerical and other worker as defined in subdivision 7 of section 190 of the labor law”) unless, “at the beginning of the process for hiring such employee, such employer disclosed in writing that they may be subject to such a covenant.”
- The other pending NYC bill would require employers to pay freelance workers during the noncompete’s restricted period.
- Another bill proposes something that seems to track the Massachusetts approach. Essentially, it follows the fairness and transparency trends harkening back to Oregon’s 2007 change and President Obama’s Call to Action on noncompetes and incorporates many of the additional concepts in the Massachusetts’ 2018 law. For example, it would require noncompetes (and other restrictive covenants) to be signed by both parties and that the employee be told they have a right to consult counsel. It would also prohibit enforcement where employees are let go without cause — though unlike in Massachusetts, it defines those circumstances. And, although it requires companies to provide advance notice that a noncompete will be required, it goes far beyond anything reasonable, requiring a minimum of 30 business days, i.e., about six weeks — even if the employee wants to start immediately. It also imposes fines for failure to comply.
- South Carolina has two bills:
- Washington has two bills:
Noncompete Legislation in Context
My paralegal, Erika Hahn, and I have been tracking state noncompete legislation at least for the past seven or eight years. As I have previously explained, contrary to popular belief, noncompete reform did not just become de rigueur because of the FTC’s now-nearly-dead noncompete rule. Rather, noncompete legislation has been au courant for about a decade.
The momentum in legislation gained steam following the Jimmy John’s debacle in 2014, the first federal noncompete bills in 2015, and President Obama’s Call to Action on noncompetes in 2016. The FTC’s rule was a late entrant.
For a chronology of the changes in laws before this year, see Changes in noncompete laws since 2011. As will be clear, relatively few changes preceded Jimmy Johns, and then all of the sudden, there was a flurry. Indeed, in the three years before Jimmy John’s, there were only two changes; in the three years after, there were 14. And the momentum has built upon itself over time.
Further, focusing on bills themselves (as opposed to enacted legislation), the FTC’s noncompete rule was issued on April 23, 2024. It was then published on the Federal Register on May 7, 2024, and was set to become effective on September 4, 2024. But in 2023, the year before any of that happened, there were already 98 noncompete bills under consideration in 35 states in 2023. Indeed, the state legislative activity was already at that same level — 98 noncompete bills in 29 states — by 2022, i.e., the year before the FTC even announced its Notice of Proposed Rulemaking to ban noncompetes on January 5, 2023.
And that trend was building on prior years. In 2021, the year we first started keeping the statistics, there were 66 noncompete bills in 26 states.
So, to those who say that the momentum to restrict (or ban) noncompetes resulted from the FTC’s activities, that’s not quite right. While the FTC’s noncompete rule certainly got a lot of press attention, it did not affect the state legislative activity. In contrast, the rule certainly created a lot of confusion and caused a lot of companies to spend a lot of money on lawyers, all for naught (so it seems).
Firm resources:
We know how hard it is to keep up with the ever-changing laws and requirements around the country for how you can protect company’s trade secrets, customer goodwill, and the integrity of your workforce. To help, we have created the following resources (available for free):
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| 50-State Noncompete Law Chart — summarizing the noncompete laws in each state and DC — the first of its kind and regularly updated (downloadable) 50-State and Federal Trade Secret Law Chart — comparing DTSA and trade secrets laws nationally to the Uniform Trade Secrets Act (downloadable) |
 | Chart of Noncompete “Low-Wage” Thresholds and Criteria — providing each state’s minimum compensation thresholds and other criteria for using noncompetes and other restrictive covenants (downloadable) |
 | Notice requirements summary chart — providing summary of each states’ (plus D.C.’s) notice requirements related to noncompetes and other restrictive covenants (downloadable) |
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Changing Trade Secrets | Noncompete Laws — dedicated blog page providing a current, detailed summary of the changing landscape of trade secret and noncompete laws around the country, state by state and at the federal level
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 | Trade secret protection plan strategy and checklist — providing a starting point for companies to update their processes for protecting trade secrets, other confidential information, and customer relationships. |
| Videos | Ten Minute Trade Secret Training SeriesTM and “Basics” Videos |
 | The Exit Plan: Being a Good Leaver — designed for employees before they decide to leave a job, and is perhaps the most critical, as it is the first chance for employees to understand how to prevent liability before the risk arises. For companies, have your job candidates watch it.
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| The Entrance Plan: Preparing for the Cease and Desist Letter at Your New Job — designed for employees as soon as they receive — or expect to receive — a cease and desist letter from their prior employer, so they know how to avoid making critical, difficult-to-fix mistakes. |
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| Avoiding Mistakes When Starting A New Job — designed for companies and employees to know the steps an employee should take when starting a job to ensure they comply with their post-employment obligations. |
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| Protecting Trade Secrets While Working Remotely — designed for companies and employees to learn how to identify and protect against the common risks to trade secrets in a remote (or hybrid remote) work environment. |
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| Fair Competition Law Basics – What is a Trade Secret? — explaining what a trade secret is through easy-to-understand examples. |
We hope you find all of these resources useful. More will be coming.
And please note, we are grateful for all of the input we’ve received over the years. We welcome any suggestions for improvements that you may be willing to share.
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*A huge thank you to Erika Hahn for all of her extraordinary help in tracking and monitoring all of the recent noncompete and trade secret legislative and caselaw developments.