Changing Trade Secrets | Noncompete Laws

Changing Trade Secrets | Noncompete Laws

Hand WritingThe Changing Landscape of Trade Secrets Laws and Noncompete Laws Around the Country

We are currently updating and revamping this page to make it easier to use and navigate. Please note that most of the historical information has been temporarily removed and is in the process of being relocated to separate pages. 

For over two hundred years, trade secret laws and noncompete laws have been the product of state law. Since May 11, 2016, we have also had a federal private right of action for trade secret misappropriation under the Defend Trade Secrets Act of 2016. And, if some federal legislators have their way, there will be a federal noncompete law (see below).

These laws — especially noncompete laws — are in a constant state of flux, particularly in the past several years. As such, no surprise, we have 50 variations of each (really 52, when you factor in DC and federal bill).

On the noncompete side, as of now, only 3 states (California, Oklahoma, and North Dakota — no, Montana does not ban noncompetes) prohibit employee noncompetes altogether (see BRR’s 50-state summary chart), although that may change, as various legislatures have been considering a ban on employee noncompetes and significant other possible changes to existing laws.

Charts reflecting the differences among how each of the 50 states (plus D.C.) handle noncompetes and trade secrets are available here (noncompetes) and here (trade secrets). Note that these charts are updated as new developments arise.

Given how hard it can be to stay on top of the recent developments in each state (as well as at the federal level, not to mention international changes) and the absence of any aggregation of this information elsewhere, we have dedicated a separate page to the current status of developments in trade secrets laws and noncompete laws around the country.

While updates will continue regularly in our blog posts, this page is intended to serve as an ongoing resource for people to easily find all of the important developments in one place. Although the focus will be on the United States, important international developments will sometimes be included as well.

Actual changes in the laws – as opposed to bills being considered – and key dates and issues are indicated by bolded orange dates. (Various colors also used to indicate proposed bans, exemptions for low-wage workers (however defined) or medical personnel, and other issues of note.)

Please consider this page to be a work in progress, as the laws are ever-changing. So, please check back regularly. And, a huge thank you to Erika Hahn for all of her extraordinary help in tracking the bills.

Federal [Trade Secrets and Noncompetes]

CURRENT (2021)

On the noncompete sidePresident Biden has identified noncompete reform as part of his platform. The details are uncertain, but the stated policy is “to eliminate all non-compete agreements, except the very few that are absolutely necessary to protect a narrowly defined category of trade secrets . . . .”

On February 25, 2021, four Senators — Chris Murphy (D-Conn.), Todd Young (R-Ind.), Kevin Cramer (R-N.D.) and Tim Kaine (D-Va.) — introduced another version of the Workforce Mobility Act (S.843). Simultaneously, Congressman Scott Peters (D-CA-52) filed an analogue bill (H.R.1367) in the House. (For a detailed history, see Federal Noncompete Initiatives: When you can’t convince the states, ask the feds.) Although the text is not yet available, according to Senator Murphy’s websiteThe Workforce Mobility Act would:

    • “Narrow the use of noncompete agreements to include only necessary instances of a dissolution of a partnership or the sale of a business”;
    • “Place the enforcement responsibility on the Federal Trade Commission and the Department of Labor, as well as a private right of action”;
    • “Require employers to make their employees aware of the limitation on non-competes, as studies have found that non-competes are often used even when they are illegal or unenforceable. The Department of Labor would also be given the authority to make the public aware of the limitation”; and
    • “Require the Federal Trade Commission and the Department of Labor to submit a report to Congress on any enforcement actions taken.”

In essence, this would be a complete ban on all employee noncompetes.

PRIOR YEARS:

On the trade secrets side, the Defend Trade Secrets Act of 2016 (commonly referred to as the “DTSA”), a bill to create a federal private right of action for the protection of trade secrets, was – with some amendments, including in connection with the inevitable disclosure doctrine – reported out of the Senate Judiciary Committee at the end of January 2016. Bloomberg BNA has a terrific summary here: Senate Judiciary Committee OKs Federal Trade Secret Bill.

Testimony was taken back in December 2015, and is available here. Persons appearing to testify were: Karen Cochran, Chief Intellectual Property Counsel at E.I. DuPont de Nemours and Company, Tom Beall Vice President and Chief Intellectual Property Counsel at Corning Incorporated, James Pooley, a leading trade secrets expert, and Sharon Sandeen, Professor of Law at Hamline University School of Law. In addition, a letter was submitted in lieu of live testimony by a number of trade secrets practitioners (myself included) around the country. That letter is available here.

On March 7, 2016, the Senate Committee on the Judiciary reported favorably on the Defend Trade Secrets Act of 2016 bill (S. 1890) and issued a report detailing its reasons.

On April 4, 2016, the Senate voted unanimously to approve the DTSA.

On April 20, the House Judiciary Committee voted to approve the DTSA without amendment. As Reuters has reported, “The House version of the bill has more than 120 sponsors, but the House Judiciary Committee has not yet considered it and it was not clear whether it would act in coming months.”

On April 27, 2016, the United States House of Representatives joined the Senate in voting in favor of the DTSA. Not quite unanimous like the Senate, but almost, the House voted 410-2 to approve.

On May 11, 2016President Obama signed the DTSA into law.

The DTSA “has been described as the ‘most significant expansion of federal law in intellectual property since the Lanham Act in 1946.’” See Congress May Be About to Shake Up Trade Secret Law: Is That a Good Thing?

Given that so much has been written about it, I will not repeat the details until something new develops. In the meantime, however, the House Judiciary Committee has a detailed report (here), my post (Defend Trade Secrets Act and What it Means) is hereBen Fink’s summary of the amendments is in Federal Trade Secrets Law Takes Another Step Toward Reality, and Dennis Crouch’s What you need to know the Amended Defend Trade Secrets Act on PatentlyO.

On June 28, 2017 (which was about a year ahead of time), Timothy Lau, on behalf of the Federal Judicial Center, produced the best practices report mandated by the the DTSA: Trade Secret Seizure Best Practices Under the Defend Trade Secrets Act of 2016. Definitely worth a read!  

Also on the trade secrets (encryption) side, in the spring of 2016, the Senate Intelligence Committee had been working on a bill (the Compliance with Court Orders Act of 2016) to authorize court orders requiring companies to assist the government to gain access to encrypted data. The bill received heavy criticism and ultimately died.

On the noncompete side,

The first federal legislative efforts to restrict noncompetes trace back to three bills filed in 2015. The first (the “Mobility and Opportunity for Vulnerable Employees Act” or “MOVE Act“), filed by Senator Chris Murphy (D-CT) and co-sponsored by then-Senator Franken and Senators Elizabeth Warren (D-MA), Richard Blumenthal (D-CT), and Sheldon Whitehouse (D-RI), sought to prohibit the use of noncompetes for “low-wage employees,” i.e., employees earning the greater of (subject to inflation) $15 per hour or the applicable state or local minimum wage rate or $31,200 per year, but excluding any salaried employee earning (subject to inflation) more than $5,000/month for 2 consecutive months. The other two were the “Limiting the Ability to Demand Detrimental Employment Restrictions Act” (the “LADDER Act”), which was very similar to the MOVE Act (but limited somewhat the definition of the employees that are considered low-wage employees), and the “Freedom for Workers to Seek Opportunity Act” (“FWSOA”), which although not having quite as catchy an acronym as the MOVE Act or the LADDER Act, won on creativity in that it sought to ban the use of noncompetes for grocery store workers (only). None of these bills passed.

In April 2018, Senators Elizabeth Warren (D-MA), Chris Murphy (D-CT), and Ron Wyden (D-OR) introduced the Workforce Mobility Act of 2018 (S. 2782) to impose a federal ban on the use of employee noncompetes. A companion bill (H.R. 5631) was introduced in the House by Representatives Joseph Crowley (D-NY), Linda Sanchez (D-CA), Mark Pocan (D-WI), Keith Ellison (D-MN), Jerrold Nadler (D-NY), and David Cicilline (D-RI), who were later joined by Janice Schakowsky (D-IL), and Alan Lowenthal (D-CA). The two bills were largely the same, although they differed in some respects, including that the Senate version instructed the Secretary of Labor to enforce the law and provided for civil penalties, while the House bill added that such contracts violate antitrust laws absent a showing by the employer to the contrary. That legislative session ended without action on either bill.

In January 2019Senator Marco Rubio introduced the “Freedom to Compete Act” to amend the Fair Labor Standards Act of 1938 (29 U.S.C. 201, et seq.) to ban noncompetes for most nonexempt workers. And, in October 2019, Senator Chris Murphy (D-CT) and Senator Todd Young (R-IN) filed the Workforce Mobility Act to ban the use of virtually all employee noncompete agreements. Neither of these bills passed.

During late 2019 and early 2020, the issue went before the Federal Trade Commission.

Related to noncompetes, though not technically a noncompete, other federal legislation has been proposed to addresses other restrictive covenants (also typically the province of the states): In March 2018Senator Cory Booker (D-NJ) and Senator Elizabeth Warren (D-MA) introduced the End Employer Collusion Act (S.2480), which would have made it unlawful for two or more employers to enter an agreement prohibiting one of them from soliciting or hiring the other’s employees or former employees. The bill allowed aggrieved individuals to bring a civil action for actual and punitive damages and attorney’s fees against an entity that enters into, or threatens to enforce, an agreement that violates the act. The bill also would have granted the Federal Trade Commission the power to enforce. The bill was immediately referred to the Committee on Health, Education, Labor, and Pensions. A companion bill (HB 5632) was introduced in April 2018, by Representative Keith Ellison (D-MN), Representative Jerrold Nadler (D-NY), Representative David Cicilline (D-RI), Representative Joseph Crowley (D-NY), and Representative Steve Cohen (D-TN) and was immediately referred to the Committee on Education and the Workforce, and in addition to the Committees on Energy and Commerce, and the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned. In May 2018, it was referred to the Subcommittee on Regulatory Reform, Commercial And Antitrust Law. Both bills ultimately died.

State Changes

CURRENT (2021)

Connecticut [Noncompetes]

The bill is pending before the Joint Committee on Public Health.

  • SB.117 (An Act Concerning Homemaker And Companion Services): Introduced on January 12, 2021, the bill would “modify provisions on covenants not to compete between an individual and a homemaker-companion agency, registry or home health aide agency.” What does it mean? Unclear at this point, as the bill provides no details whatsoever. However, it was introduced by Senator Saud Anwar, who also proposed SB.99 (above) and there’s another bill (SB.663, below) to remove the ban for homemakers and companions, a bill (SB.906, below) that would maintain the existing ban on noncompetes for persons providing “homemaker, companion or home health services,” and a bill (SB.879, below) to allow nonsolicitation (customer and vendor) and no-recruit agreements for homemaker-companion agencies, registries, and home health aide agencies.

The bill is pending before the Joint Committee on Public Health.

The bill is pending before the Joint Committee on Public Health.

  • SB.663 (An Act Concerning Homemakers And Companions And Noncompete Provisions):  Introduced on January 28, 2021, the bill would reverse the ban on noncompetes for “homemakers and companions.” Specifically, the bill says, “Be it enacted . . . That the general statutes be amended to eliminate the prohibition on noncompete provisions in private employment contracts for homemakers and companions.”

The bill is pending before the Joint Committee on Labor and Public Employees.

  • HB.6285 (An Act Concerning Noncompete Agreements): Introduced on January 29, 2021, the bill seeks to “establish statutory standards for reasonable noncompete agreements.” Specifically, seemingly drawing inspiration from the Massachusetts Noncompetition Agreement Act, the bill would require that: 
    • a noncompete must “be written, signed by the employer and employee”;
    • the noncompete “state that the employee has a right to consult with counsel prior to signing”;
    • “the employer provide notice of the agreement to the employee,” which
      • if the employee is required to sign the agreement “prior to beginning employment” (strange, but presumably meaning at the commencement), must be given before (i.e., not with) a formal offer or “ten days prior to the start of employment, whichever comes first”; and
      • if the agreement is provided “during employment,” must be given “not less than ten business days before the agreement becomes effective”; and
    • a noncompete entered “during employment” must “be supported by consideration other than continued employment.” 

The bill is pending before the Joint Committee on Labor and Public Employees.

  • HB.6379 (An Act Concerning Workers’ Rights): Introduced on February 3, 2021, the bill would establish various standards for noncompete agreements entered into on or after July 1, 2021, and ban noncompetes in certain circumstances. Specifically, the bill would:
    • Permit noncompetes that are (1) limited to one year; (2) “necessary to protect a legitimate business interest of the employer”; (3) “reasonably limited in time, geographic scope and employment restrictions as necessary to protect such business interest”; and (4) “consistent with . . . public policy.”
    • Permit noncompetes for up to two years if “the employer agrees to continue to compensate the employee with the employee’s base salary and benefits for a period of not less than one year following termination of employment.”
    • Require noncompetes to “(1) be provided to the employee not less than ten business days prior to the date of signing; (2) expressly state that the employee has the right to consult with counsel prior to signing; and (3) be signed by the employee and the employer.”
    • Ban noncompetes under four circumstances:
      • when the noncompete expires and is not renewed in accordance with the requirement that “prior to their expiration, the employer makes a bona fide offer to review the contract on the same or similar terms and conditions” (unless the agreement is “made in anticipation of a sale of the good will of a business or all of the seller’s ownership interest in a business, or as part of a partnership or ownership agreement”); 
      • when used for employees who are paid less than “compensation at an hourly rate of more than twice the minimum fair wage” (i.e., $20.20 per hour currently);
      • when the employer terminates the employment (without an express carve-out for termination for misconduct); and
      • when the employee terminates the employment “for good cause attributable to the employer.” (“Good cause” is undefined in the statute.)

The bill is pending before the Joint Committee on Labor and Public Employees.

  • SB.906 (An Act Concerning Non-compete Agreements): Introduced on February 18, 2021, the bill would create comprehensive requirements related to noncompetes “entered into, renewed or extended on or after July 1, 2021.” Specifically, the bill would: 
    • Permit noncompetes (excluding nonsolicitation agreements, no-recruit agreements, nondisclosure agreements, and no-reapply agreements) that meet all of the following requirements:
      1. the restriction is limited to one year — unless “the worker is compensated with the worker’s base salary and benefits, minus any outside compensation, for the entire period of such covenant,” in which case the restriction may last up to two years;
      2. the restriction is “necessary to protect a legitimate business interest of the employer” (i.e., trade secrets, other confidential information, and “an interest in preventing solicitation of the employer’s customers”) where “such business interest could not be reasonably protected via less restrictive means, including, but not limited to, a nondisclosure agreement, nonsolicitation agreement, or reliance on the protections afforded by” the Connecticut Uniform Trade Secrets Act;
      3. the “covenant is no more restrictive than necessary to protect such business interest in terms of the covenant’s duration, geographic scope, type of work and type of employer” — and the agreement “shall be presumed entirely unenforceable” if the “covenant applies to geographic areas in which an employee neither provided services nor had a material presence or influence within the last two years of employment, or . . . applies to types of work that the employee did not perform during the last two years of employment . . . .”
      4. the “worker is an exempt employee earning monetary compensation of more than three times the minimum fair wage as defined in section 31-58 of the general statutes [(i.e., $30.30 per hour currently)], or such worker is an independent contractor earning monetary compensation of more than five times said minimum fair wage” (i.e., $50.50 per hour currently);
      5. “the written text of such covenant is provided to the worker no later than ten business days prior to the earlier of (A) the deadline for acceptance of the offer of employment or the offer to enter into an independent contractor relationship, or (B) the date of signing of such covenant”;
      6. the “covenant expressly states that the worker has the right to consult with counsel prior to signing”;
      7. the “covenant is signed by the worker and the employer or contractor separately from any other agreement underlying the relationship”;
      8. “if such covenant is added to an existing employment or independent contractor relationship, it is supported by sufficient consideration independent from continuation of the employment or contractor relationship”;
      9. “such covenant does not require the worker to submit to adjudication in a forum outside of Connecticut, or otherwise purport to deprive the worker of the protections or benefits of this section”;
      10. the “covenant does not unreasonably interfere with the public’s interests and s consistent with this section, other laws of this state and public policy”; and
      11. the noncompete is “entered into, extended or renewed on or after July 1, 2021.”
    • Permit noncompetes “predicated on ownership interest” unless “the employment or contractual relationship is terminated by the employer or contractor; or (2) the employment or contractual relationship is terminated by the worker for good cause attributable to the employer or contractor.”
    • Maintain the existing ban on noncompetes for persons providing “homemaker, companion or home health services” (Conn. Gen. Stat. § 20-681) and for “broadcast employees” (CT Gen Stat § 31-50b).
    • Prohibit most anti-moonlighting covenants for employees unless “unless the worker is an exempt employee earning monetary compensation of more than three times the minimum fair wage . . . or the worker is an independent contractor earning monetary compensation of more than five times said minimum fair wage” — but the duty of loyalty and laws preventing conflicts of interest still apply.
    • Adopt the red pencil rule.
    • Require the payment of actual damages or $5,000 — as well as attorneys’ fees, expenses, and court costs — to an employee who is subject to a noncompete (or anti-moonlighting covenant) that violates the terms of the Act.
    • Ban noncompetes for security guards (classification 33-9032 of the DOL’s standard occupational classification system) to the extent the agreement was “entered into, renewed or extended on or after October 1, 2007, and before July 1, 2021.”
    • Establish an enforcement mechanism, permitting the Connecticut Attorney General to enforce the Act.

The bill is pending before the Joint Committee on Labor and Public Employees.

  • SB.879 (An Act Concerning Nonsolicitation Agreements In The Home Health Services Industry): Introduced on February 19, 2021, the bill would allow nonsolicitation (customer and vendor) and no-recruit agreements for homemaker-companion agencies, registries, and home health aide agencies, provided that they are limited to one year. Instructively, this language, if passed, could be read to expand the definition of “covenant not to compete” (as used in other Connecticut legislation) to cover these other types of restrictive covenants.

The bill is pending before the Joint Committee on Commerce.

  • SB.974 (An Act Concerning Homemaker And Companion Services): Introduced on March 22, 2021, the bill (in relevant part) would modify Connecticut’s existing noncompete ban for homemaker and companion services, which currently bans “any contract or agreement that restricts the right of an individual to provide homemaker, companion or health services (1) in any geographic areas of the state for any period of time, or (2) to a specific individual.” Specifically, if passed, the bill would narrow the definition (and, therefore, the ban) by covering only “any contract or agreement between an individual and a homemaker-companion agency, registry or provider of home health services prohibiting such individual from providing homemaker, companion or home health services to a specific individual, or for a competing homemaker-companion agency, registry or provider of home health services, but does not include any private contract or agreement not to solicit or accept solicitation from any client, employee or vendor of such homemaker-companion agency, registry or provider of home health services, provided such contract or agreement shall be limited in duration to not more than six months.”

The bill is pending before the Joint Committee on Public Health.

(a) For purposes of this section: (1) “Covenant not to compete” means any provision of an employment or other contract or agreement that creates or establishes a professional relationship with a physician and restricts the right of a physician to practice medicine in any geographic area of the state for any period of time after the termination or cessation of such partnership, employment or other professional relationship; (2) “physician” means an individual licensed to practice medicine under this chapter; and (3) “primary site where such physician practices” means (A) the office, facility or location where a majority of the revenue derived from such physician’s services is generated, or (B) any other office, facility or location where such physician practices and mutually agreed to by the parties and identified in the covenant not to compete.

(b) (1) A covenant not to compete that is entered into, amended, extended or renewed prior to July 1, 2021, is valid and enforceable only if it is: (A) Necessary to protect a legitimate business interest; (B) reasonably limited in time, geographic scope and practice restrictions as necessary to protect such business interest; and (C) otherwise consistent  with the law and public policy. The party seeking to enforce a covenant not to compete shall have the burden of proof in any proceeding.

(2) A covenant not to compete that is entered into, amended, extended or renewed on or after July 1, 2016, shall not: (A) Restrict the physician’s competitive activities (i) for a period of more than one year, and (ii) in a geographic region of more than fifteen miles from the primary site where such physician practices; or (B) be enforceable against a physician if (i) such employment contract or agreement was not made in anticipation of, or as part of, a partnership or ownership agreement and such contract or agreement expires and is not renewed, unless, prior to such expiration, the employer makes a bona fide offer to renew the contract on the same or similar terms and conditions, or (ii) the employment or contractual relationship is terminated by the  employer, unless such employment or contractual relationship is terminated for cause.

(3) Each covenant not to compete entered into, amended or renewed on and after July 1, 2016, until June 30, 2021, shall be separately and individually signed by the physician.

(4) On and after July 1, 2021, no employment, partnership or ownership contract or agreement entered into, amended or renewed shall contain a covenant not to compete and each covenant not to compete entered into, amended or renewed on and after said date shall be void and unenforceable. Any physician who is aggrieved by a violation of this subdivision may bring a civil action in the Superior Court to recover damages, together with court costs and reasonable attorney’s fees, and for such injunctive and equitable relief as the court deems appropriate.

(c) The remaining provisions of any contract or agreement that includes a covenant not to compete that is rendered void and unenforceable, in whole or in part, under the provisions of this section shall remain in full force and effect, including provisions that require the payment of damages resulting from any injury suffered by reason of termination of such contract or agreement.

The bill is pending before the Joint Committee on Public Health.

Georgia [Noncompetes]

The bill is pending before the House Industry and Labor Committee.

Illinois [Noncompetes]

  • HB.789 Amendment (An amendment to replace the entirety of the text of HB.789): Introduced on January 8, 2021, to amend the Illinois Freedom to Work Act by expanding its scope beyond low-wage workers (and raising the minimum compensation thresholds of employees for whom noncompetes, and now nonsolicits, can be used), prohibiting enforcement of noncompetes for someone terminated or furloughed because of COVID-19 or similar events, requiring specified advance notice, adding an “adequate consideration” requirement (as well as otherwise typical standards), and requiring payment of attorney’s fees for a prevailing employee.Specifically, the bill (which would apply only to agreements entered into after its effective date) would:
    • Remove the definition of “low-wage employee” from the statute and the reference to “low-wage” from the definition of a “covenant not to compete,” thereby expanding the scope of the statute.
    • Add to the definition of “covenant not to compete” that it includes “an agreement between an employer and an employee, entered into after the effective date of this amendatory Act . . . , that by its terms imposes adverse financial consequences on a former employee if the employee engages in competitive activities after the termination of the employee’s employment with the employer,” but excludes “(i) a covenant not to solicit [(separately defined to include both typical nonsolicits and no-recruit covenants)], (ii) a confidentiality agreement or covenant, (iii) a covenant or agreement prohibiting use or disclosure of trade secrets or inventions, (iv) invention assignment agreements or covenants, (v) a covenant or agreement entered into by a person purchasing or selling the goodwill of a business or otherwise acquiring or disposing of an ownership interest, (vi) clauses or an agreement between an employer and an employee requiring advance notice of termination of employment, during which notice period the employee remains employed by the employer and receives compensation, or (vii) agreements by which the employee agrees not to reapply for employment to the same employer after termination of the employee.”
    • Prohibit the use of noncompetes for anyone earning — or expected to earn — a minimum of $75,000 (increasing to $80,000 by 2027, $85,000 by 2032, and $90,000 by 2037) in annualized earnings. (“Earnings” are defined to include virtually all compensation received by the employee from the employer.)
    • Adopt the totality of the facts and circumstances test from the 2011 Illinois Supreme Court decision in Reliable Fire Equipment Co. v. Arredondo as the standard for determining the existence of a legitimate business interest, including the following factors that may be considered: “the employee’s exposure to the employer’s customer relationships or other employees, the near-permanence of customer relationships, the employee’s acquisition, use, or knowledge of confidential information through the employee’s employment, the time restrictions, the place restrictions, and the scope of the activity restrictions.” The bill is also express that “[e]ach situation must be determined on its own particular facts. Reasonableness is gauged not just by some but by all of the circumstances. The same identical contract and restraint may be reasonable and valid under one set of circumstances and unreasonable and invalid under another set of circumstances.”
    • Require the noncompete is supported by “adequate consideration,” which is defined as: “(1) the employee worked for the employer for at least 2 years after the employee signed an agreement containing a covenant not to compete or a covenant not to solicit or (2) the employer otherwise provided consideration adequate to support an agreement to not compete or to not solicit, which could consist of the period of employment plus additional consideration or merely other consideration adequate by itself.”
    • Prohibit the use of nonsolicits (both customers, etc., nonsolicits and no-recruit agreements) for anyone earning — or expected to earn — a minimum of $45,000 (increasing to $47,500 by 2027, $50,000 by 2032, and $52,500 by 2037) in annualized earnings.
    • Render a noncompete or nonsolicit “illegal and void unless (i) the employer advises the employee in writing to consult with an attorney before entering into the covenant and (ii) the employer provides the employee with a copy of the covenant at least 14 calendar days before the commencement of the employee’s employment or the employer provides the employee with at least 14 calendar days to review the covenant.”
    • Render a noncompete “void and illegal for any employee who an employer terminates or furloughs as the result of business circumstances or governmental orders related to the COVID-19 pandemic, or under circumstances that are similar to the COVID-19 pandemic, unless enforcement of the covenant not to compete includes compensation equivalent to the employee’s base salary at the time of termination for the period of enforcement minus compensation earned through subsequent employment during the period of enforcement.”
    • Permit something similar to the so-called “purple pencil” approach by saying that “extensive judicial reformation . . . may be against the public policy of this State” (emphasis added), but providing the following detail: “In some circumstances, a court may, in its discretion, choose to reform a covenant not to compete or a covenant not to solicit rather than hold such covenant unenforceable. Factors which may be considered when deciding whether such reformation is appropriate include the fairness of the restraints as originally written, whether the original restriction reflects a good-faith effort to protect a legitimate business interest of the employer, the extent of such reformation, and whether the parties included a clause authorizing such modifications in their agreement.”

The bill is pending before the House Labor & Commerce Committee.

The bill is pending before the House Labor & Commerce Committee.

  • SB.1938 (An Act concerning employment): Introduced on February 26, 2021, would ban all employee noncompetes with immediate effect. (SB.1938 is the Senate analogue to H.3449.)

The bill is pending before the Senate Labor Committee.

  • HB.4007 (An Act concerning employment): Introduced on March 1, 2021, would require the employee to compensate the employee during the restricted period of a noncompete. Specifically, the bill would:
    • Require that “[a]n employer that elects to enforce a covenant not to compete . . . must pay to the employee . . . full compensation, including all benefits, that the employee would have received had his or her employment not been discontinued (1) for the time specified in the covenant not to compete or (2) until the separated employee is employed full-time at a commensurate rate of pay and benefits in a field of work not subject to the covenant not to compete.”
    • Render void a noncompete that the employer attempts to enforce “in a manner that does not comply with” the payment obligations.

The bill is pending before the House Labor & Commerce Committee.

Iowa [Noncompetes]

  • Senate Study Bill 1031 Amendment (A bill for an Act concerning the circumstances under which employers can enter into noncompete agreements with employees and including applicability provisions): Introduced on January 12, 2021, the bill would impose certain notice requirements, limit the restricted term of noncompetes (defined to exclude nonsolicits, no-recruits, and NDAs) to 18 months, establish a wage threshold (of $41,600) for the use of noncompetes, and prohibit the use of noncompetes for apprentices and student interns or against people whose employment is terminated without cause, and would prohibit anti-poaching restrictions within franchises. Specifically, the bill, which would apply only to agreements signed after the bill’s effective date, would:
    • Require advance notice in writing — before making the offer — that a job or promotion is contingent on a noncompete (if it is).
    • Require that the employer — before making the offer — provide a copy of any noncompete to the employee.
    • Require similar notice and the provision of a copy when an employee is required to sign a noncompete “to continue employment . . . after a substantial change in circumstances of the employer” (e.g., a sale of all or substantially all of the assets, significant financing, or other significant “business arrangement with another person”).
    • Ban noncompetes for workers who do not receive annualized earnings (separately defined) of more than $41,600.
    • Ban enforcement of noncompetes for workers whose employment is terminated “not for good cause.”
    • Limit the restricted period of a noncompete to 18 months.
    • Ban noncompetes for “employee[s] participating in a program registered with the United States department of labor, office of apprenticeship.”
    • Ban noncompetes for undergraduate and graduate students working as interns or “in other short-term employment.”
    • Ban the use of no-recruit and no-hire agreements for franchises.

The bill is pending before the Senate Labor and Business Relations Committee.

Kentucky [Noncompetes]

  • S.B. 235 — which has died — would have banned the use of noncompetes for low-wage workers, required employers to post of the provisions of the statute, and banned retaliation (as though retaliation would otherwise be lawful), among other things.

Louisiana [Noncompetes]

The bill is pending before the Committee on Commerce, Consumer Protection and International Affairs.

    • ban noncompetes for “any primary care physician” (broadly defined) or “physician employed by the state”;
    • prohibit noncompetes for any “physician specialist . . . who has been employed by, or under contract with, the employing or contracting entity for three years”;
    • require (for any physician specialist noncompete) “a buyout provision equal to no more than one year’s salary which diminishes pro rata [to zero] annually over three years;”
    • render a noncompete for a physician “who is terminated without cause” unenforceable;
    • limit physician noncompetes to two years; and
    • limit the geographic reach to “the parish of the physician’s primary office location and up to two contiguous parishes.”

The bill is pending before the House Health and Welfare Committee.

Massachusetts [Noncompetes]

The bill is pending before the Joint Labor and Workforce Development Committee.

  • H.2051 (An Act relative to physician assistant non-competes): Introduced on March 29, 2021, the bill, which tracks the language used for (other existing) legislative exemptions for physicians (G.L. c. 112, § 12X); nurses (G.L. c. 112, § 74D), psychologists (G.L. c. 112, § 129B), and social workers (G.L. c. 112, § 135C), would ban the use of noncompetes for physician assistants. Specifically, the bill would create G.L. c. 112, § 9L, as follows:

“Section 9L. Any contract or agreement which creates or establishes the terms of a partnership, employment, or any other form of professional relationship with a physician assistant registered to practice as a physician assistant pursuant to section 9E which includes any restriction of the right of such physician assistant to practice as a physician assistant in any geographical area for any period of time after the termination of such partnership, employment or professional relationship shall be void and unenforceable with respect to said restriction. Nothing in this section shall render void or unenforceable any other provision of any such contract or agreement.”

The bill is pending before the Joint Labor and Workforce Development Committee.

The bill is pending before the Joint Labor and Workforce Development Committee.

The bill is pending before the Joint Labor and Workforce Development Committee.

Minnesota [Noncompetes]

The bill is pending before the House Labor, Industry, Veterans and Military Affairs Finance & Policy Committee.

The bill is pending before the House Labor, Industry, Veterans and Military Affairs Finance & Policy Committee.

The bill is pending before the Senate Health and Human Services Finance and Policy Committee.

The bill is pending before the Senate Health and Human Services Finance and Policy Committee.

Mississippi [Noncompetes]

  • HB.331 — which has died — would have only touched incidentally on restrictive covenants in the context regulating professional employer organizations.

Missouri [Noncompetes]

  • SB.223 (“AN ACT To amend chapter 431, RSMo, by adding thereto one new section relating to restrictive employment covenants for physicians and advanced practice registered nurses”): Introduced on January 6, 2021, the bill would ban noncompetes for physicians and advanced practice registered nurses. Specifically, the bill provides in relevant part, “any contract or agreement that creates or establishes the terms of a partnership, employment, or any other form of professional relationship between a nonprofit hospital or health system and a physician licensed to practice . . . or an advanced practice registered nurse . . . that includes any restriction of the right of such physician or advanced practice registered nurse to practice medicine or nursing in any geographic area for any period of time after the termination of such partnership, employment, or professional relationship shall be void and unenforceable with respect to said restriction . . . .”

The bill is pending before the Senate Labor and Business Committee.

The bill is pending before the Senate Small Business and Industry Committee.

The bill is pending before the Senate Judiciary and Civil and Criminal Jurisprudence Committee.

The bill is pending before the Senate Small Business and Industry Committee.

Nevada [Noncompetes]

The bill is pending before the Senate Commerce and Labor Committee.

  • AB.291 — which has died — was introduced on March 17, 2021, and would have amended the current version of NRS 613.195 (Nevada’s noncompete statute) to bring independent contractors within the scope of the statute.

New York [Noncompetes]

  • SB.734 (AN ACT to amend the labor law, in relation to prohibiting non-compete agreements): Introduced on January 6, 2021, the bill would create a (fairly typical) statutory framework for employee noncompetes and prohibit noncompetes where an employee “loses or leaves a job due to circumstances surrounding a declared state or emergency . . . .” Specifically, the bill would:
    •  Define “non-compete agreement” as “an agreement, or clause contained in an employment contract, between an employer and an employee that prohibits or restricts such employee from obtaining employment, after the conclusion of employment with the employer included as a party to the agreement: (i) for a specified period of time; (ii) in any specified geographical area; and/or (iii) with any particular other employer or in any particular industry.
    • Render noncompetes “enforceable [only] if such agreement: (a) is no greater than required for the protection of the legitimate interest of the employer; (b) does not impose an undue hardship on the employee; (c) is not injurious to the public; and (d) is reasonable in time period and geographic scope,” failing which, “the non-compete agreement [would be] deemed invalid.”
    • Define “undue hardship” as “includ[ing] but, . . . not limited to, situations where an employee loses or leaves a job due to circumstances surrounding a declared state of emergency or disaster emergency . . . .”

The bill is pending before the Senate Labor Committee.

The bill is pending before the Assembly Labor committee.

The bill is pending before the Senate Labor Committee.

Oregon [Noncompetes]

653.295. (1) A noncompetition agreement entered into between an employer and employee is void and unenforceable unless the noncompetition agreement is limited to:

(a) The protection of trade secrets;

(b) A covenant not to contact former customers or clients to provide similar products, processes or services after the employee has separated from employment by the employer; or

(c) The protection of proprietary information.

(2) The term of a noncompetition agreement may not exceed 18 months from the date of the employee’s termination. The remainder of a term of a noncompetition agreement in excess of 18 months is voidable and may not be enforced by a court of this state.

(3) Subsections (1) and (2) of this section apply only to noncompetition agreements made in the context of an employment relationship or contract and not otherwise.

(4) Nothing in this section restricts the right of any person to protect trade secrets or other proprietary information by injunction or any other lawful means under other applicable laws.

(5) As used in this section:

(a) “Employee” and “employer” have the meanings given those terms in ORS 652.310.

(b) “Noncompetition agreement” means an agreement, written or oral, express or implied, between an employer and employee under which the employee agrees that the employee, either alone or as an employee of another person, will not compete with the employer in providing products, processes or services that are similar to the employer’s products, processes or services for a period of time or within a specified geographic area after termination of employment.

(c) “Proprietary information” has the meaning given that term in ORS 164.377.

(d) “Trade secret” has the meaning given that term in ORS 646.461.

The bill is pending before the Senate Labor and Business Committee.

  • HB.2325 (“A BILL FOR AN ACT Relating to noncompetition agreements; creating new provisions; and amending ORS 653.295”): Introduced on January 11, 2021, the bill would modify and reorganize parts of the existing law. Specifically, the bill would change noncompetes that do not comply with the act from being “voidable and may not be enforced” to “void and unenforceable,” decrease the maximum duration of the restriction from 18 months to 12 months, and replace the median-family-income-for-a-four-person-family threshold with a straight “$100,533, adjusted annually for inflation.”

The bill is pending before the House Business and Labor Committee.

The bill is pending before the House Business and Labor Committee and has been voted favorably on (in March 2021) by the Senate Labor and Business Committee and (on May 5, 2021) by the House committee.

Virginia [Noncompetes]

  • HB.1112 — which has died — was carried over from the 2020 legislative session and would have banned all employee noncompetes.

Utah [Noncompetes]

  • SB.46 — which has died — would have restricted the legitimate business interests that could support a noncompete (to cover only trade secrets, intellectual property, and “properly designated and protected” confidential information and materials) and prohibited any noncompete that “is broader than necessary to protect the legitimate business interests of the employer; or (B) applies to a geographic area that is larger than the geographic area in which the employer has significant presence or influence.”