Compliance Stuff

Overview State legislatures continue to reevaluate the role of employee non-compete agreements, with 2026 shaping up to be another consequential year in the ongoing movement to restrict or eliminate their use. Current pending legislation reflects two dominant strategies: (1) bans on non-compete agreements either entirely or limited to specific industries and (2) increasing wage thresholds that condition enforceability on exceptionally high compensation levels. This alert only focuses on legislation that proposes an outright ban to non-compete agreements or imposes new or increased wage thresholds. Although details vary significantly by jurisdiction, the cumulative effect of these legislative efforts is a steady contraction of the circumstances in which non-competes are likely to remain enforceable. Further, the patchwork of state-level enforcement means employers operating across multiple states must closely track these developments and continually reassess their approach to restrictiv...

What are non-compete agreements? Non-compete agreements are contractual agreements between an employer and employee that restrict an employee’s ability to work for a competitor or start a competing business after leaving employment with their employer. Many states have passed laws that outright ban or significantly restrict non-compete agreements.    Which states have implemented bans on non-compete agreements? Four states, (Minnesota, North Dakota, Oklahoma and California) have implemented bans on non-compete agreements with limited exceptions. Several other states have laws restricting the use of non-compete agreements in employment. And some of these have bans on noncompete agreements with low income workers. As is usually the case, the laws vary from state to state so employers need to be aware of the requirements in each state with non-compete restrictions.  Virginia amends their law that prohibits non-compete agreements Virginia is following the lead from several ot...

On March 4, 2025, Arkansas Governor Sarah Huckabee Sanders signed into law Senate Bill 139, now Act 232 (the “Act”), which amends the state’s non-compete statute to provide that non-compete covenants that “restrict the right of a physician to practice within the physician’s scope of practice” are void. The term “physician” includes any person authorized or licensed to practice medicine under the Arkansas Medical Practice Act and any person licensed to practice osteopathy under Arkansas law . The Act will take effect 90 days after adjournment of the current legislative session, likely resulting in a mid-July 2025 effective date . Arkansas’s Existing Non-Compete Statute Arkansas Code Section 4-75-101, entitled “Covenant not to compete agreements,” provides statutory factors for determining the enforceability of non-compete agreements signed after July 22, 2015 (the statute’s initial effective date).  A non-compete agreement is enforceable where it is ancillary to an employment relat...

Employers in Ohio may soon need to reexamine employment agreements and internal policies if a proposed non-compete ban becomes law . A state Senate bill was recently introduced aiming to prohibit agreements that restrict a worker’s ability to engage in a lawful profession or business after their employment ends . What do employers in Ohio need to know as state lawmakers consider this significant shift? Here are the four key aspects that impact the workplace.  1 . Expansive Definitions The bill sets forth broad definitions designed to capture nearly all employment relationships: Employer:   Any person or entity hiring or contracting with a worker. Worker:  T his term would broadly include employees, independent contractors, interns, volunteers, apprentices, sole proprietors, and individuals providing services through a business or nonprofit organization. If passed, this bill would require a review of all types of work relationships to ensure that agreements — whether with ...

Following the national trend toward prohibiting or limiting non-compete agreements, Louisiana Senate Bill 165 limits the length and geographical scope of non-compete agreements for both specialty and primary care physicians. The law goes into effect on Jan. 1, 2025. Under Senate Bill 165, non-compete agreements for physicians must expire three years or five years from the effective date of the initial contract or agreement. Non-compete agreements for primary care physicians must expire within three years from the effective date of the initial contract or agreement. A “primary care physician” is defined as any physician who predominately practices in the areas of family medicine, internal medicine, pediatrics, obstetrics, or gynecology. Non-compete agreements for physicians who do not meet the definition of primary care physician must expire within five years from the effective date of the original contract or agreement. Senate Bill 165 also limits the geographic scope of these non-com...

 The Federal Trade Commission’s (FTC) ban on noncompetition covenants (“noncompetes”) could significantly impact the design and administration of employee benefits and executive compensation arrangements. Quick Hits The FTC’s ban on noncompetition covenants has potential implications for several aspects of employee benefits and executive compensation plans and arrangements, such as Code Section 457(f) plans, restricted stock, severance arrangements, golden parachute payments, and garden leave. The rule takes effect on September 4, 2024 , but a federal district court in Texas recently granted a preliminary injunction staying the enforcement of the final rule as to the parties in the case. The court’s decision, pending a final ruling on the merits by August 30, 2024, has signaled that the FTC’s noncompete rule will not survive judicial scrutiny. Although the U.S. District Court for the Northern District of Texas recently granted a preliminary injunction staying enforcement of the ru...

With the Federal Trade Commission’s Final Rule that would ban noncompetes nationwide set to go into effect on September 4, 2024 , assuming pending litigation doesn’t cause any delays, employers should begin planning now to address any potential compliance concerns. Legal and human resources teams will need to consider the impact of the Final Rule on current noncompete agreements, requirements for providing notice to impacted employees under the rule, and strategies for implementing pending and future agreements if the rule is upheld. Please see full publication here for more information. Source(s): JD Supra , received on July 18, 2024; McDermott Will & Emery , accessed on July 18, 2024.

With the April 23, 2024 FTC approval and issuance of the final rule banning employers' use of non-compete agreements (with very few exceptions), despite the unfavorable reception from some employers, it may be important to understand that all is not lost.  The FTC's new rule will force US employers to adopt practices that California companies have used for generations (remember the Gold Rush?  California became the 5th largest economy in the world. Employers need to lean into confidentiality, intellectual property, and trade secret provisions in employment agreements.  This is one of the best ways to safeguard their businesses. The focus of this article is to provide practical guidance that can help employers make the necessary pivot toward protecting their trade secrets. In this article, JD Supra provides this guidance:   Draft separate, stand-alone agreements to address confidentiality, intellectual property, and trade secret provisions.  Provisions addressing...

Banning noncompete agreements has been a trend in recent years. Noncompete agreements, referred to as “restrictive covenants”, are contracts that are designed to prevent workers from leaving their current employer to work immediately for a competitor.  The restrictive covenant oftentimes establishes a specific timeframe that employees need to wait before beginning work for said competitor. The ban will go into effect   120 days   from publication in the Federal Register.   US Employers will also be required to give notice before the effective date to workers whose noncompete agreements will be no longer enforceable.    The Chamber of Commerce, the nation's largest business lobby, are joining forces with a growing number of employers arguing that noncompete agreements serve as an important purpose to protecting an employer's investment in employees as well as proprietary information and intellectual property.   Compliance will continue to follow this an...

The Governor of Main, Janet Mills, vetoed the legislation (Bill LD 1496 that would have restricted the context in which employers in the state of Maine could use and enforce Non-Compete Agreements.   Under the current law, Maine employers may use non-competition agreements to protect trade secrets, confidential information (which does not qualify as a trade secret), and employer goodwill. Employers must disclose the agreements before an offer of employment and give employees at least three business days before requiring that an agreement be signed. Additionally, employees making at or below 400 percent of the federal poverty level (currently, $60,240 a year) cannot enter into non-competition agreements. Civil penalties accompany violations of income level and disclosure requirements. The amendments of 2023 added a prohibition on non-competition agreements for veterinarians unless the veterinarian has an ownership interest in the facility. If it became law, LD 1496 would have left m...

  The state of California has had a statute that voids a noncompetition clause or agreement that restrains a person from participating in a profession, trade or business, with very limited exceptions for a while---other states are following suit.     States such as Connecticut, Illinois, Kentucky, Louisiana, Missouri, Rhode Island, and Utah are introducing bills that would make it difficult to bind a prospective or current employee with such agreements.   New York city is also considering legislation related to noncompetition agreements---prohibiting non-compete agreements with low wage workers and the use of restrictive covenants with freelance workers.   Source:  JD Supra , received on March 29, 2024.