Many companies have their employees execute non-compete clauses either in employment agreements or as separate documents. The justification for doing so is to protect the company from training workers who later leave and take their new talents and the company clients to a competitor or to protect certain trade secrets. Most states restrict the terms of non-compete agreements, limiting both the geographic scope of where the ex-employee can work and the time period of the restriction. Some lawyers make a good living either attempting to negate such agreements or moving to enforce them.
On October 25, President Obama issued a “State Call to Action on Non-Compete Agreements” that followed up on several federal studies claiming that non-competes affect over 30 million U.S. workers in a negative fashion. The White House called on state legislators and governors to engage in several strategies to reduce the use of non-competes:
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Completely ban non-compete clauses for “certain workers,” defined broadly to include workers under a certain wage threshold; public health and safety workers; workers who do not possess trade secrets; and “those who may suffer undue adverse impacts from non-competes”
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Improve the transparency of non-compete agreements. The document calls on banning non-competes unless they are proposed before a job offer or in connection with a raise or promotion. Essentially, the White House would like the states to do away with the practice of using continued employment as consideration for a non-compete.
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Incentivize employers to write enforceable contracts. The White House wants to do away with blue-penciling and encourage complete nullification of non-compete agreements that may only have a single unenforceable clause.
Obviously, this call to action does not have any force of law and will not affect existing statutes or case law within the states. However, it does indicate an effort, at the federal level, to categorize these types of agreements as unfair. The White House push should be a reminder to employers that they need to make sure that their non-competes comply with state law and that supervisors are properly enforcing the terms.
