Overview: One type of employment contract is the noncompete agreement. A noncompete agreement prevents an employee from pursuing a similar profession or trade in competition against the employer (usually post-employment). Noncompetition agreements are used to discourage an employee from working for a competitor using the specialized knowledge, skills, or confidential information gained while working for the employer.
The majority of the states recognize and enforce various forms of noncompete agreements. Generally, the terms of a noncompete agreement will only be enforced to the extent necessary to protect the employer's legitimate business interests. Most states will enforce a noncompete agreement if contains reasonable limitations as to the geographical area and time period in which an employee may not compete with the employer.
Trends: Several states have either passed or are considering legislation that would change how noncompete agreements are regulated. For instance, Illinois became one of the first states to ban noncompetes for low-wage workers. Also, in 2016 several states enacted laws prohibiting physician noncompete agreements. Further, a few states have passed laws limiting the duration of noncompete agreements.
Author: Melissa A. Silver, JD, Legal Editor
Updated to include Oregon law regarding restrictive covenants for home care workers, effective January 1, 2018.
Updated to reflect law regarding restrictive covenants for home care workers, effective January 1, 2018.
Updated to include amendments to the state public health law regarding vaping, effective November 23, 2017; to reflect retaliation protections under the New York City Fair Work Practices ordinances, effective November 26, 2017; and to include amendments to the New York City Earned Sick Time Act.
In a ruling that aids employers, the Florida Supreme Court has held that home health service referrals can be a legitimate business interest protected under a noncompetition agreement.
Updated to reflect amendments to the Uniform Trade Secrets Act, effective September 1, 2017.
Veeva Systems, a California-based, cloud-based software provider for the life sciences industries, has filed a claim in the superior court of California against three competitors that use post-termination non-compete, confidentiality and nondisparagement clauses in employment agreements.
Restrictive covenants of all types (e.g., non-competition, customer non-solicitation and employee non-solicitation) are widely used across the country. But there is no uniform federal law governing their enforceability. Proskauer Rose employment attorneys John Barry and Guy Brenner survey the landscape and share their tips.
Updated to include requirements regarding covenants not to compete for physicians, effective July 1, 2017.
Guidance for HR on the use of noncompete agreements to prevent employees from competing with the employer.