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 reflect Massachusetts noncompete law requirements, effective October 1, 2018.
Maryland's ban on sexual harassment waivers in employment contracts and a Massachusetts law governing noncompetition agreements top the list of new October 1 compliance requirements affecting employers.
Updated to reflect information on a state supreme court ruling concerning noncompete agreements.
A new Massachusetts law establishes minimum requirements for employment-related noncompete agreements to be enforceable and bans agreements that do not meet the law's requirements.
Updated to reflect extension of discrimination protections based on sexual orientation and gender identity.
Updated to include amendments to the New York City Earned Safe and Sick Time Act, effective May 5, 2018.
Guidance for HR on the use of noncompete agreements to prevent employees from competing with the employer.