The Banning of Non-Compete Agreements
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A non-compete agreement is a legal contract between an employer and an employee (or between businesses) that restricts the employee’s ability to work for a competing company or start a competing business for a specified period of time and sometimes within a specific geographical area after leaving their current position or business relationship. Employers contend that these agreements are important to protect a company’s intellectual property, trade secrets, and client relationships, although we find that in most cases, their real purpose is to protect from ordinary competition. In Massachusetts, non-competes are governed by the Massachusetts Non-Compete law, G.L. c. 149, § 24L, except ones that were entered into before the law’s effective date on October 1, 2018 are covered by that law.
Whether governed by the Massachusetts Non-Compete law or not, these types of agreements have always been subject to legal scrutiny, and their enforceability varies. MRW’s position has been that such agreements are an unfair restraint on an employee’s autonomy (as well as a restraint on trade), and they should be banned. Currently, California, Minnesota, North Dakota, and Oklahoma have banned them entirely while New York appears to be taking steps to do so as well. Colorado, Illinois, Maine, Maryland, New Hampshire, Oregon, Rhode Island, Virgina and Washington have restricted use of the agreements.
MRW is particularly gratified to see that this year, the Federal Trade Commission (the federal agency charged with enforcing federal anti-monopoly law, among other things), proposed a new rule barring employers from enforcing non-competes and voiding all existing ones nationwide. Unfortunately, the vote on the rule has been delayed, and will now be taking place in 2024. We strongly and enthusiastically endorse the FTC’s action and look forward to the day when all non-competes are a relic of the past.