Developments & Trends Across the Country in Non-Compete Law [PODCAST]

On this episode of The Proskauer Transient we’re joined by companion Man Brenner, who heads up Proskauer’s D.C. Employment Law observe and co-chairs our Non‑Compete and Commerce Secrets and techniques Observe group and Daryl Leon, an affiliate in Proskauer’s New York workplace and senior member of the Agency’s Non‑Compete and Commerce Secrets and techniques Observe Group. Employers ought to hear in as we talk about key developments and tendencies we’ve been seeing throughout the nation in non-compete regulation.

Man Brenner: Howdy and welcome to The Proskauer Transient:  Sizzling Subjects and Labor and Employment Law. I’m Man Brenner, head of Proskauer’s D.C. Employment Law observe and Co‑Chair of our Non-Compete and Commerce Secrets and techniques Observe Group.  With me at present is Daryl Leon, an affiliate in our New York workplace, and senior member of our Non-Compete and Commerce Secrets and techniques Observe Group.  I’ve requested Daryl to affix me at present to debate the developments and tendencies we’ve been seeing throughout the nation in non-compete regulation.  Daryl welcome to the podcast.

Daryl Leon: Thanks Man good to be right here.

Man Brenner: Daryl, you and I not too long ago mentioned on a previous episode of The Proskauer Transient, the D.C. ban on Non-Compete Agreements Amendments Act 2020.  How does that D.C. ban on non-compete regulation match into the nationwide non-compete panorama and tendencies that you just’ve been monitoring.

Daryl Leon: So Man, I believe that employers round the nation can breathe a sigh of reduction that D.C.’s close to whole ban on non-competes seems to be an aberration reasonably than a rising development, however there was a number of state motion over the previous few years trying to restrict the classes of staff who could also be topic to a non-compete, however the close to whole ban that we anticipate in D.C., which is admittedly extra in line with states like California or Oklahoma doesn’t appear to be gaining a lot traction round the nation.

Man Brenner: Thanks Daryl and I notice that employers exterior of D.C. can be completely satisfied to listen to that however there was as you famous a number of exercise in state legislatures making an attempt to limit non-competes.  What are a few of the frequent tendencies you’re seeing in jurisdictions throughout the nation?

Daryl Leon: The massive development that we’re seeing round the nation is states trying to restrict the classes of staff who could also be topic to a non-compete or placing further hurdles in place for employers wanting to make use of non-competes to guard their enterprise pursuits.

Man Brenner: What sort of categorical limitations are you seeing being carried out throughout the nation?

Daryl Leon: That’s an important query.  The primary that involves thoughts and that I believe actually triggered a number of significant consideration for the shoppers that we work with happened in Massachusetts.  So Massachusetts’ non-compete regulation was signed throughout the summer season of 2018 and it put in place numerous key restrictions on employers means to make use of non-compete agreements.  So Massachusetts regulation prohibits the use of non-compete for FLSA non-exempt staff, for pupil staff, staff beneath the age of 18 and staff who’ve been terminated with out trigger or who’ve been paid off.  Notably it additionally requires a backyard depart, which implies that employers must pay their former staff not less than 50% of the staff highest base wage throughout the previous two years, throughout the interval the non-compete is enforced.

Man Brenner: That backyard depart provision will be fairly expensive.  Are different states following swimsuit and requiring a backyard depart to have enforceable non-competes?

Daryl Leon: Paid backyard depart nonetheless doesn’t appear frequent however we do see it cropping up in different circumstances.  So in Nevada for instance, paid backyard depart is required for workers topic to a non-compete if they’ve been laid off.  What I believe is admittedly fascinating although is the method taken by a state like Oregon, which has obligatory compensation thresholds and in addition makes use of unpaid backyard depart.  What which means is that in Oregon, employers are prohibited from utilizing non-competes with staff incomes lower than about $100,000 a 12 months with the threshold up to date yearly for inflation however employers can truly get round this threshold by offering paid backyard depart throughout the interval the worker can be topic to a non-compete.  Oregon additionally requires a few of these hurdles that I discussed earlier, so in this case their perspective staff obtain two weeks-notice of their non-compete earlier than beginning their new job.

Man Brenner: It looks like that Oregon and Massachusetts are fairly difficult regimes when you’re trying to have an enforceable non-compete.  What are a few of the different states doing in this area?

Daryl Leon: The wage threshold actually appears to be the most typical restriction on non-competes that we’re seeing throughout the nation, however truly Man, this frequent development doesn’t make issues any simpler sadly for multi-state employers as a result of the thresholds are throughout the place.  So for instance, we simply talked about Oregon that has a threshold of about $100,000 a 12 months, however Maine has a threshold of about $50,000 a 12 months, which relies on the federal poverty stage and it prohibits non-compete’s staff incomes lower than 400% of the federal poverty stage.  Additional down the coast in Maryland the threshold is about $15 an hour or $31,000 a 12 months after which we return over to the Pacific Northwest the place Washington State has a restrict of about $100,000 a 12 months for an worker however $250,000 a 12 months for an unbiased contractor.

Man Brenner: That’s rather a lot for multistate employers to maintain observe of.  What can a multi-state employer do to handle this patchwork of non-compete necessities?

Daryl Leon: That’s an important query.  From a course of standpoint, I like to recommend the shoppers contemplate setting calendar reminders and in addition following our blogs to pay attention to new legal guidelines in altering compensation thresholds.  I’ll additionally work with shoppers to see if there are states that may be grouped collectively when getting ready their non-compete agreements so we will see if there are thresholds or different restrictions that we will mix collectively in order that there are fewer for agreements from multi-state employers.  Additionally at the similar time that this podcast is being launched we’re going to publish an infographic that identifies numerous key state compensation thresholds and employers can use this as a baseline or a intestine test on their present use of non-competes in order that they know what will be enforced for sure staff round the nation based mostly on compensation thresholds.

Man Brenner: And I’ve seen that infographic and I believe it’s actually useful.  I believe are listeners are going to seek out it a really great tool.  Is there the rest on the horizon that you just see in phrases of non-compete developments?

Daryl Leon: The ten,000lb elephant in the non-compete room is the federal authorities.  Over the summer season, myself and different colleagues and I do know you as properly, have been religiously watching the White Home’s press briefing to try to learn the tea leaves on an anticipated government order for President Biden.  Main as much as the issuance of president’s government order on selling competitors in the American financial system there was a number of pleasure and a number of deceptive headlines about the finish of non-competes agreements in America.  Nonetheless, on July ninth when the President truly issued his Government Order the language was not almost as apocalyptic as some predicted.  The Order truly solely inspired the federal commerce fee to think about using its authority to curtail the use of non-compete clauses and notably for our listeners and for these of us who work in this area throughout the intervening months we’ve not seen any additional motion from the Federal Commerce Fee or the White Home.  That is in fact one thing that we proceed to watch and we’ll publish about on our Proskauer Law and the Workplace weblog however absent any actual motion we’re not recommending that our shoppers alter their non-compete utilization based mostly on any modifications at the federal stage at the moment.

Man Brenner: Daryl, I wish to thanks a lot for what has been an informative and eye opening dialogue about rising tendencies in non-compete regulation and I do know that you just’re going to be monitoring this area and reporting on it and I thank all of you for becoming a member of us at present on The Proskauer Transient.  To our listeners, keep tuned for extra insights on the newest sizzling subjects on labor and employment regulation and you should definitely comply with us on Apple Podcasts, Google Podcasts and Spotify.

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