The GigReporter

Non-compete agreements have become a hot topic in state legislation and federal rulemaking over the past few years. Non-competes have long been judicially disfavored, with courts requiring temporal and geographic limitations for enforceability, and recently state legislatures have begun to wade into this subject matter more frequently, usually (but not always!) to add further restrictions.

Last year the Federal Trade Commission attempted to entirely ban non-competes nationwide, but that effort was killed with the change in administrations. Meanwhile, many states have continued to add restrictions, mostly in the form of minimum salary thresholds; these range from as low as double the federal minimum wage in New Hampshire (RSA § 275:70-a) to as high as over $150,000.00 annually in the District of Columbia. (D.C. Code § 32-581.01(13)(A).) Restrictions on applying non-competes to certain professions are also common, especially for physicians or other healthcare workers.

At least one state is bucking the trend, however. Florida recently enacted legislation, the CHOICE Act, to make non-competes easier to enforce. For contracts meeting certain technical requirements, and individuals meeting minimum salaries, the law creates a presumption of validity for up to four-year periods of restriction on competition. Under the new law the burden of proof requires courts to automatically grant employers injunctions, and forces workers to show cause why the injunction should be dissolved. A law of this scope will necessarily invite a lot of litigation to clarify its language, so even Florida businesses should proceed with caution.

What does this all mean for SCI’s clients? Our most important piece of advice is to consult a local lawyer in the jurisdiction you need to have the non-compete enforced, if you are seriously considering a non-compete agreement, especially with the wide-ranging and rapidly shifting differences between state laws. Beyond that:

-Think carefully whether you really need a non-compete. They weigh unfavorably in employee/independent contractor classification determinations, so they’re not something a business should throw in carelessly or automatically if they’re hiring independent contractors.

-Consider substituting a combination of non-solicitation and non-disclosure agreements. These may be able to achieve the same goals you want from a non-compete while drawing less scrutiny.

-Tailor any non-compete or equivalent to the specific needs of each relationship. Draw the restrictions narrowly and specifically to the people and places where the other party worked with your business. Reusing a single identical form non-compete clause will probably not suffice.