Remote Work Further Complicates Employers’ Non-Compete Agreements

Approximately one in five American workers are bound by noncompetes, preventing them from joining competing businesses or establishing one of their own. While the FTC’s fight against non-competes is far from over, they remain enforceable to some degree in all but four U.S. states.

Is your company’s workforce remote or hybrid? If so, be sure to check the latest blog by our Labor & Employment Attorney, Emily Dilloway, to learn how to navigate non-compete rules amongst those working from home.

This August, a federal court in Texas threw out a ban on non-compete agreements that was set to take effect only weeks later in early September. Approximately one in five American workers are bound by noncompetes, preventing them from joining competing businesses or establishing one of their own. While the FTC’s fight against non-competes is far from over, they remain enforceable to some degree in all but four U.S. states.

Nevertheless, there are plenty of rules and stipulations employers should keep in mind when implementing non-competes – particularly in the age of remote work. Firms with remote workforces likely have employees in multiple states and there is rarely a one-size-fits-all agreement.

Governed at the state level, laws surrounding the use of non-compete agreements vary widely across state lines. Non-compete agreements typically include a “choice of law” provision by which parties agree that a specific state’s law will govern any legal questions related to the agreement; however, when the employer and worker reside in different states, courts vary on enforcement.

The recent rise of remote work is requiring courts to work through this issue, leaving room for ambiguity. Multi-state employers should consult an experienced employment attorney to ensure agreements comply with relevant state law to protect their businesses against unfair competition.

California, North Dakota, Minnesota and Oklahoma ban the use of noncompetes in an employment context. Some states – such as Oregon, Washington, Colorado, Illinois, Virginia and Maryland – have enacted income thresholds that specify which employees may be subject to the agreements. The majority of states have implemented other restrictions, ranging from industry-specific bans and scope limits to process requirements and additional limits based on case law.

With state-level non-compete agreement reform picking up steam in recent years, employers should revisit these agreements often to ensure recent restrictions haven’t left them unprotected. Alternatives to non-competes can offer an extra layer of protection, including nondisclosure agreements that protect trade secrets and non-solicitation agreements that preclude former employees from soliciting clients or colleagues.

If you need assistance drafting or reviewing existing non-compete agreements for your remote workforce, I’m happy to help. Please contact me at edilloway@isaacwiles.com to get started.