October 31st, 2020
October 31st, 2020
Rating
5 - 1 vote
These days, if you work for a private employer, especially one that might be running an internet business (as so many of us are), you might have been asked to sign a Non-Compete Agreement. It's become so commonplace and easy for people to steal intellectual property and client/customer information from others that most savvy business owners with information to protect have started to ask employees and potential employees to sign Non-Competes.
Often, however, Non-Competes are written in legalese - in other words, it can be impossible to understand them without the help of an attorney. Most Non-Competes aim to be very restrictive as far as what the employee can and can't do (and where the employee can or can't do it) after the employment relationship ends.
It's always a good idea to get an attorney's help reviewing a Non-Compete you've been asked to sign. Before getting to that, though, you might be wondering, "Is a non-compete even enforceable in my state?"
Although many people may feel that if an employer gives you a Non-compete, it's definitely valid, that's often not the case. In fact, many employers will do everything they can to make the document as restrictive as possible, without regard to what their specific state allows.
In this guide, we'll talk about the enforceability of Non-Competes, specifically for employment situations, in each state. Many states treat Non-Competes in their own unique way when it comes to employment, so getting an overview of the laws per state is important for both employees and employers.
It's important to remember, however, that in practice, the question of the enforceability of a non-compete only comes up if the employer and employee are arguing about it in court. In other words, if you feel that a Non-Compete is not valid based on state law, but you sign it anyway, you may end up in litigation about it down the line. Ultimately, a court decides whether any particular Non-Compete is valid.
Please keep in mind this guide does not constitute legal advice and should be taken as informational only. Additionally, this guide is intended to give a general overview of state laws and will not contain highly detailed information about each state. Each state may have additional factors it considers in the enforcement of Non-Competes. As mentioned above, it's always a good idea to contact an attorney in your specific state for any questions you may have.
First thing's first, though, before we move on, let's talk about what a Non-Compete specifically is and what its purpose is. A Non-Compete is a document generally used by an employer to ensure that during the course of an employee's employment and after they leave, they do not engage in direct competition with the employer for a certain time and in a certain geographic location. The restriction on the competition can take one of many forms, depending on what the employer is specifically concerned about. Often, non-competes restrict the employee or former employee from working with direct competitors, taking customers with them, or hiring staff out from under the employer. They may also restrict the employee from utilizing information that belongs to the employer, such as client lists, customer contacts, strategy documents, etc. Generally, this type of information is protected in a Non-Disclosure Agreement, but there can be similar clauses in a Non-Compete.
As discussed above, Non-Compete laws vary on a state-by-state basis. Some states are more lenient in their treatment of allowable Non-Competes and others are more strict. That being said, however, there are other states that don't permit Non-Competes at all. Although this is the exception, rather than the rule, it's important to know if you are in a state that bans Non-Competes.
What state's law is applicable will either be dependent on the text of the proposed Non-Compete (like through a choice-of-law provision, for example) or the circumstances of the employment relationship. Most often, if a choice-of-law provision is not included within the agreement, the state where the employer is based will govern.
According to Ala. Code §§ 8-1-190-197, although contracts which restrict professions, trade, or business are supposed to be void, there is a specific carve-out for Non-Competes. In Alabama, Non-Competes are generally valid, as long as the employer is protecting trade secrets, confidential information, business contacts or relationships, goodwill in business or marketing, or specialized training. The Non-Compete can restrict these activities for up to two years and will be considered reasonable. Anything beyond that may start to look unreasonable to a court of law. An important exemption to note: Alabama will not enforce Non-Competes against professionals, like doctors, lawyers, accounts, etc.
In Alaska, although Non-Competes are not favored by courts, they are permitted, as long as they are narrowly tailored and reasonable with regard to the restrictions, and they are trying to protect a legitimate interest of the employer. The court will look at several additional factors surrounding the details of the employment relationship, as well.
In Arizona, Non-Competes are generally enforceable, as long as they are not broader than necessary to protect a legitimate interest of the employer and are not unreasonably restrictive (in both time and scope) for the employee. They also must not be against public policy. Importantly, physicians in Arizona are exempt from having Non-Competes enforced against them.
According to Ark. Code 4-70-207, Non-Competes are enforceable as long as they are " limited with respect to time and scope in a manner that is not greater than necessary to defend the protectable business interest of the employer." In other words, they must be very narrowly tailored. Certain professionals are exempt. The court will look at several additional factors surrounding the details of the employment relationship, as well.
In California, except in very limited circumstances, Non-Competes which restrict what the employee can do after the employment has ended are not permitted (found in Cal. Business & Professions Code § 16600).
In general, in Colorado Non-Competes are not permitted unless they fall into one of four specific exceptions (Colo. Rev. Stat. § 8-2-113): as related to the purchase and sale of a business, as related to trade secrets, a Non-Compete which attempts to recover expenses for training an employee who has been employed less than two years, or as related to executive and management personnel and their staff. Other than this, Non-Competes in Colorado are generally void. Physicians are exempt from having Non-Competes enforced against them.
Non-Competes in Connecticut will be permitted as long as they are reasonable. To determine what is reasonable, a court will look at the Non-Compete's geographic reach, time, scope, how much it restricts the employee, how fairly it protects the employer, and whether it is against public policy. Broadcasters are exempt.
In Delaware, Non-Competes are only enforceable if they are reasonable with regard to time and geographic scope and if they protect a legitimate interest. Physicians are exempt. The court will look at the hardship the restrictions pose on the employee versus the legitimate protection required to the employer.
According to Fla. Stat. Ann.§ 542.335, Non-Competes are only enforceable in Florida if they are reasonable with regard to time and geographic reach and if they protect a legitimate interest. Mediators are exempt.
In Georgia, Non-Competes are enforceable against four categories of employees: employees that solicit customers for the employer, sales staff, managerial staff, and "key" employees. As with many other states, the restrictions in time, scope, and geographic reach in the Non-Compete must be reasonable and not overbroad. The court will look at public policy and weigh individual concerns of being free to earn versus commercial concerns of needing to protect a business.
In Hawaii, under Haw. Rev. Stat. § 480-4, Non-Competes are generally enforceable as long as they are reasonable in their time, geographic reach, and scope restrictions, except as to technology business employees.
In Idaho, Non-Competes are enforceable only as to "key" employees and "key" independent contractors, which are defined in Idaho Code §§ 44-2701-2704 as those employees or independent contractors who "have gained a high level of inside knowledge, influence, credibility, notoriety, fame, reputation or public persona as a representative or spokesperson of the employer and, as a result, have the ability to harm or threaten an employer's legitimate business interests." The Non-Compete must still be reasonable in duration, geographic reach, and type of employment, and not restrict the employee more than necessary to protect a legitimate business interest of the employer.
In Illinois, Non-Competes must go along with an employment relationship and be reasonable in their time, geographic reach, and scope restrictions, not pose too great a hardship on the employee, and not be against public policy. If so, they are generally enforceable. However, there are a number of exemptions, including low-income workers. Physicians, broadcasters, and government contractors are also exempt.
In Indiana, Non-Competes are generally enforceable, as long as the restrictions as to time, geographic reach, and scope are both reasonable and specific. Indiana does not allow general, boilerplate Non-Competes. The court will look at the legitimate interests that need to be protected versus the impact on the employee, as well as the public interest.
In Iowa, Non-Competes are generally enforceable, as long as the employer needs it to legitimately protect their business and the restrictions are reasonable as to time and geographic reach. The public interest is also considered. Franchisees are exempt from having Non-Competes enforced against them in situations where their Franchise Agreement is not renewed.
In Kansas, Non-Competes are generally enforceable as long as the employer is protecting a legitimate business interest and the Non-Compete does not place a hardship on the employee. As in other states, the restrictions need to be reasonable as to time and geographic reach and not against the public interest.
In Kentucky, Non-Competes are generally enforceable as long as they are reasonable in their restrictions as to scope and purpose, the Non-Compete does not place a hardship on the employee, and the restrictions are not against the public interest.
In Louisiana, Non-Competes are generally disfavored, but are allowed for a list of exemptions, of which the employer/employee relationship is one. Non-Competes are only enforceable if they don't last longer than two years and are very specific with regard to the geographic restrictions. The Non-Compete must be in strict compliance with the Louisiana statute on the matter, La. R.S. 23:921.
In Maine, Non-Competes are not permitted for employees earning less than 400% of the federal poverty level. Beyond that, although they are disfavored, they are enforceable as long as they are narrowly tailored to protect the employer's legitimate business interest and are not broader than that. They must also be reasonable with regard to the time, geographic reach, and interests to be protected, and not place undue hardship on the employee. Employers also have some new advance-notice rules that dictate when they must tell an employee about the Non-Compete and provide them with a copy of the document. Finally, Non-Competes in Maine cannot take effect until one year after the employee is hired or six months after the employee signs the agreement, whichever is later.
In Maryland, Non-Competes are not enforceable against employees who make less than or equal to $15 per hour or $31,200 per year. Beyond that, for other workers, Non-Competes are allowed as long as they go along with an employment relationship and restrictions on geographic reach and duration are no broader than necessary to protect legitimate business interests of the employer. They must also not place an undue hardship on the employee or be against public policy.
In Massachusetts, according to Mass. Gen. Laws c. 149, § 24L, Non-Competes can be enforceable as long as they are narrowly tailored to protect legitimate business interests and limited with respect to the time, geographic reach, and scope restrictions. They must also not be against public policy. Massachusetts also has new notice requirements, giving the employee time to review the document and get an attorney's help, if desired. There are a number of exemptions, however, including employees terminated without cause or who were laid off. Non-Competes cannot be enforced against them. Doctors, nurses, psychologists, social workers, and broadcasters are also exempt.
Michigan
Non-Competes in Michigan, under Mich. Comp. Laws § 445.774, can be enforceable as long as they are protecting a legitimate business interest, are not longer than one year in time, and are reasonable as to geographic reach, type of employment, and scope. They must not be harmful to the public.
In Minnesota, Non-Competes can be enforceable if they protect an employer's legitimate business interest and are not broader than that. They also must not place undue hardship on the employee.
In Mississippi, Non-Competes must be reasonable and specific with regard to time and geographic reach restrictions. The equities of hardship are balanced between employer and employee and public interest is considered.
In Missouri, Non-Competes must be reasonably necessary to protect an employee's legitimate business interests and reasonable with respect to time and geographic reach restrictions. The employee must not be unreasonably restrained.
Non-Competes in Montana are only enforceable in situations related to the sale of a business or the dissolution of a partnership.
Non-Competes in Nebraska can be enforceable if they are not unduly harsh or oppressive on the employee, if they are reasonable and not injurious to the public, and if they are no broader than what is reasonably necessary to protect the employer's legitimate business interest.
In Nevada, under Nev. Rev. Stat. § 613.195-200, Non-Competes must meet four factors to be enforceable. They must (1) be supported by valuable consideration, (2) not create any restraint on the employee greater than what is required to protect employer, (3) not place an undue hardship on the employee, and (4) be appropriate in relation to the consideration. Consideration is what the employee receives in exchange for the contract.
In New Hampshire, Non-Competes may be enforceable if they are narrowly tailored in a way that's not broader than necessary to protect the legitimate interests of the employer. They must not place an undue or disproportionate hardship on the employee and they must not be against the public interest. There are also notice requirements for when the employee must receive a copy of the document prior to the employment. Physicians are exempt.
Non-Competes in New Jersey may be enforceable if they protect a legitimate business interest, do not place an undue burden on the employee, and are not injurious to the public. They also must be narrowly tailored as to time, geographic reach, and scope. Psychologists are exempt, as are in-house attorneys.
In New Mexico, Non-Competes may be enforceable as long as they are reasonable and do not place a great hardship on the employee in comparison to the benefits for the employer. They must be reasonable as to the employer, employee, and public. There are exemptions for clinical health care providers, but there are also detailed limits to those exemptions.
Non-Competes in New York may be enforceable only if they are reasonable as to time and geographic reach and are not broader than necessary to protect an employer's legitimate interests. The Non-Compete must also not place an undue hardship on the employee and must not be injurious to the public.
Although Non-Competes are not favored in North Carolina, they can be enforceable if they are reasonably necessary to protect a legitimate business interest, reasonable as to time and geographic reach, and not against public policy. They must also be in writing and as part of an employment contract to be valid.
Non-Competes are not permitted in North Dakota, as under N.D. Cent. Code § 9-08-06, except as may be related to business sale or dissolution.
Non-Competes may be enforceable in Ohio if they are not more restrictive than necessary in order to protect an employer's legitimate business interest. They must not place an undue hardship on the employee and they must not be injurious to the public interest. There are a number of different points Ohio courts consider when determining the enforceability of a Non-Compete, such as the restrictions on time and geographic reach, the employee's relationship to customers, and the employee's possession of confidential information, among others.
Non-Competes are not permitted in Oklahoma, codified in OK Stat. § 15-219A.
Non-Competes are generally not favored by Oregon courts, but may be enforceable in certain limited circumstances (outlined in Or. Rev. Stat. § 653.295) such as proper notice to the employee (at least two weeks before employment or in conjunction with an advancement), the type of employee (executives, administrative employees, professionals who are salaried and meet minimum compensation numbers), and as long as the employer has a protectable interest. Protectable interests include trade secrets, confidential information, and certain investments in on-air broadcasters. Non-Competes may not be more than 18 months in length after the employment ends.
In Pennsylvania, Non-Competes are not favored, but may be enforceable as long as they go along with employment. They must be reasonably necessary to protect the employer's legitimate interests and, as many other states, must be reasonable with regard to their time and geographic reach restrictions.
In Rhode Island, Non-Competes are not favored, but may be enforceable as long as they are reasonable as related to the protectable interests of the employer. Physicians are exempt.
In South Carolina, Non-Competes may be enforceable as long as they are necessary to protect a legitimate business interest. They must be reasonable with regard to their time and geographic reach limitations and cannot cause undue hardship to the employee. They must also be reasonable from a public policy perspective.
Non-Competes in South Dakota are permitted and enforceable as long as the Non-Compete only restricts the former employee from carrying on the same business or profession as the employer. The Non-Compete must also not last more than two years and must be specific with regard to its geographic scope restrictions.
Non-Competes in Tennessee may be enforceable as long as the restrictions are reasonable with regard to time and geographic reach. They must also be necessary to protect a legitimate interest and not cause undue hardship to the employee or be against the public interest. Physicians may be exempt, depending on the circumstances.
In Texas, under Tex. Bus. & Com. Code §§ 15.50-.52, Non-Competes must go along with an otherwise enforceable agreement. They must also be reasonable with regard to the time, geographic reach, and scope restrictions, and not broader than necessary to protect a legitimate business interest. Physicians may be exempt, depending on the circumstances.
In Utah, Non-Competes may be enforceable as long as they are necessary to protect a legitimate business interest and are reasonable with regard to time, geographic reach, and scope restrictions (there is a relatively new one-year limit on time). There must also not be any bad faith in the negotiations of the agreement. Broadcasters may be exempt, depending on the circumstances.
In Vermont, Non-Competes are enforceable as long as they are necessary to protect a legitimate business interest. They must not be unnecessarily restrictive to the employee and should be limited as to their restrictions for time, geographic reach, and the particular industry. As with many other states, they must not be against public policy.
Non-Competes in Virginia are enforceable, as long as they are very narrowly written - in other words, they must not be broader than necessary to protect a legitimate business interest for the employer. They must be reasonable as to their restrictions for time, geographic reach, and scope, and they must not cause an undue hardship on the employee or be oppressive against the employee's ability to earn. Finally, they must be reasonable according to (and clearly, not against) public policy.
In Washington, legislators have recently passed a more restrictive framework around Non-Competes than there has been in the past. Now, Non-Competes are only enforceable if the employee earns more than $100,000 a year or the independent contractor earns $250,000 a year from the employer proposing a non-compete, the employer discloses terms of the Non-Compete when making an offer or earlier, the employer pays employees that are laid off but were subject to Non-Compete agreements, and the Non-Compete does not last longer than 18 months.
In West Virginia, Non-Competes are enforceable if they go along with a legal contract and are not broader than reasonably necessary to protect a legitimate business interest. They must also be reasonable with regard to their time and geographic reach restrictions, not cause the employee any undue hardship, and not be harmful to the public.
According to Wis. Stat. Ann. § 103.465, Non-Competes can be enforceable if they are reasonably necessary to protect an employer and reasonable with regard to their time and geographic reach restrictions. The restrictions cannot be unreasonable as to the employee or public.
Non-Competes in Wyoming may be enforceable if they go along with a valid legal agreement. The agreement that the Non-Compete is ancillary to must also be fair itself. The Non-Compete provisions themselves must not be broader than necessary to protect a legitimate business interest and should be reasonable with regarding to their restrictions on time and geographic reach. The employee must not face undue hardship and the public interest must not be harmed.
In all the states that allow Non-Competes, consideration for a Non-Compete Agreement is required. As noted above, consideration is what the employee receives in exchange for being bound to the Non-Compete. Most states allow a new offer of employment to be enough consideration. An advancement into a new position that comes with a financial raise may also be enough consideration.
Not all states have their framework around Non-Competes codified into statute. The states that do are noted above; other states have built their laws around Non-Competes from case precedent.
Overall, the tide is shifting in many states to generally disfavor Non-Competes, or at least disfavor Non-Competes for certain workers, such as low-income workers.
As noted above, always be sure to get an attorney's help for any questions you may have about your specific state.
About the Author: Anjali Nowakowski is a Legal Templates Programmer at Wonder.Legal and is based in the U.S.A.