Noncompetes Under New State Law Restrictions: Wage Requirements, Notice, Time, Layoffs, Proposed Federal Legislation

Recording of a 90-minute CLE webinar with Q&A


Conducted on Tuesday, July 14, 2020

Recorded event now available

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Program Materials

This CLE webinar will discuss recent state legislative changes and case law trends regarding noncompete agreements and other restrictive covenants in New York, California, Illinois, Washington, and other states, as well as look at the proposed changes to federal labor law. The panel will offer best practices for structuring enforceable contracts and explain how to determine whether existing agreements are lawful.

Description

Noncompetition provisions in employment agreements and, to a lesser extent, in business purchase agreements, have long been the target of state regulation. The rationale is that restraints on trade remove employees from the job market, and in the acquisition context, may remove property from commerce.

From New York's requirements that noncompetes protect only an identified and legitimate business interest to California's near ban on noncompetition restrictions, states are increasingly passing legislation that limits the enforceability of these agreements. Statutes have imposed income minimums for enforceability and required release if the employee is terminated without cause. Some states have required that independent consideration be paid to employees to create enforceability and narrowed the time-frame for enforcement. State laws are also addressing whether a noncompete would apply to agreements between two businesses exiting a joint venture.

State laws that apply strict requirements to noncompetition agreements are also attempting to limit the use in industries and positions that do not require particular technical expertise and skills. The statutory differences between states make it difficult for employers with regional or national reach to implement uniform noncompetition policies. These differences can frequently lead to complicated conflict-of-law issues, especially when employees move between states or work in different states for the same employer. This often leads to the courts of one state applying the law of another and can sometimes bring about unpredictable results.

Early in 2020, the Federal Trade Commission held a public workshop to examine if there was sufficient support to create a Commission Rule to restrict the use of noncompetition clauses in employer-employee contracts throughout the United States. It is currently unclear how the federal government can synchronize different state approaches under one national rule and whether such a rule would withstand judicial scrutiny.

Listen as our expert panel discusses this evolving issue to provide employment counsel practical advice on how to draft and negotiate noncompetition provisions in light of current state-specific restrictions.

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Outline

  1. Overview of noncompetition agreements
    1. Use in employment contract
    2. Use in business sales, joint ventures, other non-employment
  2. Common state restrictions
    1. Minimum income
    2. Release in event of layoffs
    3. Independent consideration
    4. Legitimate business interest
    5. Highly skilled employees
    6. Time, geography, scope
  3. State specific
    1. California
    2. New York
    3. Illinois
    4. Washington
    5. Maryland
    6. Others
  4. Federal response

Benefits

The panel will review these and other issues:

  • What caused the growth in the use of noncompetition provisions in employment contracts?
  • How and why are states restricting the use of noncompetition agreements?
  • How can a noncompetition provision be implemented properly in non-employment situations?

Faculty

Bindra, Amit
Amit S. Bindra

Partner
The Prinz Law Firm

Mr. Bindra focuses his practice on employment and executive agreements, noncompete, non-solicit and trade secret...  |  Read More

Milligan, Robert
Robert B. Milligan

Partner
Seyfarth Shaw

Mr. Milligan Co-Chairs the firm's Trade Secrets, Computer Fraud & Noncompetes Practice Group. His practice...  |  Read More

Redmond, Jennifer
Jennifer G. Redmond

Partner
Sheppard Mullin

Ms. Redmond is a partner in the Labor and Employment Practice Group in the firm's San Francisco office and is...  |  Read More

Other Formats
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Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

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DVD

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