Noncompete Legislation Momentum Continues at the State Level

On Feb. 12, Workspan Daily published an article, “Noncompete Agreements: The Current State at the State Level,” that summarized legislation to that point — in terms of active laws and bills — focused on restrictive covenants between employees and their employer.

Since that first article, 12 states have introduced bills or passed laws that provide guardrails — some for employers, some for employees — for using noncompetes.

This follow-up article serves as an update on the subject. Total rewards professionals, particularly those in organizations that have employees in multiple states, need to be aware of what is on the table and any applicable employment law changes that may be forthcoming.

Dozen Districts Dot the Docket

States are addressing noncompete agreements in their own ways. Here is a state-by-state synopsis of bills introduced since Feb. 12.

California: Senate Bill 351, introduced Feb. 12, allows for noncompete agreements related to the sale of a business, provided they do not function as a standalone employee noncompete pact. Voids (or renders unenforceable) contracts involving the acquisition of physician or dental practices by a private-equity group or hedge fund that restrict providers from competing after leaving or from commenting on quality of care, ethics, etc. Current status: Referred to the Senate Judiciary Committee.

Connecticut: House Bill 7196, introduced March 6, voids noncompetes for all workers except those earning at least three times the state’s worker minimum wage or five times the state’s independent contractor minimum wage. Restrictive pacts may last no longer than one year and must be deemed necessary to protect trade secrets, confidential information, etc. Gives the state attorney general investigation and enforcement powers. Fines up to $5,000 for violations may be imposed. Current status: Assigned to the House Labor and Public Employees Committee.

Florida: House Bill 1219, enrolled April 24, establishes parameters, including an employee wage minimum, to define certain noncompete and leave agreements as being allowable under current state law. If the parameters are met, an employer seeking to enforce a contract is entitled to a court injunction blocking a former employee from working for a competing business while a legal dispute runs its course. In essence, this makes it easier for businesses to enforce these pacts against former employees. Current status: Remains in its early stages; sponsored by House Commerce Committee.

Idaho: House Bill 486, introduced April 3, bans noncompetes except in cases where employees earn more than $250,000 per year or are related to a business’ sale or dissolution. Current status: Filed in the Office of the Chief Clerk.

Kentucky: House Bill 690, introduced Feb. 19, prohibits employers from entering into, enforcing or threatening to enforce a noncompete with any employee making less than $2,000 a week. Employer must notify applicable employees about this ban. Current status: Assignment pending to House Economic Development and Workforce Investment Committee.

Massachusetts: Senate Bill 1366, introduced Feb. 27, prohibits the use of noncompetes for veterinarians in most instances. Current status: Assignment pending to Joint Labor and Workforce Development Committee.

Missouri: House Bill 1326, introduced Feb. 17, prohibits the use of noncompetes for non-exempt/hourly workers. Current status: Has been read twice but not advanced to a particular committee for review.

North Carolina: House Bill 269, introduced March 3, voids (or renders unenforceable) noncompetes for employees annually earning less than $75,000 per year and employer-to-employer no-poach agreements. Disallows employers from using a noncompete as a condition of employment. Current status: Assignment pending to House Commerce and Economic Development Committee. … Senate Bill 673, introduced March 26, prevents noncompetes between hospitals and certain healthcare professionals. Current status: Assignment pending to Senate Rules and Operations Committee. … House Bill 973, introduced April 14, voids restrictive covenants (other than confidentiality or training repayment agreements) for employees earning less than the “annual mean wage” of workers in the state at the time of signing or at any time during the employment. Bans noncompetes except in instances of trade secret protection, client/customer relationships, etc. In this latter case, noncompetes can’t exceed one year in duration. Employees have 14 days to consider signing any restrictive covenant. Current status: Assignment pending to House Rules, Calendar and Operations of the House Committee.

Pennsylvania: House Bill 1166, introduced April 7, seeks amendments to the 1979 Health Care Facilities Act by preventing noncompetes between hospitals and certain healthcare professionals. Current status: Assignment pending to House Labor and Industry Committee.

Rhode Island: Senate Bill 703, introduced March 7, prevents noncompetes between healthcare facilities and their physician assistants. For these medical professionals, noncompetes up to but not surpassing five years in length are allowed when used as part of a healthcare practice’s purchase or sale. Current status: Assignment pending to Senate Health and Human Services Committee.

Texas: House Bill 4067, introduced March 7, bans noncompetes for all workers and senior executives, except in instances involving a business’ sale. Current status: Assignment pending to House Workforce Subcommittee Committee.

Wyoming: Senate Bill 107, passed March 19, voids noncompete agreements with employees with limited exceptions. Noncompetes are still allowed in some cases (e.g., sale of a business, protection of trade secrets, recovery of employer-provided training or relocation expenses). Current status: Governor signed the bill into law on March 19.

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