In the last few years a number of states have passed legislation aimed at regulating the use of non-compete clauses for certain categories of workers. Recent reforms include the Illinois Freedom to Work Act (effective 1/1/2017), which prohibits non-compete agreements for workers who earn the greater of (1) the federal, state, or local minimum wage or (2) $13.00 an hour. Because the federal and Illinois minimum wage rates are both currently below $13.00 per hour, $13.00 an hour is the operative figure for application of this statute’s prohibition. Hawaii also passed a law which became effective in 2015 and bars high-tech companies in Hawaii from requiring their employees to enter into non-compete and non-solicit agreements as a condition of employment. In 2015, New Mexico passed legislation limiting the enforceability of non-compete agreements for health care practitioners. The restrictions in New Mexico do not apply to agreements between health care practitioners who are shareholders, owners, partners, or directors of a health care practice.
President Obama recently issued a “State Call to Action on Non-Compete Agreements” which calls on state policymakers to implement best practice objectives for non-compete agreements, which include: (1) banning non-compete clauses for certain categories of workers, such as those working for low wages or working in public health and safety fields; (2) improving transparency and fairness of non-compete agreements by disallowing them unless proposed before a job offer and requiring consideration for workers signing agreements; and (3) incentivizing employers to write enforceable contracts by rendering contracts with unenforceable provisions void in their entirety. The paper notes that multiple states have recently considered legislation regulating non-compete agreements. For additional details regarding the position of the White House regarding this trend, see the State Call to Action on Non-Compete Agreements.
