• Paul Peter Nicolai

Limiting Non-Competes

Updated: Feb 15

We have reported that states are restricting the operation of non-compete and other restrictive post-employment covenants. The latest include:


Nevada


Bans the use of non-competition provisions against employees paid solely on an hourly basis, exclusive of any tips or gratuities. It bars employers from suing former employees to prevent them from providing services to an employer’s customer unless the former employee solicited the customer or is otherwise violating a non-competition covenant.


Employees now have a stronger basis to seek dismissal of enforcement suits or to seek sanctions or fees against employers who bring suit in violation of the statute.


The law also inserts a new requirement that any blue-pencil revisions by a court must not impose undue hardship on the employee. It means that when revising an overbroad non-competition covenant, Nevada courts must now take into account the equitable interests of the employee.


There is a new basis for employees to seek attorney fees and costs, even if they are the ones who initiated a suit seeking to declare a non-competition covenant invalid. It requires a mandatory fee award to an employee in any case where a court finds that a non-competition covenant violated the prohibition against application to an hourly employee or where an employer has attempted to enforce a non-competition covenant against an employee who has not solicited a customer.

Washington, D.C.


The City Council of Washington, D.C., banned non-compete provisions for all employees except certain highly compensated medical specialists.


Oregon


The governor of Oregon signed a law which made four major changes to the state’s existing regulations of non-competition covenants. The new law (1) makes overbroad non-competition covenants void, not voidable; (2) reduces the allowed applicable post-employment period for a non-competition covenant from 18 months to 12 months; (3) limits the use of non-competition agreements to employees whose gross salary and commissions exceed $100,533 per year; and (4) requires an employer who wants to impose a non-compete on an employee making less than the income threshold to agree in writing to provide that employee with either 50 percent of the employee’s gross salary and commissions at the time of termination or $100,533 for the full time the covenant applies.


Illinois


Public Act 102-0358 overhauls Illinois’s statutes governing restrictive covenants. It prohibits the use of non-compete covenants for employees making less than $75,000 or employees who are subject to union contracts.

It prohibits the use of non-solicitation covenants for employees making less than $45,000 per year.


The law prevents employers from enforcing both non-competition and non-solicitation covenants against employees who were furloughed or laid off due to business circumstances or related to the COVID-19 pandemic.



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