2018 Mid-Year Non-Compete Laws Update

Map_of_USA_showing_state_namesMore and more states are amending their non-compete statutes to make them more employee-friendly.  This trend, spurred by the White House report that highlighted the prevalence of non-compete agreements among low-skilled workers coupled with the revelation that some of the largest  employers, like Jimmy John’s and Amazon, were requiring their sandwich-makers and warehouse employees to sign non-compete agreements, has continued into 2018.  

Thus, on the heels of changes implemented in 2017 by California, Illinois and Nevada, which amended their non-compete laws to help protect employees’ right to change employers, in the first half of 2018, Utah, Idaho, and Colorado, enacted their own versions of employee-friendly laws.

UTAH – Now Restricts Use Of Non-Competes In Broadcasting Industry

In March 2018, Utah amended its non-compete statute to restrict the use of non-compete agreements in broadcast journalism.  Specifically, employers may enforce non-compete agreements against employee in the broadcasting industry only if: (1) the employee receives a salary of at least $913 per week or $47,500 a year; (2)  the non-compete clause is part of a written employment agreement with a term of less than four years; and (3) the employee was terminated “for cause” or he/she breached the employment agreement in a manner that resulted in his or her separation.

IDAHO – Has Modified Standard of Proof For Non-Compete Enforcement Actions

This March, Idaho repealed an 2-year old amendment to its non-compete law that was added back in 2016.  The amendment created a rebuttable presumption of irreparable harm with respect to “key employees” and “key independent contractors,” thus putting the burden on these employees to prove that they had no ability to adversely affect the employer’s legitimate business interests as a result of their competitive employment.  

The 2018 bill repealed this rebuttable presumption of irreparable harm. Therefore, Idaho has effectively placed the burden back on companies to establish a likelihood of irreparable harm before an injunction in a breach of non-compete case can be issued.

COLORADO – Now Prohibits Physician Non-Competes for Rare Disease Patients

Colorado generally allows non-compete agreements with physicians when certain conditions are met.  The 2018 amendment to the non-compete statute added a paragraph to permit physicians to continue to treat patients with rare disorders without liability, even when providing such service would otherwise violate their non-compete agreements. Thus, the amendment protects physicians and their new employers from damages for providing care to patients with a rare disorder, as defined in accordance with the criteria developed by the National Organization For Rare Disorders, Inc., or any successor organization. 

Many other states are considering amendments to their non-compete statutes and we are likely to see more changes in that area of the law in the second half of 2018.  The days of one-size-fits-all non-compete agreements for multi-state employers are gone, and now companies need to make sure that their non-compete agreements are compliant in all the applicable jurisdictions. 

Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice Her practice includes commercial, intellectual property and employment litigation.  You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108 or fill out the form below.

 

 

Is Your Non-Compete Agreement Enforceable?

stevecarelEvery state has its own rules about the enforceability of non-compete agreements, with many technical requirements, carve outs for certain industries like medical and technology, and various presumptions or public policy-driven rules regarding employers’ ability to limit competition from former employees.

Recently, I’ve been receiving a lot of inquiries from Texas employers or companies that are moving to Texas regarding: (1) whether non-compete agreements are enforceable in Texas?  (2) what types of non-compete agreements are enforceable in this state?  and (3) when should I enforce my non-compete agreement against a departed employee? Many of these companies already have non-compete agreements with their employees, but are worried about their enforceability in Texas courts. 

I have previously written about how to enforce non-compete agreements in Texas, here, here, and hereSo, the answer to the first question is a resounding “Yes, non-compete agreements are enforceable in Texas.”

The answer to the second question is that, generally, only non-compete agreements with reasonable geographic, time and scope restrictions are enforceable in Texas. 

Assuming a positive answer to the first two questions, the answer to the third question depends on the circumstances of a particular departed employee and the answer to the following questions:

  • What position is the employee in at your company? C-Suite? Sales? Another position that gives him or her access to sensitive information within the company?
  • What special skills the employee has and what specialized training the employee has received in that position? 
  • Is the company where the employee is going a competitor of your company?
  • What position is the departed employee going to take at his or her new place of employment? Is it the same or similar position to what he or she was doing at your company?
  • How likely is it that the employee will use the confidential information he learned while working for you at his new job?
  • What activities does your non-compete prohibit the employee from doing?
  • For how long?  Remember, it must be reasonable.
  • What area does it cover? Reasonableness is key. 
  • Did you provide the right type of consideration for the employee’s promise not to compete?
  • Do you have a non-solicit agreement that will protect your company without having to enforce the non-compete agreement?

All of these factors will come into play if you decide to enforce a non-compete agreement in Texas. Additionally, you will need to consider where to file the lawsuit, the evidence that you will need in order to obtain a temporary restraining order against the employee, and a host of procedural and discovery issues that come along with litigating a non-compete case. 

Bottom Line: Enforcing non-compete agreements is as much of a business decision as it is a legal one.  Having a non-compete agreement that is legally enforceable, allows you to decide whether it makes business sense to enforce it against a particular employee.  Without a legally enforceable non-compete agreement, however, the business reasons may not even matter. 

Leiza litigates non-compete and trade secrets lawsuits in a variety of industries. If you are a party to a dispute involving a noncompete agreement in Texas, contact Leiza at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108 or fill out the form below.