Massachusetts employers and employees have enough to contend with trying to keep abreast of the judicial and legislative fits and starts of non-compete reform within the state, let alone developments in other states. It is important to remember that non-compete law varies widely from state to state, and these variations may come into play if employees are in different states or if a former employee is moving to a new state. Below you will find just a few of the many variances in state non-compete law.
Outright Bans
California and North Dakota have statutory prohibitions on almost all non-competition agreements. Employees working in those states—or in some cases even employees leaving work to secure new employment in those states—cannot be subject to traditional non-competes. In Colorado, non-competes are enforceable only in very limited circumstances, such as for the protection of trade secrets. Even in states that ban non-competes, however, trade secret or traditional common law claims may be available to protect business interests.
Idiosyncrasies
Other states have quirks that unwary employers may find devastating to their ability to enforce non-competes. For example, an Illinois appellate court recently held that an employee who has not worked for the employer for at least two years has not received sufficient consideration to justify a non-compete. Meanwhile, in Louisiana, which differs from the other 49 states as it follows a French-influenced Civil Code, a non-compete is invalid unless it contains a listing of the specific parishes from which the employee is restricted.
Reformation
One of the most significant variations in state non-compete law is whether judges are permitted to reform overbroad agreements. For example, in Massachusetts, a judge is permitted to “blue pencil,” or rewrite a non-compete so that it is reasonable. Thus, a judge could reduce a three-year non-compete to a one-year non-compete and enforce the remainder of the agreement. However, in other states such as Wisconsin or North Carolina, a judge is only permitted to “red pencil,” or strike overbroad language from the agreement. Thus, although a judge could not reduce a three-year non-compete to a one-year non-compete, the judge could completely strike an overly broad non-compete provision while enforcing a reasonable non-solicitation provision.
These examples illustrate just a few of the major variances in state non-compete law. For a more comprehensive analysis, you may find it useful to review Beck Reed Riden's 50-State Non-Compete Survey, or similar resources.
PartnerChristopher H. Lindstrom chairs Nutter’s Litigation Department. He also chairs the firm’s Labor, Employment and Benefits practice group. Clients rely on Chris’ broad experience in complex civil litigation matters that ...
In the rapidly changing business world, protecting a company's human capital and proprietary information is critical to maintaining a competitive edge. On this blog, Nutter's experienced Business Litigation and Labor, Employment & Benefits attorneys offer news and insights on all aspects of restrictive covenants and trade secrets—from analyzing a rapidly evolving body of case law, to summarizing new legislation and legislative efforts, to providing other need-to-know updates and more.
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