Congress May Step in to Prevent Overreaching Non-Competes

The trade off for a non-compete or restrictive covenant is pretty clear: Company will invest in employee, train employee, and expose employee to the market — and employee will not turn around and use all that information and exposure to hurt Company on behalf of a new employer.

But what was once reserved for top company executives has trickled its way down to lower-level employees. With minimum wage and other low-level employees the trade-off does not appear so clear. These individuals generally do not possess the valuable company information or market exposure that might justify being locked out of an industry for an extended period of time. Companies that impose restrictions on lower level employees are usually either (i) thoughtful but overly cautious; or (ii) overly-standardized without thinking about the implications of the documents they ask their employees to sign.

Democrats in Congress are asking companies to think twice before imposing a one-size-fits-all restrictive covenant on employees. They have introduced a bill that would prohibit employers from requiring minimum-wage workers to sign non-competition agreements. The Mobility and Opportunities for Vulnerable Employees Act—MOVE—would also require companies to inform applicants that a non-compete is part of the hiring process.

The MOVE Act is still just a proposal, and may never become law. But that bill is not the only reason to think before you impose a restrictive covenant. Keep in mind that to be enforceable, a restrictive covenant usually must be narrowly tailored to a protectable interest. A one-size-fits-all agreement imposed on top executives and minimum wage workers alike may not satisfy that test. If you are considering asking your employees to sign a restrictive covenant, or if you have concerns that the document you have now may not be right for all of your employees, it is probably time to check with your lawyer.

Contact info: Meredith S. Campbell Co-Chair, Employment and Labor Group, Shulman Rogers [email protected] | T 301.255.0550 | F 301.230.2891