James says noncompete agreements—the legally binding documents that many businesses require employees to sign to prevent them from leaving to work with an organization’s competitors, usually for a specified period and in a limited geographic
area—are undercutting Domo’s ability to attract qualified workers. Additionally, some would-be investors are so skittish about
the labor supply in Utah that they’ve pressured him to move his
company to California, one of the few states where the agreements aren’t allowed.
James is far from alone in speaking out against the arrangements. They have long been reviled by employee advocates for
putting pressure on workers to stay in jobs they no longer want.
And it’s not even clear that the arrangements are particularly
“If a person wants to leave a job, can you really stop them
from taking another one?” asks Cathy Donahoe, vice president
for HR at Domo.
About 1 in 5 U.S. workers— 28 million people—currently
function under noncompete agreements, according to a 2017
study by researchers at the University of Maryland and the University of Michigan. And nearly 40 percent have been required
to sign one at some point in their careers.
The growth of the knowledge economy and the penchant
today’s workers have for job-hopping workers are likely driving
many employers to rely on such restrictions to provide an added
layer of protection, says Russell Beck, a partner at the Boston
law firm Beck Reed Riden. “Intellectual property is easy to take,
compared to bricks and mortar,” he says.
No one disputes a company’s right to protect its proprietary
information. But when considering whether to use these restrictive covenants, you’ll need to carefully balance the company’s
business interests against your workers’ right to move freely from
job to job—while keeping in mind the many state laws regulating
the use of noncompetes.
State Noncompete Laws by the Numbers
Many states, concerned that noncompete agreements could be harmful to workers and the economy, restrict what employers can require.
Source: Employee Noncompetes: A State by State Survey, Beck Reed Riden LLP, 2017, and Non-Compete Reform: A Policymaker’s Guide to State Policies, White House, 2016.
26 states have laws governing the enforcement
of the arrangements:
Alabama, Arizona, Arkansas, Colorado, Connecticut,
Delaware, Florida, Georgia, Hawaii, Idaho, Illinois,
Louisiana, Maine, Michigan, Missouri, Montana, Nevada,
New Hampshire, New Mexico, North Carolina, Oregon,
South Dakota, Texas, Utah, Vermont and Wisconsin.
21 states and the District of Columbia have no
specific statutory reference to noncompetes:
Alaska, Indiana, Iowa, Kansas, Kentucky, Maryland,
Massachusetts, Minnesota, Mississippi, Nebraska, New
Jersey, New York, Ohio, Pennsylvania, Rhode Island,
South Carolina, Tennessee, Virginia, Washington, West
Virginia and Wyoming
3 states prohibit the agreements, regardless
of whether they were signed within the state or
California, North Dakota and Oklahoma
25 states and Washington, D. C., prohibit
noncompetes for those in certain
professions, the most frequent of which are
broadcasters and medical practitioners.
Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware,
Florida, Hawaii, Idaho, Illinois, Iowa, Kansas, Louisiana, Maine,
Massachusetts, Missouri, New Hampshire, New Jersey, New
Mexico, North Carolina, Rhode Island, Tennessee, Texas,
Vermont and Washington