egregious applications of noncompetes in our area,” says James E. Rooney,
head of the pro-business group. The organization, however, still supports management’s right to use the agreements for upper-level employees who are privy
to trade secrets.
Protecting the Company
Business owners have always worried about rogue employees stealing their stuff,
including critical proprietary information. That’s why, despite dissent from some
corners, plenty of organizations defend the use of noncompetes as a lawful practice that benefits companies and workers alike.
“[As an employee], I want to know that my company’s intellectual property
and customer relations, and a litany of company value, is protected so I have a
job,” says Randy Shumway, founder of the Cicero Group, a management consultancy in Salt Lake City.
Cicero Group requires some of its workers to sign the covenants, but Shumway has never felt the need to enforce one. “We try to be an honorable company,”
he explains. “Employees come, and when they leave, I want to wish them the
best.” The company would seek to enforce a noncompete only in response to an
egregious violation of the agreement, he says.
States Push Back
Despite the growing popularity of noncompetes among businesses, many states
are drawing the line on how far they can go.
California, North Dakota and Oklahoma ban noncompetes unless they are
part of the sale of a business. And more than two dozen states have attempted
to weaken the agreements’ impact by limiting the duration of the restrictions
and prohibiting their use in some professions, particularly broadcasting and
Increasingly, companies are also in the hot seat for requiring low-skilled, low-wage workers such as camp counselors and sandwich makers to sign restrictive
covenants. “I see employers going deeper into the ranks and broader with their
agreements,” Beck says.
More than one-third of workers without a bachelor’s degree report signing
a noncompete at some point in their careers, and 13. 5 percent of those earning
less than $40,000 have agreed to them, according to the Michigan-Maryland
study. These workers rarely have access to the kind of proprietary data the agreements were designed to protect.
“There is the inaccurate perception that noncompetes are about protecting
the keys to the castle and protecting trade secrets,” says Massachusetts state
Rep. Lori Ehrlich. The reality is that the agreements ensnare a broad swath of
In 2016, Jimmy John’s restaurants settled lawsuits filed by New York and Illinois by agreeing to stop requiring sandwich makers and delivery drivers to sign
restrictive contracts. In Illinois, the company will also pay the state $100,000
to create programs that promote best practices regarding the arrangements.
New York also settled a suit in 2016 against Law360, a legal news site that
required most of its employees to sign noncompete agreements. Eric Schneider-
man, the state’s attorney general, was particularly incensed that the mandate
applied to entry-level news assistants working their first jobs out of college.
“Unless an individual has highly unique skills or access to trade secrets, non-compete clauses have no place in a worker’s employment contract,” Schneiderman said in a statement.
Following the Jimmy John’s settlement, Illinois passed a law prohibiting
noncompetes for minimum-wage workers. Other states are considering similar
In a Nutshell
Many companies rely on post-employment agreements to keep employees
and former workers from stealing and
sharing trade secrets. Work with an attorney if you are considering this option,
and realize that this area of employment
law is evolving rapidly; there are no guarantees that a contract that’s legal when
signed will still be valid when you decide
to enforce it.
Customer nonsolicitation agreements
prohibit an individual from poaching a
former employer’s customers or clients
for his or her benefit or for the benefit of
Employee nonsolicitation contracts
prevent an individual from attempting
to hire or retain a former employer’s
Nondisclosure agreements lay out
terms that prevent former employees
from disclosing confidential proprietary
Noncompete agreements prevent
former employees from going to work
for, advising or otherwise engaging with
an organization’s competitors, usually
for a specified period and in a limited