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Noncompete Agreements: An Overview of the Law as it Stands . . . For Now
Noncompete Agreements: An Overview of the Law as it Stands . . . For Now
April 12, 2023
Noncompete Agreements: An Overview of the Law as it Stands . . . For Now
What Is A Noncompete Agreement?
A noncompete agreement is an agreement between an employer and employee that the employee will not engage in competitive activity against the employer after the employment relationship ends. These agreements may state that the employee cannot work for a competitor or make a competing product, and typically include durational and geographical limits. More general information on noncompete agreements can be found here.State Laws on Noncompetes
California, North Dakota, and Oklahoma broadly prohibit noncompete agreements between employers and employees, but each state’s prohibition contains narrow exceptions. For example, Oklahoma allows an employer and employee to agree that the employee cannot solicit sales or services from customers of the former employer after the employee’s departure. Both California and North Dakota allow noncompetes for the sale of a business (preventing the former owner from competing in the same geographic area) and the dissolution of Limited Liability Companies (LLCs) or Partnerships. A proposed New York law would also broadly prohibit noncompete agreements subject to very narrow exceptions. Of the remaining 47 states that generally allow noncompete agreements, 11 of them and the District of Columbia restrict their use based on the type of employee or employee’s income. The list below details which states have these income or employee classification restrictions as well as the worker threshold or employee classification restricted.Income Threshold
Colorado – $101,250 Illinois – $75,000 Maine – 400% of federal poverty level Maryland – $15/hr or $31,200 annually New Hampshire – 200% of federal minimum hourly wage Oregon – $100,533 Virginia – Average weekly wage less than state average Washington – $100,000 District of Columbia – $150,000Worker Classification Where Noncompetes Prohibited
Massachusetts – FLSA Nonexempt Workers Nevada – Hourly Workers Rhode Island – FLSA Nonexempt Workers
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