Employers desiring to require low-wage earners to sign and comply with non-competition agreements will find that such agreements are becoming increasingly less enforceable. Courts across the country are refusing to enforce non-competes against low-wage employees, and some states are also taking legislative action to prohibit these agreements.
For example, in 2017, Illinois enacted the Illinois Freedom to Work Act, which prohibits employers from entering into non-competes with “low-wage workers,” defined as employees making the greater of $13 per hour or the federal minimum wage.
Similarly, New Hampshire’s S.B. 197, which takes effect on September 8, 2019, bars employers from entering into covenants not to compete with employees who earn an hourly rate less than or equal to 200% of the federal minimum wage, which translates to $14.50/hour.
Maine also recently passed An Act to Promote Keeping Workers in Maine, which is set to go into effect on September 18, 2019. Among other things, the law prohibits employers from requiring or permitting employees earning at or below 400% of the federal poverty level to enter into non-compete agreements.
Rhode Island’s Governor Raimondo signed the Rhode Island Noncompetition Agreement Act into law on July 15, 2019. The law prohibits noncompetition agreements with several groups of employees, including those earning less than 250% of the federal poverty level.
These are only a few examples of the continuing legislative trend to restrict non-compete provisions as they relate to low-wage employees, and they serve as a reminder of the best practice rule to reserve non-competes for only those employees in true positions of competitive power. Employers may also consider alternatives to protect their legitimate business interests, such as having all employees sign separate confidentiality agreements.
Credit myHRcounsel, one of USA’s Valued Partners.