Pro-Employee Legislation Could End the Use of Non-Compete Agreements

While use of non-compete agreements by employers is common practice outside of California, proposed legislation may eliminate this practice in place of a pro-employee agenda. On April 26, 2018, three Senate Democrats introduced the Workforce Mobility Act, which included prohibition of the use of non-compete agreements, while still allowing employers to enter in to agreements that would protect their trade secrets. The reasoning for this legislative push centers around the notion that non-compete agreements reduce worker bargaining power, stifle competition and innovation, and hurt workers looking for entrepreneurship opportunities.

Additionally, the proposed legislation would require employers to notify employees that non-compete agreements are illegal by prominently posting a notice in the workplace stating the same. The real kicker is in the fines and actions allowed if this legislation is enacted. Employers could be fined up to $5,000 for each aggrieved employee and for each week the employer violates the statute, along with $5,000 fine for each week an employer violates the notice posting requirement. Workers who may be subjected to non-compete agreements would also have a private right of action to pursue lawsuits in federal court to address a violation and seek damages.    

STEPS TO CURB LEGISLATION EFFECTS

Don’t freak out yet, this legislation is in its early stages and could very well lose steam before it ever makes it out of Committee. However, the fact that California has already enacted a state law barring non-competes suggests that a similar ban, either on the state or federal level, is likely to resurface in the future. While no changes are required at this point, it would be wise for employers to consider new policies and creative ways to retain employees in a world barring non-competes.

Please feel free to contact your Thompson Coe attorney or myHRgenius@thompsoncoe.com to discuss ways to improve retention of your employees and for guidance on non-compete agreements and enforcement.

Thompson Coe and myHRgenius Tip of the Week is not intended as a solicitation, does not constitute legal advice, and does not establish an attorney-client relationship.