This summer, New York Attorney General Eric T. Schneiderman has reached agreements with a number of companies curtailing their use of non-competition agreements with respect to non-executive and low-wage employees in New York. The issue appears to have caught the attention of Mr. Schneiderman, who stated recently that “restricting rank-and-file workers from being able to find other jobs is unjust and inappropriate” and “workers should be able to change jobs without fear of being sued.”
For example, on August 4, 2016, Examination Management Services, Inc. (“EMSI”), a medical information services provider headquartered in Texas, agreed to stop using non-compete agreements for most of its employees in New York. Prior to the agreement, EMSI’s mandatory non-compete agreements prohibited employees for nine months after leaving the company from working for competitors within fifty miles of any locations they worked for EMSI.
As another example, on June 15, 2016, the legal news website Law360 reached a similar agreement with Mr. Schneiderman’s office. Prior to that, Law360 required a majority of employees, including all editorial employees, to sign an employment contract with a non-compete provision that prohibited them for one year after leaving the company from working for any media outlet that provides legal news.
The Attorney General’s actions on this issue may be part of a larger trend. A March 2016 report by the U.S. Treasury Department found that non-compete agreements cause various harms to “worker welfare, job mobility, business dynamics, and economic growth more generally.” A May 2016 report published by the White House reached similar conclusions. Employers thus should make sure that their non-compete agreements with employees protect legitimate business interests such as safeguarding trade secrets and/or customer relationships.