Massachusetts employers and employees have enough to contend with trying to keep abreast of the judicial and legislative fits and starts of non-compete reform within the state, let alone developments in other states. It is important to remember that non-compete law varies widely from state to state, and these variations may come into play if employees are in different states or if a former employee is moving to a new state. Below you will find just a few of the many variances in state non-compete law.
California and North Dakota have statutory prohibitions on almost all non-competition agreements. Employees working in those states—or in some cases even employees leaving work to secure new employment in those states—cannot be subject to traditional non-competes. In Colorado, non-competes are enforceable only in very limited circumstances, such as for the protection of trade secrets. Even in states that ban non-competes, however, trade secret or traditional common law claims may be available to protect business interests.
Other states have quirks that unwary employers may find devastating to their ability to enforce non-competes. For example, an Illinois appellate court recently held that an employee who has not worked for the employer for at least two years has not received sufficient consideration to justify a non-compete. Meanwhile, in Louisiana, which differs from the other 49 states as it follows a French-influenced Civil Code, a non-compete is invalid unless it contains a listing of the specific parishes from which the employee is restricted.
One of the most significant variations in state non-compete law is whether judges are permitted to reform overbroad agreements. For example, in Massachusetts, a judge is permitted to “blue pencil,” or rewrite a non-compete so that it is reasonable. Thus, a judge could reduce a three-year non-compete to a one-year non-compete and enforce the remainder of the agreement. However, in other states such as Wisconsin or North Carolina, a judge is only permitted to “red pencil,” or strike overbroad language from the agreement. Thus, although a judge could not reduce a three-year non-compete to a one-year non-compete, the judge could completely strike an overly broad non-compete provision while enforcing a reasonable non-solicitation provision.
These examples illustrate just a few of the major variances in state non-compete law. For a more comprehensive analysis, you may find it useful to review Beck Reed Riden’s 50-State Non-Compete Survey, or similar resources.