Like Federal Government, States Taking Aim At Non-Compete Agreements

As Connecting the Dots has reported, both the National Labor Relations Board and the Federal Trade Commission have taken aim at non-compete agreements. (Read more about those efforts here and here. )

They are not the only ones.

According to AXIOS, more and more state governments want to do away with these agreements too. Indeed, last week, the New York State Assembly approved a bill that would ban non-compete agreements. The bill is now on the governor’s desk and she is expected to sign it.

Minnesota’s governor has signed a bill banning these agreements that will go into effect on July 1, 2023. Washington, D.C. also already has a law on the books that limits non-compete agreement to high earners, as do nine other states, including Colorado, Illinois, and Oregon.

Proposals to ban non-compete agreements have sparked widespread concern among the business community because they could affect businesses’ investment in employees and the protection of sensitive information and intellectual property.

Manufacturers use non-compete agreements only for select workers handling their most sensitive information. That information might include the details of a company’s most sophisticated processes and strategies, which cannot be allowed to fall into competitors’ hands. Not only do these employees handle the keys to a company’s success, but they are the recipients of significant investments in time, compensation and training.

By signing a non-compete agreement, they may, for example, agree not to share any sensitive information while serving in their integral role or not to work for a competitor in the near future where they could share that information.

Banning non-compete agreements would force companies to revamp their human capital operations completely. Trade secrets or other essential information could be exploited not only by competitors, but also by foreign adversaries. Manufacturers would be forced to put in place burdensome controls or silo parts of their operations from each other, which would result in less training for employees and less efficiency across various divisions.