Erik W. Weibust, Member of the Firm in the Litigation & Business Disputes and Employment, Labor & Workforce Management practices, in the firm’s Boston office, was cited in Business Insurance, in “State Curbs on Noncompete Agreements Spread,” by Judy Greenwald.
Following is an excerpt:
More states are passing or introducing legislation that will make it harder to enforce noncompete agreements on departing employees.
Employers should examine the new laws in states where they operate to ensure they comply with the requirements, which sometimes include salary limitations on employment restrictions, experts say.
Last month, Colorado became the latest state to enact a law curbing noncompete and nonsolicitation clauses in employment agreements.
Colorado H.B. 22-317, “Concerning Restrictive Employment Agreements,” which was signed in June and takes effect Aug. 10, eliminates noncompete agreements for employees earning less than $101,250 a year and provides for the protection of trade secrets. Some of the laws introduced elsewhere also ban noncompetes against lower-paid workers. Other states that have recently enacted similar laws are Illinois, Nevada and Oregon.
The Colorado law, which applies prospectively, also applies to customer nonsolicitation agreements unless they are entered into by someone who earns at least 60% of the threshold for highly compensated workers, or $60,750. Workers must also be provided notice of the law before they accept employment.
Companies that apply noncompetes that do not meet statutory requirement are subject to penalties of $5,000 per worker.
Separately, a law approved in January, which experts say is unique to Colorado, criminalizes restrictive covenants, which include noncompetes, by making it a misdemeanor that provides for a $750 fine per violation, a possible punishment of 120 days in prison, or both.
Experts say that except for the misdemeanor charge, the Colorado law falls “in the middle of the pack” in terms of its stringency among the states that have enacted similar legislation. More states are expected to address the issue.
There are 39 such bills pending in eight states, said Erik W. Weibust, a partner at Epstein Becker Green P.C. in Boston.
Colorado’s “falls within a trend that has been occurring within the states to set wage floors for noncompetes,” he said.
