News & Insights


Historically, non-compete agreements were utilized to safeguard a company’s trade secrets, proprietary information, and customer relationships. Non-compete agreements served as critical tools for protecting business interests. However, over the past few years, there has been a recent legislative priority to limit or ban the use of restrictive covenants. In 2021, President Joe Biden signed an executive order encouraging the Federal Trade Commission (“FTC”) “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”  

Recently, the FTC found that non-compete agreements constitute an unfair method of competition, violating Section 5 of the Federal Trade Commission Act. In 2023, the FTC proposed a rule that would ban most non-competes nationwide. This rule seeks to cover anyone working for an employer, whether paid or unpaid, and would require employers to affirmatively rescind existing non-compete agreements. It is anticipated that the FTC will vote on the rule this April. Roughly six months after this proposed rule by the FTC, the National Labor Relations Board (“NLRB”) announced its position that most non-compete and non-solicitation agreements violate the National Labor Relations Act.

This trend in disfavoring non-competes is rising amongst the states as well. In an effort to protect employee rights and promote fairness, there has been an increasing number of states that prohibit by statute non-competes unless the employee is exempt or earns more than a statutory minimum. Examples include, the District of Columbia, where employees must make at least $150,000.00 to have a non-compete; Colorado, where employees must make at least $123,750.00 to have a non-compete; and Washington, where employees must make at least $ $120,559.99 to have a non-compete. 

New York recently proposed aggressive legislation prohibiting any new non-compete agreements with employees, workers, and services providers, without any exceptions for highly compensated employees. While Governor Hochul vetoed the proposed legislation, she left open the possibility of a statewide restriction for lower-wage workers.

Even in states where a general ban on non-competes already exist, there is a push to further restrict the ban. For instance, while non-competes have generally been unenforceable for some time in California, the state has recently enacted a law that allows employees to have a private cause of action against employers whose agreements include non-compete covenants. In addition, this new law provides for an award of attorney fees for any current, former, or even prospective employee who successfully brings suit over an employer’s use of a restrictive covenant.

With such drastic changes on the horizon, it is possible that most non-compete and non-solicitation agreements will become unenforceable in the near future. As a result, it is encouraged that employers be proactive in monitoring these changes closely to ensure that their current restrictive covenant agreements comply with all applicable state laws.