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Tips For Employers To Enforce Restrictive Covenants In An Age Of Increasing Scrutiny

Restrictive covenants are governed by the states, and in recent years, we have seen a growing trend to limit the use of non-compete agreements. In 2019, Maine, Maryland, New Hampshire, and Rhode Island passed legislation aimed at curtailing the use of non-compete agreements to “low-wage” workers. Last year, Virginia followed suit. Washington D.C. took it a step further, and on March 16, 2021, it banned non-compete agreements. This is not a new concept. In 2019, Congress introduced the Workforce Mobility Act, which sought to impose a federal ban on the use of non-compete agreements. The bill ultimately did not become law. This year, Congress reintroduced the Workforce Mobility Act, which could result in the extinction of non-compete agreements. Notably, none of the aforementioned legislation limits or bans the use of non-disclosure and non-solicitation agreements.

With state and national attention on non-compete agreements, employers are revisiting and modifying their employee agreements to ensure enforceability. Here are practical tips for employers to increase the likelihood of enforcing restrictive covenants:

  • While the precise requirements for the enforceability of restrictive covenants vary from state to state, most courts require non-competes to be reasonable in both geographic scope and duration.  Avoid overbroad terms.
  • Geographic restrictions should be imposed where necessary to protect an employer’s interests, and if imposed, reasonably limited to areas where the employer provides services.
  • Expressly address social media use, including post-termination use, in restrictive covenants.
  • Include a favorable choice-of-law provision if the employer is located in a more restrictive state.
  • Include a severability clause such that any covenant found unenforceable does not impact the enforceability of the remaining covenants.
  • With the increase of a remote workforce, ensure restrictive covenants are executed prior to, or at the time of, hire or risk a court finding the restrictive covenant lacks sufficient consideration to be enforceable.
  • If using electronic signatures, ensure security measures to validate the employee’s acknowledgement and assent to the restrictive covenants.

Please join us for a one-hour employment law update on trends in restrictive covenants, presented as a CE and CLE approved webinar on June 22, 2021.  Additional details can be found on our website by clicking here or you can register here.

This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between Galloway and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdiction.