On Friday, July 9, 2021, President Biden issued a sweeping executive order that asked the Federal Trade Commission (“FTC”) to develop new regulations that ban or limit noncompete agreements. The request has no immediate impact on existing noncompete agreements, but employers should expect new regulations in the coming months. In the meantime, many questions remain for employers to consider: Will the FTC ban noncompete provisions outright, or will it limit their use with only “low-wage” workers?  What would constitute a “low-wage” worker?  Will the FTC regulations create new penalties against companies who seek to use non-compete agreements? Can the regulations have retroactive effect?  Will other types of restrictive covenants (including confidentiality or non-solicitation provisions) be excluded from any order?

We will be monitoring the Administration’s actions closely in the coming months, and will provide additional guidance when new regulations are announced.  In the interim, employers should ensure that any noncompete agreements that are currently being utilized or contemplated are in compliance with new state laws–many of which already address the questions being considered by the FTC.

For example, Oregon and Illinois recently took action to limit employers’ use of noncompete provisions that prohibit “low-wage” workers from moving to competitors. Although the statutes are similar in nature, they define “low wage” workers differently.  In Oregon, noncompete covenants are prohibited for employees earning less than $100,533 per year, adjusted annually based on inflation. In Illinois, however, the wage threshold is only $75,000 annually. Notably, Illinois also enacted provisions imposing new penalties against companies that use illegal or abusive noncompete contracts.

Oregon and Illinois are not the only states to have enacted legislation barring noncompete agreements for “low-wage” workers, as the following states have all enacted restrictions in favor of “low-wage” workers since 2016 (though their thresholds for “low-wage” also vary greatly):

  • Maine
  • Maryland
  • Massachusetts
  • New Hampshire
  • Rhode Island
  • Virginia
  • Washington

Other states have gone further.  Nevada, for example, recently barred noncompetes for all hourly workers, and enacted provisions imposing new penalties against companies that use illegal or abusive noncompete contracts. Similarly, the District of Columbia banned nearly all noncompete provisions early this year, joining California, North Dakota, and Oklahoma as jurisdictions with broad restrictions against noncompete agreements.

If you have any questions regarding the latest trend in noncompete legislation or the executive order, please contact Glenn Cunningham at gcunningham@goodwin.com, Peter Murphy at pjmurphy@goodwin.com, Daniel Schwartz at dschwartz@goodwin.com or Sarah Niemiroski at sniemiroski@goodwin.com.

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Photo of Glenn Cunningham Glenn Cunningham

Glenn Cunningham is the Chair of the firm’s Intellectual Property Practice Group and Manufacturing Industry Team. Glenn represents publicly traded and privately held companies in industries, including manufacturing, software and technology, food and beverage, franchise, construction, and healthcare in intellectual property and technology…

Glenn Cunningham is the Chair of the firm’s Intellectual Property Practice Group and Manufacturing Industry Team. Glenn represents publicly traded and privately held companies in industries, including manufacturing, software and technology, food and beverage, franchise, construction, and healthcare in intellectual property and technology cases throughout the United States. His trial practice includes the prosecution and defense of unfair competition, non-competition agreement, trade secret, trademark, patent and copyright cases.

Photo of Peter J. Murphy Peter J. Murphy

Peter represents public and private sector employers in a broad array of cases, with a focus on cases involving claims of discrimination, wrongful termination, first amendment retaliation, and other labor and employment disputes. In addition, Peter advises employers on issues such as employee…

Peter represents public and private sector employers in a broad array of cases, with a focus on cases involving claims of discrimination, wrongful termination, first amendment retaliation, and other labor and employment disputes. In addition, Peter advises employers on issues such as employee discipline, disability accommodations, and internal investigations, and provides training and seminar presentations on those issues.

Photo of Daniel Schwartz Daniel Schwartz

Dan represents employers in various employment law matters such as employment discrimination, restrictive covenants, human resources, retaliation and whistle blowing, and wage and hour issues. He has extensive trial and litigation experience in both federal and state courts in a variety of areas…

Dan represents employers in various employment law matters such as employment discrimination, restrictive covenants, human resources, retaliation and whistle blowing, and wage and hour issues. He has extensive trial and litigation experience in both federal and state courts in a variety of areas, including commercial litigation and trade secret enforcement. Dan is the author of the independent Connecticut Employment Law Blog. The blog discusses new and noteworthy events in labor and employment law on a daily basis.

Photo of Sarah N. Niemiroski Sarah N. Niemiroski

Sarah Niemiroski is a first year associate in our Hartford office.  While in law school, she served as a judicial intern for the Honorable Janet C. Hall of the United States District Court for the District of Connecticut.  Previously she was a summer…

Sarah Niemiroski is a first year associate in our Hartford office.  While in law school, she served as a judicial intern for the Honorable Janet C. Hall of the United States District Court for the District of Connecticut.  Previously she was a summer associate with Shipman.