Representative Lori Ehrlich and I, with good counsel from engineer Caroline Huang and Attorneys Russell Beck, Rob Mantell and Phil Gordon, have been continuing to work over language to limit the use of non-competition agreements. See previous background discussion.
We have a feeling that we have made some progress and are looking forward to wider discussion about a draft that we currently both feel comfortable with. The issue will probably get its first formal hearings in the fall and the language is likely to continue to evolve through the process.
Here is the full text of the draft . A summary appears below. Input is very welcome, through comments on this site, or otherwise.
Summary of current working draft of non-compete legislation
To protect employees from unfair non-competition agreements while preserving protections for legitimate risks to business assets.
Prohibit non-compete agreements for lower level employees; for others, allow non-compete agreements but clarify guidelines and give employers strong incentives to require only moderate and reasonable agreements.
- Create procedural protections for all employees
- Agreements must be in writing
- Employers making job offers must give early notice that a non-competition agreement will be required, in time for a prospective employee to assess his or her options and decline the job offer before resigning their present job.
- Clarify common law rules that, to be enforceable, non-competition agreements must be necessary to protect trade secrets, confidential information or good will and must be consonant with public policy and reasonable in duration, geographic scope and proscription of activities
- Limit term of agreements to one year (unless garden leave payments of at least 50% of total compensation are made, in which case agreements may last two years).
- Make non-compete agreements unenforceable against employees making under $50,000 and enforceable only to protect trade secrets or confidential information (but not for goodwill) for employees between $50,000 and $100,000.
- Create safe harbors for very moderate agreements — giving employers incentives to choose agreements meeting those terms:
- Six month agreements prohibiting activities of the type the employee was actually engaged in within the geographic area that they were working in.
- Garden leave agreements supported by adequate compensation (greater of $50,000 or 50% of total compensation).
- Punish overreaching by employers by awarding attorneys fees to the employee whenever an agreement is reformed or found unenforceable and was not within one of the safe harbors.
- Otherwise preserving existing law
- Preserve existing common law defenses for employees facing enforcement actions
- Not applying new rules to business purchases, covenants not to solicit employers’ customers, etc.
- Effective as to agreements entered on or after January 1, 2010