Non-compete agreements were originally intended to prevent high-level executives from taking trade secrets and client relationships to a competitor, but companies have recently been expanding their use of non-compete agreements to almost all their employment contracts, even with workers earning minimum wage. It has become a way to lock low-wage employees into their current jobs because the terms of their non-compete contract often make it impossible for them to find work in a related field.
At the same time, while non-compete agreements might not do much harm to employees at the executive level because they have more bargaining power, workers at the lower levels often have little-to-no bargaining power and are often unaware of their options when it comes to their employment contracts. Whether that means negotiating the terms of their contract, or recognizing when the contract is invalid, low-wage workers tend to have fewer options than those higher up the ladder.
While there is no federal law putting limitations on when companies can use non-compete agreements, there are a variety of state laws that either ban or limit non-compete agreements within the state. California is famous for their total ban on non-compete agreements, while other states, like Washington, have recently added limitations to when companies can use non-compete clauses and what terms can be included in those contracts.
Virginia and Maryland are the latest states to add laws restricting the use of non-compete agreements.
Back in January of this year, the Virginia State Senate introduced a bill to prohibit companies from including non-compete agreements in their employment contracts with low-wage employees, with a “low-wage employee” being defined as anyone who earns less than the average weekly wage of the Commonwealth. Apprentices, interns, trainees, students, and independent contractors would all be included as protected workers under the terms of the proposed bill.
While the bill would protect companies from former employees who might try to lure clients away from the company in order to work with their new employer, it would not allow companies to maintain non-compete agreements that don’t allow former employees to work with shared clients who came to the former employee without having been solicited or recruited by that employee. That means employees aren’t allowed to actively invite customers to follow them to their new job, but if the customers end up following them of their own volition, no non-compete agreement could get in the way of that relationship. In this way, the bill would protect, not only workers but consumers who might want to stop working with a company whose work isn’t making them happy.
Since low-wage employees are often unaware of all their legal rights as workers, it would be easy for companies to continue to violate these laws without anyone calling them out on it, but the proposed bill requires would require employers to educate their workers by posting a copy of the Bill in the same place that other worker notices get posted.
Just three days after Virginia proposed their new bill, the Maryland State Senate introduced a similar bill, which went into effect four months later, even without the Governor’s signature. The introduction of the bill specifies that it applies only to workers earning $15 per hour or less, or $31,200 per year or less. It invalidates any contract with any such low-wage employee that prevents them from going to work for another company in the same field or starting their own business in the same industry. Like the Maryland bill, it does not protect employees who actively steal, or try to steal customers from their former employer.
Although there is currently no federal law limiting the use of non-compete agreements and what they can and cannot include, the rapid increase of state laws that either put limitations on non-compete agreements or ban them altogether, is encouraging for both workers and consumers, as it will help make our markets more competitive.
Our Chicago non-compete agreement lawyers with offices near Oak Brook, Wilmette and Elmhurst have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results. We represent both plaintiffs and defendants in such cases, and can also help stop litigation before it starts by reviewing contracts to look for covenants and clauses that could create problems later. With offices near Naperville and Schaumburg and in downtown Chicago, our Chicago restrictive covenant lawyers take cases from Lake Forest and Hinsdale and many other cities throughout Illinois, as well as in Indiana, Wisconsin, and the entire United States. To learn more or set up a free consultation, please contact us online or call toll-free at (833) 306-4933 or locally at (630) 333-0333 today.