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On May 5, 2016, the White House issued a report titled, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses.” In its 16-page analysis, the White House criticizes the prevalence of non-compete agreements and the problems they cause, ultimately advocating for their reform. The U.S. Treasury published a similar report in March of this year.
Covenants not to compete, commonly called “non-competes,” are contracts that restrict an employee’s ability to work for a competing employer or in a similar field following an employee’s subsequent departure. Employers use non-compete agreements to guard against proprietary company information and trade secrets falling into the hands of a competitor.
The White House report briefly acknowledges the benefits non-compete agreements provide such as encouraging innovation, protecting company trade secrets, and increasing employer investment in worker training. However, the report ultimately concludes that the harm caused by non-competes outweighs any benefit they may provide. The report’s comment that “non-competes can play a beneficial role when used in a limited way” foretells the likelihood of impending restrictions in this area.
The report focuses on seven potential issues with non-compete agreements. As employers evaluate their own non-compete agreement practices, they should keep in mind these seven areas of concern in anticipating future reform regarding the use of restrictive covenants.
While the report simply provides suggestions regarding non-compete agreements, employers can expect to see further reform in the realm of non-compete agreements at both the state and federal level. Ultimately, the White House report notes that the administration will continue to examine these agreements, their impact on society, and the ways in which they can be reformed. It is likely there will be further investigation by state and federal law and policymakers into the nature and scope of non-competes, which could noticeably impact employer policies and hiring procedures.
If you have questions about the impact of this report or any other matter relating to employment practices, please contact Connie Carrigan at firstname.lastname@example.org.
Connie Elder Carrigan is a partner in the firm, with a practice concentration in Business Law. Her focus is assisting clients with issues regarding employment law, business advice and litigation, construction law, equipment leasing and creditor bankruptcy. Connie has lectured on topics ranging from employment law, bankruptcy, and equipment leasing to construction law....LEARN MORE