State-Specific Laws: Non-compete laws vary significantly by state. California largely bans non-competes, Florida has specific statutory requirements, and states like Illinois and Washington have recent legislative changes limiting non-competes. Each state's specific requirements must be considered.
Federal Trade Commission Proposed Rule: The FTC has proposed a rule to ban non-compete agreements nationwide. This pending regulation could significantly impact the enforceability of non-compete agreements across all states.
Fair Labor Standards Act: Federal law that establishes standards for wage, overtime pay, and employment conditions, which may impact the terms and consideration in non-compete agreements.
Defend Trade Secrets Act: Federal law that provides protection for trade secrets and must be considered when drafting provisions related to confidential information and trade secrets in non-compete agreements.
Legitimate Business Interest: The agreement must protect a legitimate business interest such as trade secrets, confidential information, or customer relationships to be enforceable.
Geographic Scope: The agreement must specify a reasonable geographic limitation that is no broader than necessary to protect the employer's legitimate business interests.
Time Duration: The non-compete period must be reasonable in duration, typically ranging from 6 months to 2 years depending on state laws and industry standards.
Scope of Restricted Activities: The agreement must clearly define and reasonably limit the specific activities that the employee is prohibited from engaging in after employment.
Consideration Requirement: Legal requirement that the employee must receive something of value in exchange for signing the non-compete agreement, such as initial employment, promotion, or additional compensation.
Industry-Specific Regulations: Specific restrictions or requirements that apply to particular industries or professions must be incorporated into the agreement.
Right to Work Laws: State laws that protect employees' rights to work and may impact the enforceability of non-compete agreements.
Interstate Commerce Implications: Constitutional considerations regarding commerce across state lines, particularly relevant for sales representatives operating in multiple states.
Blue Pencil Doctrine: Legal principle allowing courts to modify or strike unreasonable provisions while maintaining the enforceable portions of the agreement, varies by state.
