Noncompetition or “non-compete” agreements may, at first, seem like a reasonable request for employers to make of their employees. After all, they protect your business against the loss of valuable employees, the exploitation of sensitive company information, and potential operational or technological undermining by competitors when a worker leaves your employment. However, restricting low-income workers to post-employment covenants (often with limits of 1-2 years) has actually been found to stifle wage growth, career advancement, and industry innovation.
Most recently, state-level amendments have sought to not only evaluate the validity of these agreements but protect low-wage employees in non-compete contracts from wrongful unemployment in the future. Without taking proper care to maintain compliance around non-compete policies, these restrictive agreements could cost you in 2020.
So, which states have banned them? And is yours next?
Overview of States with New Non-Compete Legislation
As of 2019, an increasing number of states have enacted restrictions on non-compete agreements for low-income employees. However, many have yet still yet to outlaw such agreements entirely. Below is an overview of several of the newest states to enact legislation--and their unique approaches for tackling non-compete policies. For a full overview of all 50 states, visit the Department of Labor’s page.
Maine: bans non-compete agreements preventing an employee “from working in the same or similar profession or in a specified geographic area for a certain period of time following termination of employment.” This applies to all employees earning at or below 400 percent of the federal poverty limit (which is $48,560 per year under current data).
Maryland: bans non-compete agreements that “restrict[s] the ability of an employee to enter into employment with a new employer or to become self-employed in the same or similar business or trade.” This applies to all employees earning less than $15 per hour or $31,200 annually.
New Hampshire: bans non-compete agreements preventing an employee from “performing: (1) work for another employer for a specified period of time; (2) work in a specified geographical area; or (3) work for another employer that is similar to such low-wage employee’s work for the employer who is a party to the agreement.” This prohibition applies to all employees making less than or equal to 200 percent of the federal minimum wage (which is $14.50 per hour).
Rhode Island: bans non-compete agreements for a variety of employee types, namely: non-exempt employees under the FLSA, undergraduate or graduate students participating in an internship or short-term employment, employees aged 18 or younger, and low-wage workers. Low wage workers are defined as earning 250 percent or less of the federal poverty level ($31,225 per year under current data). This law will become effective as of January 15, 2020.
As you can see, Rhode Island specifically excludes employee and customer non-solicitation agreements and confidentiality agreements, but New Hampshire and Maryland law are silent on enforcement of these provisions. Regardless of whether or not your business has officially outlawed or restricted these types of agreements, it helps to prepare for multiple scenarios to avoid future compliance violations.
Tips for Achieving Non-Compete Compliance
- Determine your state’s present or incoming non-compete policy laws for 2020. Based on your state’s legal requirements and current restrictive employment guidelines, you may need to update your policies to ensure they comply with all enacted statutes.
- Cover all possible scenarios to avoid non-compliance. Clarify your policies to include employees and worksites outside of your central or primary state location. You may also need to consider including non-discriminatory clauses around hiring to subjects who fall into non-compete exceptions to avoid complications and unnecessary discrepancies down the road.
- Hire an HR specialist. If you don’t already employ one, hiring on a professional who is trained to confidently navigate complicated legal mandates, HR policy writing, and compliant new employee onboarding will help put your mind at ease when it comes to non-competes. Not only will a specialist be able to help construct the right policy for your unique operation, but he or she will be able to take the reins on any potential lawsuits should a situation arise.
Help from EPAY Systems
Do you need creating a non-compete policy for your workforce? Don’t want to spend a fortune?
At EPAY, we understand the difficulties keeping up with various labor laws, the demands of managing HR, and remaining competitive within hourly workforce industries. Our seamless Human Capital Management (HCM) system includes easy onboarding, contract, and HR management for the distributed workforce. In addition, our software offers compliance safeguards, consulting services, and resources such as monthly assets like “Sample Employee Handbook” downloads and “Key Legislative Updates for the Hourly Workforce in 2019 & Beyond” webinar recordings.
With EPAY, you never have to wonder if your policies are up-to-date or if they’re putting your operation at risk. Ready for more? Check out a quick overview of our HR and Payroll solution or request a live demonstration today!