When noncompete agreements are not safety nets

A Florida legislator, in proposed legislation drafted within the Fair Labor Standard Act, moved to limit the use of noncompete agreements. The Senator submitted the “Freedom to Compete Act” for consideration at the federal congressional level on Jan. 15, 2019.

Nondisclosure and nonsolicitation agreements could also falter through implication in the language of the proposed legislation. It would protect low-level workers currently restricted from negotiating better benefits and higher wages.

The unpopularity of noncompete agreements 

Last year, Bills S-2782 and H.R. 5631 banning noncompete agreements across the United States were not successful; however, federal noncompete reform is alive and well, as evidenced by the legislator’s passionate attack on noncompetes restricting employees from work options after their employment with a noncompete agreement employer terminates.

As most employees know, nearly all employers—as a condition of employment—require a worker’s signature on a noncompete agreement. These agreements, while flavored a little differently between employers, generally include provisions that disallow a terminated or defecting employee from working for similar goods or services employers for a period of time in a specific geographic locale. Bans on disclosure of trade secrets are also usually an explicit or implied part of noncompete agreements.

Shaky ground and a shoddy framework

Most noncompetes leave themselves open to egregious and unfair, overbroad interpretation. For example, some documents contain blanket statements forbidding an employee to work for any competitor, without reference to locale or time constraints. Another problem is that gray areas are not made clear: Can an employee work for a competitor as an independent contractor? Does a ban on sharing trade secrets extend to an employee who gives a new employer confidential information that is not a trade secret? Ironically, most noncompete signers have no access to trade secrets. 

Bipartisan support to end noncompete agreements 

The failed bills in 2018 resurface in intent in the Freedom to Compete Act. It appears that bipartisan support is growing to end noncompete agreements as they currently stand.

Furthermore, many cases of noncompete litigation end in judgments on the side of those people or business entities obliged to sign noncompetes whose subsequent behavior cannot contradict the intent of the original document. In common terms, many noncompetes do not hold water. Their terms are too broad, nonspecific or unreasonably and illegally restrict the signer in ways never intended by the Fair Labor Standard Act.