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The ‘Great Resignation’ Causing Questions About Noncompetes

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Because of the unusually high number of Americans who voluntarily left their jobs as the economy opened after the early stages of the pandemic, the past two years have become known as the “Great Resignation.” The key driver has been the boom in job openings, creating lots of opportunities for workers seeking a better situation.

Many of these workers have noncompetition agreements in place that bar them from leaving to work for a competitor and/or sharing any of your company’s confidential information with a new employer.

However, the government has been engaging in a concerted effort to rein in noncompetes. For example, President Joe Biden has stated that he would like to eliminate all noncompetes that are not absolutely necessary to protect a narrowly defined category of trade secrets. Along these lines, he has ordered the Federal Trade Commission to use its rulemaking authority to curtail noncompetes that might unfairly limit worker mobility. In addition, senators from both parties have introduced bills to bar noncompetes for hourly workers.

Meanwhile, nearly a dozen states have banned noncompetes for low-wage and blue collar workers.

If your company uses noncompetes and other restrictive covenants, this means you will be confronting hard questions.

For example, what if an employee with a noncompete agreement decides to bolt for what you view as a competitor? Should you sue to enforce? If you don’t do it for one employee, future employees may claim you waived the noncompete and you might not be able to enforce it against them.

If you do sue to enforce the agreement, you will have to show that the new employer actually is a competitor, that you’re likely to suffer “irreparable harm” if the worker takes that new job, that whatever harm you suffer is worse than the harm the employee would suffer by being deprived of an opportunity and that enforcing the noncompete wouldn’t unreasonably prevent the worker from plying his or her trade.

If your noncompete is unreasonably broad (for example, it binds workers who don’t have access to trade secrets and/or the geographic restrictions are too broad), you face an uphill battle. A good employment attorney can review your restrictive covenants and help you determine if your agreements make sense in light of the changing work environment and reforms in your own state.

And what happens if you have job openings and you encounter a good candidate bound by a noncompete? Would hiring them subject your company to a lawsuit? Is the worker worth the time and money to fight the suit? These are also questions an employment attorney can help you with.

A couple of things are true for every employer. First, you should sit down with an attorney and review your agreements to confirm they’re both reasonable and necessary based on your industry and geographic location.

Additionally, make sure you’re not relying solely on noncompetes to protect confidential information. Instead, review and strengthen your internal codes of conduct and maintain a culture where your employees will respect confidentiality.