Because there is no federal law prohibiting or limiting an employer's use of noncompetition agreements and other restrictive covenants in employment contracts, states have "grown impatient" and are starting to pass their own laws, said Kelly Dobbs Bunting, an attorney with Greenberg Traurig in Philadelphia.

"There are legitimate reasons for employers to maintain restrictive covenants, but more states and courts are starting to say that it's not as legitimate as it once was," said Bunting, speaking at the Society for Human Resource Management's Employment Law & Compliance Conference on March 30 in Washington, D.C.

President Joe Biden's July 2021 executive order encourages the Federal Trade Commission "to curtail the unfair use of noncompete clauses and other clauses or agreements that may unfairly limit worker mobility." The action suggests that the Biden administration is focused on regulating restrictive covenants in employment contracts.

As employers await regulatory direction from the federal government, they should note that the enforceability of noncompete agreements is generally evaluated under state laws. And those laws vary significantly, from an outright noncompete ban in California, North Dakota and Oklahoma; to prohibitions on noncompetes with low-wage or nonexempt workers; to a controversial ban in Washington, D.C., on policies that prohibit current employees from simultaneously working for a competitor.

Array of State Laws

Bunting said that most state...

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