At least 15 states have enacted significant restrictions on noncompete agreements, ranging from minimum income thresholds to outright bans. Eight states have passed restrictions in the last five years.
The prohibitions are mainly found in Democrat-leaning states like California and Washington but they are popping up in more conservative states too. The most recent was Tennessee, which in May enacted a minimum salary threshold of $70,000 per year for noncompete clauses, and voided any prior contract clauses below that threshold. Washington enacted a complete ban on the clauses in March.
Noncompete clauses prevent workers from leaving their jobs to do the same work for rivals until a set period of time expires. Two states – North Dakota and Oklahoma – have prohibited noncompete clauses since the 19th century. More recently, Jimmy John’s agreed to drop noncompetes from contracts in 2016 after the New York attorney general’s office declared the practice unlawful. The chain had prohibited employees from working for a competing sandwich shop within three miles of its franchises.
The issue has gained more prominence in recent years as job mobility has stalled. Workers are not moving on to new careers as they used to. That’s in part because employers have become more determined to keep talent in-house.
An estimated 18 percent of workers are currently covered by noncompete agreements, about 30 million people. Overall, 37 percent of workers report having been covered by a...
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