A growing number of states have banned noncompete agreements, leaving employers to grapple with a patchwork of different state-level requirements and federal actions.

"We are seeing a very clear trend of increasing hostility to the use of noncompete agreements," said Daniel Kadish, an attorney with Morgan Lewis in New York City. "It has been a significantly growing trend over the last four or five years. We've seen this pick up speed."

Noncompetes prohibit employees from working for corporate competitors or opening their own competing business within a geographic area for a certain period of time after they leave a company. Traditionally, employers have used noncompete agreements to stop employees from taking trade secrets and proprietary information to a competitor. Noncompete agreements may boost an employer's retention rate if they prevent workers from seeking similar jobs at competitors.

The trend of banning noncompetes is likely to spread to more states in the near future, said Dan Prokott, an attorney with Faegre Drinker in Minneapolis.

States tend to follow each other, and "it becomes a bit of a bandwagon effect," said Julie Werner, an attorney with Lowenstein Sandler in New York City.

State-Level Restrictions

Four states—California, Minnesota, North Dakota and Oklahoma—have banned noncompete agreements entirely, and many other states have enacted restrictions, such as setting a compensation threshold or requiring advance notice.

The New York Legislature recently ...

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