Are non-competes still enforceable in middle of the unprecedented economic disruption caused by COVID-19? Many employers have reacted to the business impact of COVID-19 by downsizing and laying off employees, some of whom signed non-compete agreements or restrictive covenants to protect the employer’s legitimate business interests, including its trade secrets and confidential information. Those same businesses now are left wondering whether those non-compete agreements are enforceable in the wake of massive unemployment triggered by the pandemic.

The answer to this question is complex, and depends on state law, public policy, and the terms of the specific agreements. Each state scrutinizes non-competes and restrictive covenants differently and, therefore, the answer may be different depending on where the business and employee are located or the agreement’s choice of law provision. Continue Reading Non-Compete Agreements and Restrictive Covenants During COVID-19

Legislators at the state and federal levels have been focused on laws that, for the most part, restrict the use of non-compete agreements or modify existing trade secret provisions. Practitioners can track the progress of these proposals to stay aware of changes that may impact their clients in 2019.

Most of the recent bills being introduced focus on the legality of non-compete agreements. Of these, many of the proposals – including at the federal level – seek to restrict non-compete agreements among low wage workers. For example, bills in Hawaii prohibit non-compete agreements for those “whose earnings do not exceed the greater of the hourly rate equal to the minimum wage required by applicable federal or state law or $15 per hour.” In comparison, a bill introduced in Washington places a minimum earnings threshold on non-compete agreements – at $100,000 for employees and $250,000 for independent contractors. Other states have focused on the use of non-compete agreements in particular industries – ranging from physicians, to IT employees, as well as those in the oil and gas industry, and even broadcasters (the last of which became law in Utah last month).

While not nearly as popular as non-compete-focused legislation, a handful of states have also seen proposals related to trade secrets. A bill introduced in West Virginia, for example, would alter its version of the Uniform Trade Secrets Act, including by adding criminal penalties for trade secret theft.

In West Virginia, legislators are moving forward a bill that would criminalize trade secret theft. On February 26th 2019, the West Virginia House of Delegates passed H.B. 2014 with a 98-1 approval that would create criminal penalties for stealing trade secret or other intellectual property. The bill is now headed to the West Virginia Senate where President Mitch Carmichael has already indicated he approves and plans to move it forward. Legislators are hoping to drive tech and corporate investment in West Virginia by imposing more stringent protections for trade secrets and according to Senate President Carmichael, “[t]his bill would make sure [these companies] are protected” from intellectual property theft. If passed, the bill would apply to violations occurring after July 1st and could make West Virginia an attractive forum for companies looking to protect valuable intellectual property assets.