A State Policymaker’s Guide to Non-Compete Reform

Executive Summary 

Non-compete agreements are restrictive employment covenants that limit a worker’s ability to switch jobs or start a new business. They are estimated to cover anywhere from 20 percent to 40 percent of today’s workforce, with negative impacts on wages, mobility, and entrepreneurship.

This guide is intended for state lawmakers who wish to take action against the use and abuse of non-compete agreements in their communities. By following these guidelines, state lawmakers can make important strides in curbing the negative economic effects of non-competes, unleashing their state’s entrepreneurial talent, and empowering workers to enjoy the full benefits of free and fair competition for their labor.

Non-Compete Reform Principles

1. Limit the share of the workforce that may be covered by a non-compete agreement.
2. Exempt certain classes of workers entirely from non-compete agreements.
3. Allow for private action and public enforcement against employers who misuse non-compete agreements with real penalties.
4. Make clear that courts should throw out rather than revise non-compliant non-compete agreements.
5. Require employers to provide workers with adequate time and resources to review a non-compete agreement.
6.  Restrict the length of time and the geographic scope that a valid non- compete agreement is enforceable.
7.  Require “garden leave” provisions in which employers must adequately compensate workers while an agreement is being enforced.
8. Prohibit employers from requiring workers to sign invalid agreements.