Sen. Ford has introduced SB 348 concerning covenants not to compete. It prohibits an employer from requiring an employee or prospective employee from entering into a covenant not to compete if the employee’s earnings don’t exceed $15 per hour. A covenant not to compete is one that restricts the employee from working for another employer for a specified time and/or in a similar field or from working in a particular geographic area. It declares such contractual provisions as void and against public policy.
I think this is a good concept. Courts are generally pretty skeptical of covenants not to compete as it is — restricting a person’s ability to work is not something they’re very comfortable with. There are some legitimate business reasons for a covenant not to compete – the employer has given the employee valuable training or contacts or information and the employee should not be able to profit off of those inputs at the employer’s expense. But, if the training or information or other inputs with which the employer has entrusted the employee are so valuable, it stands to reason that the employer would be compensating the employee accordingly. If the employee is making less than $15 per hour, it stands to reason that a covenant not to compete isn’t protecting the employer’s legitimate business interests so much as it’s being used as a tool to gain additional leverage over the employee.
The General Assembly might, however, look at tightening up the “earning $15 per hour” language. Compensation models that involve commissions or tips or irregular bonuses could complicate things somewhat. Courts could probably figure it out, but some additional attention might make it harder for employers to find work-arounds.