So I hinted in an earlier module that we would talk a little bit towards the end of this course about non-compete agreements. Non-compete agreements are clauses in employment agreements that you're likely to see in various contexts, and what they do is what we've described earlier. They sort of are negative injunctions as it were that stipulate that an employee won't leave their firm or their employer and go to compete at another employer so they can quit if they want, but they can't take another job elsewhere, usually for some prescribed amount of time, like one year or two years now, the usual justification for non compete agreements is things like trade secrets, right? So if I am working at a pharmaceutical company, the pharmaceutical company doesn't want me to take my proprietary knowledge knowledge that sort of invested in me and sort of sell it to the highest bidder at another employer. Non-compete agreements though, have started to spread into areas in which it's not obvious what they're sort of normative justification is. So you may have seen the sort of widespread coverage of the sandwich shop Jimmy John's, which was requiring its sandwich makers to sign non-compete clauses. Sandwich makers would be somewhat lower wage workers typically who don't have extensive sort of trade secret information that you would normally think of as needed to be protected. And also, we might be worried that employees who are unable to seek better job offers, they have their own wages depressed because they can't move employers, but also because they can't go back to the original employer and negotiate for higher wages. So non-compete agreements are somewhat controversial in their regulated state by state now because you're going to be thinking about non-compete agreements to the extent that you're interested in them in the context of a particular state's laws. The thing I want to do here is just to sort of give you some some heads up about the kind of thing you might be looking for and then describe a little bit of a sort of a couple of, standard approaches to non compete agreements in the United States. Most states permit non-compete agreements in some form or another. I'll mention some salient examples in a little bit, but the kind of regulation of non-compete agreements is, let me take a typical state here, which would be in New Jersey. So New Jersey permits non competes enforces them, but they do require that the non competes serve a legitimate interest of the employer and that they not be injurious to the public or against public policy. So you're sort of looking for that kind of language because those are the ways that an employee might ultimately be able to challenge a non-compete agreement. Right, by arguing. Wait a minute. This is actually not in the legitimate interests of the employer except for example, to depress my wages, that a little bit different than trying to do something that's sort of has to do with the employer's business model. Right? The other thing you might want to keep an eye out for is whether the state permits enforcement of non-compete agreements when the employee is terminated without cause. So you can imagine that it's potentially quite serious for the employee if they are terminated from the position without cause or sort of typically without tons of advanced notice and are nonetheless not permitted to seek similar employment at that employers competitor. Right. That's going to be a major loss for that employee who is discharged. New Jersey is a state where for example, it's unclear whether or not the terminated without cause employees are going to be bound to their non-compete agreements. If you look at a state like Virginia, you can see a slightly stepped up level of protection for employees. So in Virginia, non-compete agreements are permitted, but they have to be quote unquote narrowly drawn. That's a higher level of scrutiny from the court. The cloud has to be narrowly drawn in order to be enforceable, which means it has to not be applying situations that the court is going to deem sort of beyond the employers interest. And in Virginia, there's an exemption for workers who make less than about 52,000 dollars a year. So that would, for example, solved the Jimmy John's problem stepped up even further is a state like Massachusetts. So Massachusetts passed a statute in 2018, that requires that non compete agreements have to be quite formal, they have to be given in writing with a fair bit of notice. And in addition expressly prohibits that you expressly prohibits enforcement of a non-compete agreement against employees who are terminated without cause. A number of states in addition, will exempt certain professions from being subjected to non-compete clauses. Physicians is the most common here, right? Physician, you can imagine the state has a particular interest in having physicians be able to to work basically right. Other states have other kinds of carve outs for certain kinds of professionals or social workers, health care workers in New Jersey, its in house counsel as well as psychologists. So there's different kinds of carve outs for different professions, depending on the state. Big salient counter example state is California, so in California, non-compete agreements are not enforceable unless they're specifically about protecting trade secrets. What's particularly interesting is that it turns out that in California, many agreements do include non-compete agreement. So many employment contracts actually include non-compete clauses, even though they are clearly unenforceable under California state law, some researchers have begun to track the way that this potentially affects employee mobility because many employees view the clause is enforceable and don't realize it's not enforceable in California and may therefore be less likely to move from job to job. So there are a number of ways that states handle non-compete agreements requiring both things that are substantive about the about the clause that the clause has to be sort of, particularly tailored or in particular kinds of interests of the employer or not, against public policy. And then sometimes requiring sort of structural or procedural or formal characteristics, like being in writing or given to the employee with a fair amount of notice. It will also depend who it applies to, and whether or not it can be enforced against employees who are terminated without cause. So that's non-compete agreements.
