INDUSTRY U P DAT E S
CAN YOU BANK ON YOUR
Non-Competition
Agreement TO DO THE JOB? by Jane Kim and Daveante Jones
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on-competition agreements are critical in protecting information unique to businesses that help them compete in the marketplace.
However, this business need may clash with people’s needs and their ability to make a living. Most courts, including in Arkansas, generally look upon non-competition agreements with disfavor when the agreements are ancillary to an employment relationship. In a time where a pandemic has caused thousands of layoffs and furloughs and stretched businesses’ systems and servers from the office building to employees’ homes with increased remote work, any obstacle put in place to making a living is placed under an even bigger microscope. An effective non-competition agreement can be vital in an industry like banking, which experiences extreme competition in the markets the industry serves. Now is a good time to check the legal trends, re-evaluate and revamp any agreements, and develop a plan on handling potential violations.
LEGAL TRENDS Under Arkansas law, non-competition agreements entered into on or after July 22, 2015, are valid and enforceable if “the employer 18
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has a protectable business interest” and the agreement “is limited with respect to time and scope in a manner that is not greater than necessary to defend the protectable business interest of the employer.” Ark. Code Ann. § 4-75-101(a). Unlike in the past, courts are now able to reform any unreasonable restrictions and enforce the reformed agreement. At the federal level, President Joe Biden recently issued an “Executive Order on Promoting Competition in the American Economy.” Among other things, it encourages the Federal Trade Commission to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” While the Executive Order did not make any immediate changes to the law on non-competition agreements, it has raised a lot of questions, especially for multi-state employers. Across the country, several states (and Washington D.C.) have recently instituted or plan to institute some sort of ban on non-competition agreements. Illinois, Maine, Maryland, Massachusetts, New Hampshire, Virginia, and Washington currently prohibit non-competition restraints on low-wage workers. The definition of low-wage work between these states ranges anywhere from 200% of the federal minimum wage ($14.50/hour) up to $100,000 a year. Rhode Island prohibits non-competition
