Future of Non-Compete Clauses - NLRB Decision

searcher profile

May 31, 2023

by a searcher from Texas A&M University in Johnson City, TN, USA

There is a NLRB decision relating to employee non-compete agreements: https://www.vice.com/en/article/k7zbjx/employee-non-compete-agreements-are-illegal-nlrb-lawyer-says

Writing this post to stir-up a dialogue here about potential impacts.

Ways to address concerns when buying a business if employee non-competes are no allowed?

Contractor non-competes also may be on the table to be eliminated.

What does this imply for the future of non-compete agreements for Sellers? This would seem to be a significant need in many M&A deals.

Perhaps this will hit certain industries harder than others?

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commentor profile
Reply by a professional
from Stanford University in Minneapolis, MN, USA
Here in Minnesota, the state legislature just passed a law that outright bans non-compete agreements (sometimes called restrictive covenants, in legalese). My own humble opinion is that this type of ban goes way too far, both as a matter of fairness to employers (whose investments in IP and human capital deserve protection) and because of the unintended negative effects this legislation will likely have on economic activity and innovation. One of my law partners who has lots of experience litigating these cases recently made a similar case in an op-ed published in our local paper, the Star Tribune: https://bit.ly/3qKmRpo
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Reply by an intermediary
from Arizona State University in Long Beach, CA, USA
I'm not an attorney, so I'll leave the legal advice to the attorney's on this platform. What I can say is in California, employee non-competes have been almost meaningless for a long time to keep them for working for a competitor. Although, it can help to keep them for soliciting former customers/employees. However, non-competes signed by a Seller upon Selling the business are treated differently since there is significant consideration attached to it and it would be contrary to the spirit of the transaction if the Seller started competing with the Buyer.(so, we've been advised by attorneys). I don't think the new ruling will make a difference for us in California with regards to M&A transactions.
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