Protection Against Unfair Non-Compete Clauses Act

Summary: The Protection Against Unfair Non-Compete Clauses Act makes it illegal to insert a non-compete clause into the employment contract of a lower-wage worker.

Based on Illinois SB 3163. The following states have similar laws: Maine, Maryland, Massachusetts, New Hampshire, Nevada, Oregon, Rhode Island, Virginia and Washington. The District of Columbia enacted a more sweeping ban on non-compete agreements and similar to laws have been adopted by California, Montana, North Dakota and Oklahoma.

SECTION 1. SHORT TITLE

This Act shall be called the “Protection Against Unfair Non-Compete Clauses Act.”

SECTION 2. FINDINGS AND PURPOSE

(A) FINDINGS—The legislature finds that:

  1. It is not unusual for employers to require a non-compete clause in employment contracts when the employee is highly-paid and develops highly-specialized, marketable knowledge through his or her employment.
  2. In recent years, some employers in service industries have begun to impose non-compete clauses on low-wage, low-skill employees, such as fast food workers.
  3. There is no reasonable need for non-compete clauses where workers do not acquire highly-specialized knowledge and are relatively easy to replace.
  4. Non-compete clauses makes it easier for employers to exploit low-wage workers, and therefore, such contract provisions are contrary to the public good.

(B) PURPOSE—This law is enacted to protect the welfare of employees in this state.

SECTION 3. NON-COMPETE CLAUSES

After section XXX, the following new section XXX shall be inserted:

(A) DEFINITIONS—In this section:

  1. “Lower-wage employee” means an employee who is paid by an employer at a rate of $60,000 per year or less.
  2. “Non-compete clause” means a provision in an employment contract or similar agreement that restricts the ability of an employee to (a) work for another employer for a specified period of time; (b) work for another employer within a specified geographical area; or (c) engage in work for another employer that is similar to the employee’s work for the employer.

(B) NON-COMPETE CLAUSE VOID FOR LOWER-WAGE EMPLOYEES

  1. No employer shall enter into a contract or agreement with a lower-wage employee that includes a non-compete clause.
  2. A non-compete clause in a contract or agreement with a lower-wage employee is illegal and void.

SECTION 4. EFFECTIVE DATE

This law shall become effective on July 1, 20XX.

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