Over the past several years, a number of states have adopted legislation limiting an employer’s ability to enforce restrictive covenants against former employees. While some states, like California, have had longstanding prohibitions on enforcing non-competes against employees within the state, other states have enacted more limited legislation restricting the use of restrictive covenants without prohibiting their use entirely. During the past 20 months, Maine, New Hampshire, Maryland, Oregon, Washington, and Rhode Island each enacted laws restricting an employer’s ability to enforce non-compete agreements. Congress and federal agencies also have considered adopting new restrictions on the use of non-competes. See Freedom to Compete Act, S. 124, 116th Cong. (2019-2020); Non-Competes in the Workplace: Examining Antitrust and Consumer Protection Issues, Federal Trade Commission, Jan. 9, 2020.

Despite renewed questioning by these governmental entities as to the legitimacy of restrictive covenants, many employers continue to rely on such agreements to protect their customer information, goodwill, trade secrets, and confidential information. Mindful of certain states’ laws which limit the enforceability of restrictive covenants, as well as the existence of a multi-state workforce, employers sometimes include choice-of-law provisions in their agreements with employees that choose the law of states outside the territory where the employee works.  For employers located in states that are more hostile to enforcement of restrictive covenants, these provisions may allow the parties to choose the laws of a state that would be more likely to enforce the restrictive covenants.