The Wall Street Journal on line has taken a recent interest in non-competes in a pair of recent one-line articles (protected by pay wall) on August 12 and August 14, 2013. Both pieces cite to a study commissioned by the Journal showing that the number of lawsuits filed over non-competes went up 60 percent between 2002 and 2012 (from about 475 to 760). In “Litigation Over Noncompete Clauses is Rising,” authors Ruth Simon and Angus Loten theorize that non-competes are having a “damping effect on U.S. entrepreneurship.” While there is little evidence for this theory, it does appear that non-compete litigation is at an all time high. Certainly adequate legal protections against unfair competition also are important for economic growth.
The article also points to proposed legislative changes in New Hampshire, Massachusetts, and, as reported here, New Jersey, to limit enforceability of non-compete agreements, in part based on arguments that this might spur employment and economic activity. What the article did not mention that is that it arguably has become easier to enforce non-compete agreements in other states, including Georgia and Texas, than it was just a few years earlier. Non-compete law continues to vary widely from state to state and it would be premature to say there is a national trend to impose greater limitations in this area.
In “Companies Loosen the Handcuffs on Non-Competes” (August 12, 2013), the Journal reported what it saw as a trend of employers taking a “looser attitude toward enforcing non-compete agreements” by invoking trade-offs between the old and new employer over duration, duties and compensation. Negotiated resolution to non-compete disputes is nothing new, but the Journal’s story is a good reminder that it often pays to be creative, and flexible, when faced with one of these issues. On the other hand, readers of the Journal should not take away the misperception that non-competes are never enforceable or can always be resolved. In appropriate situations, properly drafted agreements can be and often are enforced by the courts.