Don’t Risk an Improper Non-Compete Agreement During COVID-19

Courts don’t like restrictive covenants (non-compete agreements). They don’t like telling people who want to work that they can’t work. That is why these covenants need to be drawn carefully to protect a legitimate business interest.

Non-compete agreements are often improperly used and are often thrown out upon court review.

With COVID-19, the Federal government has issued a statement warning employers, staffing companies and recruiters of essential workers not to engage in collusion or anti-competitive behavior.

“The Agencies are on alert for employers, staffing companies (including medical travel and locum agencies), and recruiters, among others, who engage in collusion or other anticompetitive conduct in labor markets, such as agreements to lower wages or to reduce salaries or hours worked. For years, the Agencies have challenged unlawful wage-fixing and no-poach agreements, anticompetitive non-compete agreements, and the unlawful exchange of competitively sensitive employee information, including salary, wages, benefits, and compensation data. Moreover, the Division may criminally prosecute companies and individuals who enter into naked wage-fixing and no-poach agreements. Even absent a collusive agreement, the Bureau may pursue a civil enforcement action against companies and individuals that invite others to collude. The Agencies may also use their civil enforcement authority to challenge unilateral anticompetitive conduct by employers that harms competition in a labor market (monopsony power). Companies and individuals involved in the hiring, recruiting, retention, or placement of workers should be aware that anticompetitive conduct runs the risk of civil and/or criminal liability.”

Consider this a shot across the bow to all employers, even if you are governed by North Carolina law.

For a reminder on what a proper non-compete agreement looks like, click here.