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ULC Approves Uniform Restrictive Employment Agreement Act

  • 1.  ULC Approves Uniform Restrictive Employment Agreement Act

    Posted 07-23-2021 10:55 AM

    July 23, 2021 - The Uniform Law Commission (ULC) has approved a new uniform state law that will regulate restrictive employment agreements, which are agreements that prohibit or limit an employee or other worker from working after the work relationship ends.  The Uniform Restrictive Employment Agreement Act was approved by the ULC at its recently concluded 130th Annual Meeting in Madison, Wisconsin.

    The Uniform Restrictive Employment Agreement fairly balances the public interest in protecting the rights of workers to change jobs and use their skills and talents most effectively with the interests of employers in selling businesses and business assets and protecting trade secrets and ongoing customer relationships.    

    Uniformity in this area of the law benefits both employers and workers by enhancing clarity and predictability in our increasingly mobile society.  The Uniform Restrictive Employment Agreement Act addresses the enforceability of these agreements.  The Act does not regulate what a worker can or cannot do while employed.

    The core elements of the Act include:

    • Wide scope: Regulates all restrictive post-employment agreements, including noncompetes, confidentiality agreements, no-business agreements, nonsolicitation agreements, no-recruit agreements, payment-for-competition agreements, and training reimbursements agreements.
    • Low-Wage Workers: Prohibits noncompetes and all other restrictive agreements except confidentiality agreements and training-reimbursement agreements for low-wage workers, defined as those making less than the state's annual mean wage.
    • Notice: Requires advance notice and other procedural requirements for an enforceable noncompete or other restrictive agreement.
    • Penalties: creates penalties and enforcement by state departments of labor and private rights of action, to address the chilling effect of unenforceable agreements.

    President Biden recently issued an executive order titled "Promoting Competition in the American Economy."  The executive order "encourages the FTC to ban or limit non-compete agreements."  The executive order does not change the law; noncompete law is still controlled by state law.

    A noncompete expressly prohibits a worker, upon termination of employment, from creating, joining, or working for a competing firm.  A typical modern noncompete specifies the time, geographic area, and scope of business that the worker may not engage in.  The Uniform Restrictive Employment Agreement Act addresses these noncompete agreements, including topics such as the extent to which noncompetes are enforceable, notice and other procedural requirements, enforceability standards, choice of law issues, and remedies. 

    Further information on the Uniform Restrictive Employment Agreement Act can be found at the ULC's website at www.uniformlaws.org.

    About the Uniform Law Commission

    The Uniform Law Commission is comprised of more than 350 practicing lawyers, governmental lawyers, judges, law professors and lawyer-legislators, who are appointed by each state, the District of Columbia, Puerto Rico and the U.S. Virgin Islands to research, draft and promote enactment of uniform state laws in areas of state laws where uniformity is desirable and practical.  Now in its 130th year, the ULC provides states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law. 

    After receiving the ULC's seal of approval, a uniform act is officially promulgated for consideration by the states, and legislatures are urged to adopt it.  Since its inception in 1892, the group has promulgated more than 200 acts, among them such bulwarks of state statutory law as the Uniform Commercial Code, the Uniform Probate Code, and the Uniform Partnership Act.

    Uniform Law Commission / 111 N. Wabash Ave., Suite 1010, Chicago, IL  60602 / 312-450-6600, www.uniformlaws.org

    Contact:  Katie Robinson, ULC Legislative Program Director and Communications Officer / 312-450-6600 / krobinson@...

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    Katie Robinson
    Legislative Program Director
    Chicago IL