Partner Kristopher D. Hill authored the Bloomberg Law article “Non-Competes in the Economic Wake of Covid-19.” The piece explores how non-compete agreements have been and likely will be affected by the ongoing Covid-19 pandemic. Hill notes, “In the economic wake of the pandemic, employers and employees alike face critical decisions concerning the use, application, and enforceability of non-competes.” Hill further explains that “In jurisdictions where non-competes are enforced regardless of whether employees quit their jobs or are laid off, employers and employees can expect that the effects of Covid-19 will not stop courts from continuing to enforce valid non-competes even in the context of layoffs resulting from the pandemic-related economic downturn.”
Prior to the pandemic, use of noncompetes – at all levels – was on the rise, Hill notes. With their increased prevalence came increased scrutiny, a trend that will likely continue.
Employers should be aware that non-compete laws vary across the country, and many states have taken recent action to restrict the reach of non-competes—and that was in a healthy economy. With the blow Covid-19 has dealt the economy, a whole new wave of investigations and legislations clamping down on non-competes could be on the horizon…. Competitors, too, may be wary of hiring employees who are deemed a litigation risk because of a non-compete. If such a chilling effect plays out and employees and competitors are wary to challenge unreasonable, unenforceable non-competes, the resulting restraint on trade will likely stifle competition and innovation in an already struggling economy. Only time will tell.
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