Choice of Law and Employee Restrictive Covenants: An American Perspective

Abstract

Employees are increasingly mobile across state lines. This is partly the result of technological change facilitating individual movement and communication, but also a result of corresponding changes in corporate organization to establish offices and interests in multiple jurisdictions. With these developments, there has been a rise in litigation surrounding the enforcement of employee covenants not to compete when the parties or issues involved have connections to multiple jurisdictions. The emerging body of law intrigues and confounds lawyers and commentators because of its complexity and unpredictability. The current legal regime creates significant incentives for parties in litigation over non-compete agreements to shop for an advantageous forum. This essay is an effort to describe recent legal developments in the United States, situating them within the background doctrines of conflict of laws and parallel litigation that govern such disputes. We also briefly consider the normative implications of the legal incentives for forum shopping.

Keywords: Employee Restrictive Covenants, Choice of Law

JEL Classification: J68, K31, K41