The New Enforcement Regime: Revisiting the Law of Employee Competition (and the Scholarship of Professor Charles Sullivan) with 2020 Vision
37 Pages Posted: 13 May 2020
Date Written: May 12, 2020
This Article, prepared for Seton Hall Law School’s 2019 Symposium on the scholarship of Professor Charles Sullivan, labels and critiques “the new enforcement regime” in employee mobility law. For centuries, employee noncompetes have been regulated primarily through the common law rule of reason. The last decade, however, has witnessed a surge in public initiatives seeking to restrict employers’ use and enforcement of these agreements. They include proposed legislation, regulatory undertakings, class action litigation, and state enforcement programs that seek reforms ranging from an end to the use of noncompetes with vulnerable workers to the outright prohibition of all forms of employee restraints.
This budding regime has the potential to upend basic enforcement rules and status quo employer practices. Against this regulatory backdrop, and in celebration of Sullivan’s work, this Article makes two contributions. First, it locates the current reform movement within an emerging economic literature that is exposing the harmful impact of noncompetes on employees and the economy. Recent data reveal that employers use noncompetes more commonly than supposed, including in contexts where they are clearly unlawful or unlikely be enforced. This research owes a debt to the foundational work of Sullivan and other legal scholars who have long warned of likely in terrorem effects of overbroad agreements that go unchallenged in court. Such concerns have now been empirically validated and are at last being heeded.
Second, the Article provides a template for effective legislative reform. The convergence of academic research from multiple disciplines with real-time reform activity on the ground make this a critical moment for noncompete policy. Proposals thus far have not gone far enough in deterring and sanctioning employer overreach. Short of banning noncompetes altogether, the most effective new laws will be those that do the following: (1) ensure that employees have access to information about the limited enforceability of noncompetes; (2) preclude judicial modification of overbroad agreements; and (3) create streamlined pathways for employees to test the validity of their noncompetes and remedy unlawful noncompete practices. The Article calls on policymakers and advocates to capitalize on the current political will. Bolder restrictions and procedural protections must be devised, attentive to the real conditions under which employees agree to and abide by these far reaching restraints.
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