{ "type": "requirement-collection", "canonical": "https://openagreements.org/checklists/non-compete/us", "links": [ { "rel": "self", "href": "https://openagreements.org/checklists/non-compete/us/requirements.json", "type": "application/json" }, { "rel": "alternate", "href": "https://openagreements.org/checklists/non-compete/us", "type": "text/html" } ], "data": { "family": "restrictive-covenant", "topic": "non-compete", "jurisdiction": "us", "spec_version": "0.10.0", "status": "draft", "license": "CC-BY-4.0", "normative_references": [ { "text": "Defend Trade Secrets Act of 2016 (18 U.S.C. § 1833(b)(3))", "url": "https://www.law.cornell.edu/uscode/text/18/1833" }, { "text": "NLRA Section 7 (29 U.S.C. § 157, protected concerted activity)", "url": "https://www.law.cornell.edu/uscode/text/29/157" }, { "text": "McLaren Macomb, 372 NLRB No. 58 (2023, NLRB scrutiny of overly-broad non-disparagement and confidentiality in severance)", "url": "https://www.nlrb.gov/case/07-CA-263041" } ], "fields": [ { "name": "customer_nonsolicit_included", "type": "boolean", "values": null, "description": "Whether the current-customer non-solicitation covenant is included.", "definedBy": "https://openagreements.org/templates/openagreements-restrictive-covenant-master" }, { "name": "employee_nonsolicit_included", "type": "boolean", "values": null, "description": "Whether the employee no-hire / non-solicitation covenant is included.", "definedBy": "https://openagreements.org/templates/openagreements-restrictive-covenant-master" }, { "name": "noncompete_included", "type": "boolean", "values": null, "description": "Whether the non-competition covenant is included.", "definedBy": "https://openagreements.org/templates/openagreements-restrictive-covenant-master" }, { "name": "nondealing_included", "type": "boolean", "values": null, "description": "Whether the no-business-with-covered-customers covenant is included.", "definedBy": "https://openagreements.org/templates/openagreements-restrictive-covenant-master" }, { "name": "noninvestment_included", "type": "boolean", "values": null, "description": "Whether the non-investment covenant is included.", "definedBy": "https://openagreements.org/templates/openagreements-restrictive-covenant-master" }, { "name": "specified_competitors_provided", "type": "boolean", "values": null, "description": "Whether the employer provides a named list of specified competitors that the non-compete can be narrowed to.", "definedBy": null } ], "requirements": [ { "requirement_id": "identify-parties", "modal": "SHOULD", "criterion": "The agreement SHOULD identify the employer and the employee by name.", "applicability": null, "sources": [], "checkers": "./checkers/identify-parties.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "identify-effective-date", "modal": "SHOULD", "criterion": "The agreement SHOULD state an effective date. The duration of each covenant runs from a defined start date.", "applicability": null, "sources": [], "checkers": "./checkers/identify-effective-date.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "identify-employee-title", "modal": "SHOULD", "criterion": "The agreement SHOULD include the employee's title when known. Title supports later analysis of whether the worker-category basis for any non-compete inclusion was reasonable.", "applicability": null, "sources": [], "checkers": "./checkers/identify-employee-title.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "identify-governing-law", "modal": "SHOULD", "criterion": "The agreement SHOULD identify the governing-law jurisdiction. Restrictive-covenant enforceability is jurisdiction-sensitive; governing-law selection drives which overlay applies.", "applicability": null, "sources": [], "checkers": "./checkers/identify-governing-law.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "define-confidential-information", "modal": "SHOULD", "criterion": "The agreement SHOULD define Confidential Information.", "applicability": null, "sources": [], "checkers": "./checkers/define-confidential-information.json", "examples": null, "folio_iri": "https://folio.openlegalstandard.org/R8VYYILjUTVRdBAurCoMbMb", "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "define-trade-secrets", "modal": "SHOULD", "criterion": "The agreement SHOULD define Trade Secrets separately from Confidential Information. The trade-secret duration distinction (per `tie-trade-secret-duration-to-secrecy-status`) depends on a separate definition.", "applicability": null, "sources": [ { "type": "statute", "citation": "18 U.S.C. § 1839(3)(B) (2018).", "url": "https://www.law.cornell.edu/uscode/text/18/1839", "sourcePage": "https://openagreements.org/legal/non-compete/us#src-dtsa-trade-secret-definition", "quotes": [ { "verbatimRaw": "the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information", "verbatimClean": null, "paraphrase": "The federal Defend Trade Secrets Act adopts a parallel definition keyed to information that derives independent economic value from not being generally known or readily ascertainable.", "sectionLabel": null, "location": null } ] }, { "type": "statute", "citation": "Unif. Trade Secrets Act § 1(4) (Unif. L. Comm'n 1985); 10 M.R.S. § 1542(4).", "url": "https://www.mainelegislature.org/legis/statutes/10/title10ch302.pdf", "sourcePage": "https://openagreements.org/legal/non-compete/us#src-utsa-trade-secret-definition", "quotes": [ { "verbatimRaw": "Derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use", "verbatimClean": null, "paraphrase": "The UTSA defines a trade secret as information that derives independent economic value from not being generally known or readily ascertainable, and that is the subject of reasonable efforts to maintain its secrecy.", "sectionLabel": null, "location": null } ] } ], "checkers": "./checkers/define-trade-secrets.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "define-restricted-period", "modal": "SHOULD", "criterion": "The agreement SHOULD define the Restricted Period — the umbrella defined term each per-covenant duration references.", "applicability": { "expression": "employee_nonsolicit_included == true OR customer_nonsolicit_included == true OR nondealing_included == true OR noncompete_included == true OR noninvestment_included == true", "text": "if the employee no-hire / non-solicitation covenant is included or the current-customer non-solicitation covenant is included or the no-business-with-covered-customers covenant is included or the non-competition covenant is included or the non-investment covenant is included" }, "sources": [], "checkers": "./checkers/define-restricted-period.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "define-restricted-territory", "modal": "SHOULD", "criterion": "The agreement SHOULD define the Restricted Territory. Without a defined geographic scope, the non-compete is likely overbroad.", "applicability": { "expression": "noncompete_included == true", "text": "if the non-competition covenant is included" }, "sources": [], "checkers": "./checkers/define-restricted-territory.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "define-covered-customers", "modal": "SHOULD", "criterion": "The agreement SHOULD define Covered Customers (typically customers the employee had material contact with during a look-back window).", "applicability": { "expression": "customer_nonsolicit_included == true OR nondealing_included == true", "text": "if the current-customer non-solicitation covenant is included or the no-business-with-covered-customers covenant is included" }, "sources": [], "checkers": "./checkers/define-covered-customers.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "define-covered-employees", "modal": "SHOULD", "criterion": "The agreement SHOULD define Covered Employees (typically employees with whom the departing employee worked during a look-back window).", "applicability": { "expression": "employee_nonsolicit_included == true", "text": "if the employee no-hire / non-solicitation covenant is included" }, "sources": [], "checkers": "./checkers/define-covered-employees.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "define-protected-interests", "modal": "SHOULD", "criterion": "The agreement SHOULD define the employer's Protected Interests. Most jurisdictions require restrictive covenants to be no broader than necessary to protect a legitimate business interest; the definition is the substantive basis for that proportionality analysis.", "applicability": { "expression": "employee_nonsolicit_included == true OR customer_nonsolicit_included == true OR nondealing_included == true OR noncompete_included == true OR noninvestment_included == true", "text": "if the employee no-hire / non-solicitation covenant is included or the current-customer non-solicitation covenant is included or the no-business-with-covered-customers covenant is included or the non-competition covenant is included or the non-investment covenant is included" }, "sources": [], "checkers": "./checkers/define-protected-interests.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "define-competitive-business", "modal": "SHOULD", "criterion": "The agreement SHOULD define Competitive Business. A non-compete that does not define what counts as \"competitive\" is unworkable; the definition bounds the prohibited activity.", "applicability": { "expression": "noncompete_included == true", "text": "if the non-competition covenant is included" }, "sources": [], "checkers": "./checkers/define-competitive-business.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "permit-de-minimis-passive-public-investment-carveout", "modal": "SHOULD", "criterion": "When a non-compete or non-investment covenant restricts ownership of, or investment in, competing businesses, the agreement SHOULD include a de minimis carve-out permitting passive ownership of publicly-traded securities below a stated ownership threshold (commonly 1–5% of outstanding shares). Without the carve-out, the covenant effectively bans the employee from owning common stock in any public company in the industry — almost certainly overbroad and likely unenforceable.", "applicability": { "expression": "noncompete_included == true OR noninvestment_included == true", "text": "if the non-competition covenant is included or the non-investment covenant is included" }, "sources": [], "checkers": "./checkers/permit-de-minimis-passive-public-investment-carveout.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "define-passive-public-holdings", "modal": "MAY", "criterion": "The agreement MAY define Passive Public Holdings as a capitalized term to support the de minimis carve-out from `permit-de-minimis-passive-public-investment-carveout`. The substantive rule lives in that Requirement; defining a capitalized term is an optional drafting mechanic — many agreements inline the carve-out language without introducing a separate defined term.", "applicability": { "expression": "noncompete_included == true OR noninvestment_included == true", "text": "if the non-competition covenant is included or the non-investment covenant is included" }, "sources": [], "checkers": "./checkers/define-passive-public-holdings.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "define-solicit", "modal": "SHOULD", "criterion": "The agreement SHOULD define Solicit (capturing both active outreach and passive acceptance where appropriate). Without a definition, enforcement becomes a fact-by-fact dispute.", "applicability": { "expression": "employee_nonsolicit_included == true OR customer_nonsolicit_included == true", "text": "if the employee no-hire / non-solicitation covenant is included or the current-customer non-solicitation covenant is included" }, "sources": [], "checkers": "./checkers/define-solicit.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "define-termination-of-employment", "modal": "SHOULD", "criterion": "The agreement SHOULD define when the employment relationship is considered terminated (i.e., the event that triggers the Restricted Period clock). How termination is defined — whether it includes constructive discharge, resignation for good reason, expiration of a fixed term, or only termination by the employer — is jurisdictionally and contractually variable.", "applicability": { "expression": "employee_nonsolicit_included == true OR customer_nonsolicit_included == true OR nondealing_included == true OR noncompete_included == true OR noninvestment_included == true", "text": "if the employee no-hire / non-solicitation covenant is included or the current-customer non-solicitation covenant is included or the no-business-with-covered-customers covenant is included or the non-competition covenant is included or the non-investment covenant is included" }, "sources": [], "checkers": "./checkers/define-termination-of-employment.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "acknowledge-timing", "modal": "SHOULD", "criterion": "The agreement SHOULD include the employee's acknowledgement of the timing of execution relative to the start of employment or the consideration provided. Many jurisdictions condition enforceability on adequate consideration and pre-employment timing; a formal acknowledgement is evidence supporting those facts. Jurisdiction overlays may MODIFY this to MUST in jurisdictions with specific acknowledgement-form requirements.", "applicability": null, "sources": [], "checkers": "./checkers/acknowledge-timing.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "acknowledge-opportunity-to-consult-counsel", "modal": "SHOULD", "criterion": "The agreement SHOULD include the employee's acknowledgement of an opportunity to consult counsel. Useful for enforceability evidence in jurisdictions that scrutinize procedural fairness.", "applicability": null, "sources": [], "checkers": "./checkers/acknowledge-opportunity-to-consult-counsel.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "tie-trade-secret-duration-to-secrecy-status", "modal": "SHOULD", "criterion": "The agreement SHOULD tie the duration of trade-secret confidentiality to trade-secret status (i.e., protection running for so long as the information remains a trade secret under applicable law). Status-bounded duration is the ceiling the DTSA (18 U.S.C. § 1839) and state UTSAs will back, not a required form: a shorter fixed term — or a fixed term paired with a while-a-trade-secret tail, whichever is longer — is fully enforceable and simply gives up protection the law would otherwise provide.", "applicability": null, "sources": [ { "type": "statute", "citation": "18 U.S.C. § 1839(3)(B).", "url": "https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title18-section1839&num=0&edition=prelim", "sourcePage": "https://openagreements.org/practice-guides/trade-secrets/us/confidentiality-duration#src-dtsa-1839-definition", "quotes": [ { "verbatimRaw": "the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information", "verbatimClean": null, "paraphrase": "The federal DTSA defines a trade secret by two secrecy-based conditions — reasonable measures to keep the information secret, and independent economic value from not being generally known — with no fixed durational term, so protection lasts as long as the information remains secret.", "sectionLabel": null, "location": null } ] }, { "type": "statute", "citation": "Unif. Trade Secrets Act § 2(a) (1985), enacted as Wash. Rev. Code § 19.108.020(1).", "url": "https://app.leg.wa.gov/rcw/default.aspx?cite=19.108.020", "sourcePage": "https://openagreements.org/practice-guides/trade-secrets/us/confidentiality-duration#src-utsa-2a-termination", "quotes": [ { "verbatimRaw": "Upon application to the court, an injunction shall be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation.", "verbatimClean": null, "paraphrase": "UTSA § 2(a) ends injunctive protection when trade-secret status ends: an injunction shall be terminated when the trade secret has ceased to exist, subject only to a limited additional period to eliminate residual commercial advantage.", "sectionLabel": null, "location": null } ] } ], "checkers": "./checkers/tie-trade-secret-duration-to-secrecy-status.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "avoid-untethered-indefinite-confidentiality", "modal": "MUST NOT", "criterion": "The agreement MUST NOT impose a confidentiality obligation of indefinite duration that is neither time-bounded nor bounded by the information's continued status as a trade secret or otherwise legally protected information under applicable law. Courts read the untethered indefinite form — one sweeping past genuine trade secrets with no bound of either kind — as an unbounded restraint operating as a de facto non-compete (Brown v. TGS Management; TLS Management v. Rodríguez-Toledo). An indefinite obligation expressly limited to information that remains protected under applicable law is bounded by that status and is not the disfavored form.", "applicability": null, "sources": [ { "type": "common_law", "citation": "Brown v. TGS Mgmt. Co., LLC, 57 Cal. App. 5th 303 (2020).", "url": "https://www.courtlistener.com/opinion/4805583/brown-v-tgs-management-co-llc/", "sourcePage": "https://openagreements.org/practice-guides/trade-secrets/us/confidentiality-duration#src-brown-tgs", "quotes": [ { "verbatimRaw": "Collectively, these overly restrictive provisions operate as a de facto noncompete provision; they plainly bar Brown in perpetuity from doing any work in the securities field, much less in his chosen profession of statistical arbitrage.", "verbatimClean": null, "paraphrase": "A California appellate court held that confidentiality provisions broad enough to bar the employee from working in his field operated as a de facto non-compete and were void as an unlawful restraint on competition.", "sectionLabel": null, "location": null } ] }, { "type": "common_law", "citation": "TLS Mgmt. & Mktg. Servs., LLC v. Rodríguez-Toledo, 966 F.3d 46 (1st Cir. 2020).", "url": "https://www.courtlistener.com/opinion/4769672/tls-mgmt-and-mktg-ser-llc-v-rodriguez-toledo/", "sourcePage": "https://openagreements.org/practice-guides/trade-secrets/us/confidentiality-duration#src-tls-rodriguez", "quotes": [ { "verbatimRaw": "We reverse because TLS failed to satisfy its burden to prove the existence of trade secrets, and because the nondisclosure agreements are so broad as to be unenforceable.", "verbatimClean": null, "paraphrase": "The First Circuit refused to enforce non-disclosure agreements that were so broad they reached beyond protectable trade secrets, functioning like a non-compete.", "sectionLabel": null, "location": null } ] } ], "checkers": "./checkers/avoid-untethered-indefinite-confidentiality.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "state-confidentiality-duration", "modal": "SHOULD", "criterion": "The agreement SHOULD state a separate finite duration for non-trade-secret Confidential Information. Courts may refuse to enforce perpetual non-trade-secret obligations.", "applicability": null, "sources": [], "checkers": "./checkers/state-confidentiality-duration.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "disclose-dtsa-notice", "modal": "MUST", "criterion": "The agreement MUST include the Defend Trade Secrets Act whistleblower-immunity notice required by 18 U.S.C. § 1833(b)(3). Failure to include the notice forfeits the right to recover exemplary damages and attorney fees in trade-secret misappropriation actions against the employee.", "applicability": null, "sources": [ { "type": "statute", "citation": "18 U.S.C. § 1833(b)(3)(A) (2018).", "url": "https://www.law.cornell.edu/uscode/text/18/1833", "sourcePage": "https://openagreements.org/legal/non-compete/us#src-dtsa-immunity-notice", "quotes": [ { "verbatimRaw": "An employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.", "verbatimClean": null, "paraphrase": "The DTSA requires an employer to give notice of the trade-secret whistleblower immunity in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.", "sectionLabel": null, "location": null } ] } ], "checkers": "./checkers/disclose-dtsa-notice.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "carve-out-nlra-protected-discussion", "modal": "MUST", "criterion": "The agreement MUST carve out employee discussion of wages, hours, and other terms and conditions of employment from confidentiality and non-disparagement restrictions. NLRA Section 7 protects concerted activity including wage discussion; restrictions that chill such discussion are unlawful regardless of jurisdiction. See *McLaren Macomb*, 372 NLRB No. 58 (2023) for recent NLRB scrutiny of overly-broad confidentiality and non-disparagement provisions.", "applicability": null, "sources": [ { "type": "practice", "citation": "McLaren Macomb, 372 NLRB No. 58 (2023); NLRB Office of Public Affairs, Board Rules That Employers May Not Offer Severance Agreements Requiring Employees to Broadly Waive Labor Law Rights (Feb. 21, 2023).", "url": "https://www.nlrb.gov/news-outreach/news-story/board-rules-that-employers-may-not-offer-severance-agreements-requiring", "sourcePage": "https://openagreements.org/legal/non-compete/us#src-mclaren-macomb-protected-activity", "quotes": [ { "verbatimRaw": "simply offering employees a severance agreement that requires them to broadly give up their rights under Section 7 of the Act violates Section 8(a)(1) of the Act.", "verbatimClean": null, "paraphrase": "The NLRB held that simply offering employees a severance agreement requiring them to broadly waive their Section 7 rights — including through overly broad confidentiality and non-disparagement terms — violates Section 8(a)(1) of the National Labor Relations Act.", "sectionLabel": null, "location": null } ] } ], "checkers": "./checkers/carve-out-nlra-protected-discussion.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "permit-compelled-disclosure", "modal": "SHOULD", "criterion": "The agreement SHOULD permit disclosure of Confidential Information to the extent required by law, court order, or government investigation, with notice to the employer where lawful. Confidentiality obligations cannot prevent legally compelled disclosure; the carve-out plus notice procedure is standard.", "applicability": null, "sources": [], "checkers": "./checkers/permit-compelled-disclosure.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "require-property-return-and-certification", "modal": "SHOULD", "criterion": "The agreement SHOULD require the employee to return or destroy all company property and Confidential Information upon termination, and to certify compliance in writing.", "applicability": null, "sources": [], "checkers": "./checkers/require-property-return-and-certification.json", "examples": null, "folio_iri": "https://folio.openlegalstandard.org/RsJmLXZCMyfSkJ6A2x436d", "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "permit-employee-nonsolicit", "modal": "MAY", "criterion": "The agreement MAY include an employee non-solicitation covenant. When included, the covenant SHOULD cover Covered Employees for the stated Restricted Period, and the drafter MAY set that period at either 24 months (the modal term observed in benchmarked, publicly-filed employee agreements — see the restrictive-covenant market benchmark's employee-non-solicit-duration row) or 12 months (the common lighter alternative). Employee non-solicits are widely enforceable across jurisdictions when reasonably scoped to employees with whom the departing employee worked; no tracked regime caps a non-solicit duration below 24 months, though jurisdiction overlays may prefer the shorter term where a statute rewards it (e.g., Missouri's one-year safe harbor).", "applicability": null, "sources": [], "checkers": "./checkers/permit-employee-nonsolicit.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "permit-customer-nonsolicit", "modal": "MAY", "criterion": "The agreement MAY include a customer non-solicitation covenant. When included, the covenant SHOULD cover Covered Customers for the stated Restricted Period. Customer non-solicits are widely enforceable when scoped to actual contacts.", "applicability": null, "sources": [], "checkers": "./checkers/permit-customer-nonsolicit.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "permit-non-dealing", "modal": "MAY", "criterion": "The agreement MAY include a no-business-with-Covered-Customers (non-dealing) covenant. When included, the covenant SHOULD apply for the stated Restricted Period. Non-dealing is broader than non-solicit (prohibits doing business at all, not just initiating); enforceability varies by jurisdiction.", "applicability": null, "sources": [], "checkers": "./checkers/permit-non-dealing.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "permit-non-compete", "modal": "MAY", "criterion": "The agreement MAY include a non-compete covenant. When included, the covenant SHOULD be bounded in scope rather than open-ended. Non-competes are the most heavily regulated restrictive covenants; jurisdiction overlays may MODIFY this Requirement to add MUST-level gates (e.g., the Wyoming overlay's `gate-non-compete-by-statutory-pathway`).", "applicability": null, "sources": [ { "type": "common_law", "citation": "Restatement (Second) of Contracts § 188 (Am. L. Inst. 1981), quoted in August Healthcare Grp., LLC v. Manglona, No. 1:12-cv-00008, 2012 WL 12926085 (D. N. Mar. I. Oct. 12, 2012).", "url": "https://www.govinfo.gov/app/details/USCOURTS-nmid-1_12-cv-00008", "sourcePage": "https://openagreements.org/legal/non-compete/us#src-restatement-188-ancillary-restraints", "quotes": [ { "verbatimRaw": "A promise to refrain from competition that imposes a restraint that is ancillary to an otherwise valid transaction or relationship is unreasonably in restraint of trade if (a) the restraint is greater than is needed to protect the promisee's legitimate interest, or (b) the promisee's need is outweighed by the hardship to the promisor and the likely injury to the public.", "verbatimClean": null, "paraphrase": "The black-letter rule of reason treats an ancillary restraint as unreasonable if it is greater than needed to protect the employer's legitimate interest, or if that need is outweighed by the hardship to the worker and the likely injury to the public.", "sectionLabel": null, "location": null } ] } ], "checkers": "./checkers/permit-non-compete.json", "examples": null, "folio_iri": "https://folio.openlegalstandard.org/R8p2FPLcIUbqCDah7JqnJjj", "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "narrow-non-compete-by-specified-competitors-when-provided", "modal": "SHOULD", "criterion": "When the employer provides a named competitor list, the non-compete clause SHOULD be narrowed to that list rather than relying solely on the broader Competitive Business definition. A named-competitor list is a narrower and more defensible non-compete formulation.", "applicability": { "expression": "noncompete_included == true AND specified_competitors_provided == true", "text": "if the non-competition covenant is included and the employer provides a named list of specified competitors that the non-compete can be narrowed to" }, "sources": [], "checkers": "./checkers/narrow-non-compete-by-specified-competitors-when-provided.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "permit-non-investment", "modal": "MAY", "criterion": "The agreement MAY include a non-investment covenant prohibiting investment in Competitive Businesses. When included, the covenant SHOULD honor the Passive Public Holdings carve-out (see `permit-de-minimis-passive-public-investment-carveout`) and SHOULD apply for the stated Restricted Period.", "applicability": null, "sources": [], "checkers": "./checkers/permit-non-investment.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "require-non-disparagement", "modal": "SHOULD", "criterion": "The agreement SHOULD include a non-disparagement clause with a stated duration. Non-disparagement is best practice in the base form: counterparties generally accept it, and pushback typically resolves on a small set of standard carve-outs. Its absence is therefore flagged as a best-practice gap (SHOULD, not MUST — it remains omittable, and a jurisdiction that restricts non-disparagement may later override this, e.g. demote it to MAY or prohibit it where banned). When included, the clause should carry the standard carve-outs that keep it lawful and enforceable: (i) objective statements about job performance; (ii) honest answers to prospective employers, truthful testimony, and statements made in response to lawful process, subpoena, court order, or any government or regulatory inquiry or investigation; and (iii) statements made to legal counsel and the exercise or enforcement of legal rights. Because non-disparagement is largely contractual, the citation anchors are these carve-outs' necessity and the enforceability limits on broad versions — not a single enabling statute: NLRA § 7 protected concerted activity (see `carve-out-nlra-protected-discussion`) and recent NLRB scrutiny of overly-broad non-disparagement (*McLaren Macomb*, 372 NLRB No. 58 (2023)), reinforced by SEC whistleblower protections (17 CFR § 240.21F-17, which bars impeding an individual's direct communication with the SEC about a possible securities-law violation), other applicable whistleblower statutes, and anti-SLAPP laws that may limit litigation over protected petition or public expression.", "applicability": null, "sources": [], "checkers": "./checkers/require-non-disparagement.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "address-physician-specific-rights", "modal": "SHOULD", "criterion": "The agreement SHOULD address physician-specific rights and statutory carve-outs in a dedicated clause. Multiple jurisdictions impose physician-specific restrictions on restrictive covenants; a dedicated clause makes the treatment explicit and reviewable.", "applicability": null, "sources": [], "checkers": "./checkers/address-physician-specific-rights.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "require-no-conflicting-obligations-representation", "modal": "SHOULD", "criterion": "The agreement SHOULD include the employee's representation that they have no obligations to third parties (e.g., prior employers) that would prevent performance. Protects the employer against tortious-interference claims by prior employers and surfaces conflicts early.", "applicability": null, "sources": [], "checkers": "./checkers/require-no-conflicting-obligations-representation.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "address-notice-to-future-employers", "modal": "MAY", "criterion": "The agreement MAY address whether and how the employer may notify future employers (or other third parties) of the restrictive covenants. Notice provisions can support enforcement, but are not legally required and may themselves create tortious-interference sensitivity.", "applicability": null, "sources": [], "checkers": "./checkers/address-notice-to-future-employers.json", "examples": null, "folio_iri": "https://folio.openlegalstandard.org/R9sy70TmYoM9eLAjF7rfva2", "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "address-tolling-during-breach", "modal": "SHOULD", "criterion": "The agreement SHOULD address whether the Restricted Period tolls during the employee's breach of any covenant. Without tolling, a determined breacher can run out the clock.", "applicability": { "expression": "employee_nonsolicit_included == true OR customer_nonsolicit_included == true OR nondealing_included == true OR noncompete_included == true OR noninvestment_included == true", "text": "if the employee no-hire / non-solicitation covenant is included or the current-customer non-solicitation covenant is included or the no-business-with-covered-customers covenant is included or the non-competition covenant is included or the non-investment covenant is included" }, "sources": [], "checkers": "./checkers/address-tolling-during-breach.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "require-injunctive-relief-availability", "modal": "SHOULD", "criterion": "The agreement SHOULD acknowledge that breach of the restrictive covenants may cause irreparable harm and that injunctive relief is an appropriate remedy. Courts can independently find irreparable harm without the acknowledgement, but the acknowledgement supports the element.", "applicability": { "expression": "employee_nonsolicit_included == true OR customer_nonsolicit_included == true OR nondealing_included == true OR noncompete_included == true OR noninvestment_included == true", "text": "if the employee no-hire / non-solicitation covenant is included or the current-customer non-solicitation covenant is included or the no-business-with-covered-customers covenant is included or the non-competition covenant is included or the non-investment covenant is included" }, "sources": [], "checkers": "./checkers/require-injunctive-relief-availability.json", "examples": null, "folio_iri": "https://folio.openlegalstandard.org/RBhmDmdZWNMpZfSRDHWVP2v", "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "address-attorneys-fees-and-costs", "modal": "MAY", "criterion": "The agreement MAY include a fee-shifting provision entitling the prevailing party in an enforcement action to attorneys' fees and costs. Fee-shifting affects deterrence and economic feasibility of enforcement but is a commercial choice; the default American Rule applies if silent.", "applicability": null, "sources": [], "checkers": "./checkers/address-attorneys-fees-and-costs.json", "examples": null, "folio_iri": "https://folio.openlegalstandard.org/RBhmDmdZWNMpZfSRDHWVP2v", "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "permit-blue-pencil-by-default", "modal": "SHOULD", "criterion": "The agreement SHOULD include plain severability for all jurisdictions and should render any reformation language according to the `reformation_posture` facet. A `none` posture omits a reformation clause entirely; `discretionary` and `mandatory` postures render customary reformation language with an \"if and to the extent permitted by applicable law\" or \"to the maximum extent permitted by applicable law\" tail. Wyoming uses `reformation_posture=none` and omits a reformation clause because *Hassler v. Circle C Resources*, 2022 WY 28, confirms Wyoming courts may decline to reform overbroad restrictive covenants and may void them instead.", "applicability": null, "sources": [], "checkers": "./checkers/permit-blue-pencil-by-default.json", "examples": null, "folio_iri": "https://folio.openlegalstandard.org/R9JMX7niGHsR9tG8mfIMzOS", "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "address-survival-per-covenant", "modal": "SHOULD", "criterion": "The agreement SHOULD address the survival and expiration of each covenant separately. Different covenants run for different durations; a single bundled survival clause obscures the per-covenant timing analysis.", "applicability": { "expression": "employee_nonsolicit_included == true OR customer_nonsolicit_included == true OR nondealing_included == true OR noncompete_included == true OR noninvestment_included == true", "text": "if the employee no-hire / non-solicitation covenant is included or the current-customer non-solicitation covenant is included or the no-business-with-covered-customers covenant is included or the non-competition covenant is included or the non-investment covenant is included" }, "sources": [], "checkers": "./checkers/address-survival-per-covenant.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "address-assignment-and-successors", "modal": "SHOULD", "criterion": "The agreement SHOULD address whether and how the employer may assign the covenants to successors. Restrictive covenants are often the target of post-M&A successor disputes; explicit assignability language matters.", "applicability": null, "sources": [], "checkers": "./checkers/address-assignment-and-successors.json", "examples": null, "folio_iri": null, "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "specify-governing-law-and-venue", "modal": "SHOULD", "criterion": "The agreement SHOULD specify the governing law, venue, and dispute-resolution process. Restrictive-covenant disputes are jurisdiction-sensitive; choice-of-law and venue clauses bind that risk.", "applicability": null, "sources": [], "checkers": "./checkers/specify-governing-law-and-venue.json", "examples": null, "folio_iri": "https://folio.openlegalstandard.org/RCinm0jvGGkzcHth7AnasRI", "human_reviewed_at": null, "human_reviewed_by": null }, { "requirement_id": "address-entire-agreement-amendment-waiver-and-e-signatures", "modal": "SHOULD", "criterion": "The agreement SHOULD include an entire-agreement clause and address amendment, waiver, and electronic signature mechanics. Standard boilerplate that prevents oral modifications and confirms electronic execution validity.", "applicability": null, "sources": [], "checkers": "./checkers/address-entire-agreement-amendment-waiver-and-e-signatures.json", "examples": null, "folio_iri": "https://folio.openlegalstandard.org/R6H4PoC2QMbkel1osdjizV", "human_reviewed_at": null, "human_reviewed_by": null } ] } }