What's Market: Executive Compensation Snapshot: Non-Competition Provisions for a Select Group of Chief Executive Officers | Practical Law

What's Market: Executive Compensation Snapshot: Non-Competition Provisions for a Select Group of Chief Executive Officers | Practical Law

A comparison of non-competition provisions from the employment agreements of a select group of chief executive officers of companies from a variety of industries using the What's Market, Executive Employment Agreements: Detailed Analysis database.

What's Market: Executive Compensation Snapshot: Non-Competition Provisions for a Select Group of Chief Executive Officers

by Practical Law Employee Benefits & Executive Compensation
Published on 27 Sep 2023 • USA (National/Federal)
A comparison of non-competition provisions from the employment agreements of a select group of chief executive officers of companies from a variety of industries using the What's Market, Executive Employment Agreements: Detailed Analysis database.
Recently, non-compete provisions in employment contracts have come under increased scrutiny. New laws intended to limit the enforceability of these provisions are being enacted or proposed across the country. Given the increasing backlash against non-competes, employers need to think carefully about how to structure these provisions so that they remain enforceable, where permitted, against key executives and other highly skilled employees.

Non-Compete Provisions

Non-compete provisions are tools used by employers that help the employer safeguard their valuable company assets when executives and other key employees leave the company. A non-compete provision (also known as a non-competition agreement or a non-compete) is an agreement between an employer and an employee that imposes post-employment restrictions on the employee.
In general, non-competes restrict former employees from working for competitors or defined groups of competitors for a specified period. Employers use non-competes and other restrictive covenants, like non-solicitation and confidentiality agreements, to protect trade secrets, confidential information, goodwill, and other company assets.
In the past, non-competes primarily applied to top executives and other key employees, such as highly skilled employees in the tech industry. Now, non-competes have expanded beyond executives and tech industry employees and can be found in virtually every industry and job level. This expansion has led to a growing backlash against the use of non-competes in the workplace.

Non-Compete Enforceability

Non-competes historically have been governed by state law and their enforceability can vary substantially from jurisdiction to jurisdiction. Because a non-compete may restrict an employee's ability to work, they are generally disfavored as a restraint on trade, but reasonable non-competes have been found to be enforceable to varying degrees in most jurisdictions, depending on the circumstances. To be reasonable, a non-compete generally must:
  • Be reasonable in duration and scope.
  • Not go beyond what is needed to protect the employer's legitimate business interests.
  • Not impose unnecessary hardship on the employee.
  • Not adversely impact the public.
Although non-competes have generally been enforceable in most jurisdictions, in recent years the trend has been toward enacting greater restrictions on their enforceability.

Banning Non-Compete Provisions

Some states, like California, North Dakota and Oklahoma, have long-standing laws banning non-competes (with limited exceptions for the sale or dissolution of a business), but recently other states have banned or significantly restricted the enforceability of non-competes. For example:
  • Minnesota enacted a law holding non-competes in employment unenforceable per se.
  • More than a dozen states now prohibit non-competes with employees earning less than a minimum threshold amount. For example, Nevada amended its law to prohibit non-competes with employees paid solely on an hourly basis. Illinois recently passed laws restricting the enforceability of non-competes against workers who earn wages below a certain amount, limiting their duration, and requiring affected employees to be compensated during the "non-compete" period.
  • Hawaii and Colorado passed laws barring the use of non-competes in certain industries and professions.
The trend towards limiting and even banning non-competes is ongoing. For example, in June 2023, the New York State Legislature passed a bill that would ban all non-competes, even those entered in connection with the sale of a business. While this proposed law would be the most restrictive law in the nation, it has yet to be signed by the governor, and many question whether it will be signed in its current form.
In September 2023, California further amended its non-compete restrictions to create a private right of action by employees, former employees, and prospective employees against any employer that enters into or tries to enforce a restrictive covenant void under California law, regardless of where the covenant was entered into or where the employee worked (Cal. Bus. & Prof. Code § 16600.5, added by S.B. 699). The new law is effective January 1, 2024.
Further, although there is no federal law governing non-competes, in January 2023, the Federal Trade Commission (FTC) published a proposed rule barring nearly all non-competes, claiming non-competes are an unfair means of competition and are thus illegal under Section 5 of the Federal Trade Commission Act. The General Counsel of the National Labor Relations Board (NLRB) has also taken the position that employee non-competes may violate employees' rights to engage in protected concerted activity under Section 7 of the National Labor Relations Act (NLRA), though executives are generally beyond the NLRB's jurisdiction, which does not extend to managers and supervisors.

Shifting Non-Compete Construction

While resistance to non-competes may be increasing, many employers argue that there are important business reasons for their continuation. For instance, employers that invest their resources to develop client lists, trade secrets, confidential information, and other business assets want to protect those assets from competitive use by employees after the employment relationship ends.
With an increasing number of laws restricting the effectiveness of non-competes and the shifting legal landscape, employers may face more challenges in their efforts to protect company assets in the future. Accordingly, employers may want to consider using alternative approaches, such as garden leave provisions, to protect their company assets or carefully structuring their non-compete agreements to ensure they remain enforceable in jurisdictions where that is possible.
Use the chart below to compare the non-competition provisions and other restrictive covenants of the employment agreements of a select group of chief executive officers (CEOs). For a complete summary of these and other employment agreements, see the What's Market, Executive Employment Agreements: Detailed Analysis database. 
EMPLOYMENT AGREEMENT
Whole Earth Brands, Inc.
Interim Chief Executive Officer
April 6, 2023
Vishay Intertechnology, Inc. 
President and Chief Executive Officer 
January 1, 2023 
Bausch + Lomb Corporation
Chairman of the Board and Chief Executive Officer
February 14, 2023
Zebra Technologies Corporation 
Chief Executive Officer
March 1, 2023
INDUSTRY SECTOR
Food and beverage
Computer and electronic equipment
Medical devices and healthcare
Manufacturing and machinery
MARKET CAPITALIZATION AT FILING
Approximately $104.4 million.
Approximately $2.4 billion.
Approximately $6.2 billion.
Approximately $13.1 billion.
GOVERNING LAW
Illinois
Pennsylvania
New Jersey
Illinois
POST-TERMINATION NON-COMPETITION: DURATION
The executive is subject to a 12-month non-competition provision following termination.
Section 16, Non-Competition, Confidentiality Agreement
The executive is subject to a non-competition provision for one year following termination.
Section 1.10
Section 7.1
The executive is subject to a 12-month post-termination non-compete.
Section 12(b)
The executive is subject to a 24-month non-competition provision following termination.
Section 8.B. (2)
POST-TERMINATION NON-COMPETITION: GEOGRAPHY
Any country in the world in which the employer or any of its subsidiaries or affiliates has marketed or sold its products, or in which the employer or any of its subsidiaries or affiliates has operations in the most recent 12 months of the executive's employment.
Section 20, Restricted Territory
Any business or venture located anywhere in the world that is engaged in any business activities to the extent Vishay or any subsidiary or affiliate is engaged in that activity or has significant plans to enter into that activity on the date of termination.
Section 1.6
Any country in which the employer or any of its affiliates conducts business or plans to conduct business during the employment term.
Section 12(b)
The employment agreement contains a non-competition provision, but it does not specify any geographic limitations.
POST-TERMINATION NON-SOLICITATION OF EMPLOYEES: DURATION
The executive is subject to a 12-month no-hire and non-solicitation of employees provision following termination.
Section 16, Non-Competition; Confidentiality Agreement
The executive is subject to a non-solicitation provision for one year following termination.
Section 1.11
Section 7.2(b)
The executive is subject to a 12-month post-termination no-hire and non-solicitation of employees.
Section 12(a)
The executive is subject to a 24-month non-solicitation of employees provision following termination.
Section 8. B. (3)
POST-TERMINATION NON-SOLICITATION OF CUSTOMERS/
CLIENTS: DURATION
The executive is subject to a 12-month non-solicitation of customers provision following termination.
Section 16, Non-Competition; Confidentiality Agreement
The executive is subject to a non-solicitation provision for one year following termination.
Section 1.11
Section 7.2(a)
Section 7.2(c)
Section 7.2(d)
The executive is subject to a 12-month post-termination non-solicitation and non-interference of customers/clients.
Section 12(a)
The executive is subject to a 24-month non-solicitation and non-interference with customers provision following termination.
Section 8. B. (1)
POST-TERMINATION NON-DISPARAGEMENT
None specified.
The executive is subject to a non-disparagement provision.
Section 7.4
The executive is subject to a post-termination non-disparagement provision.
Section 12(c)
The executive is subject to an indefinite non-disparagement provision following termination.
Section 8. C.
ARBITRATION PROVISION
None specified.
Yes.
Section 8.8
Yes, but excludes breaches by the executive of covenants under the employment agreement.
Section 16(g)
None specified.
For additional employment agreement terms and summaries see the What's Market, Executive Employment Agreements: Detailed Analysis database, which provides employment agreement summaries for a variety of executive positions and a diverse group of employers, based on size, industry, and location. The summaries cover terms that are typically heavily negotiated, such as compensation, severance, and non-competition provisions, and often reflect emerging trends.