The Ever-Changing Employment Landscape: Non-Competes and Moonlighting

Employee rights are increasing across the country. Are your policies and agreements up to date?

Following overall trends toward transparency and employee freedoms, there have been significant changes to the use of non-compete clauses and moonlighting restrictions by employers. Historically, employers were able to keep employees from working for a competitor or holding a second job, but these practices are coming to an end in many ways.

The laws around non-competes and moonlighting are changing both at the federal and state level, meaning every state you do business in may have different rules and regulations. Additionally, even if you were familiar with the rules several months ago, you may no longer be. It is important to keep up with this ever-changing landscape.

Non-Competes

Changes and Trends

One in five US workers have signed non-competes, but many states are passing laws limiting or completely prohibiting them. Non-competes have been shown to reduce wages and innovation, and even the FTC is looking at banning these agreements. (1)

John Butler, Senior Corporate Counsel with Equinox Business Law says, “Non-competes have been used for a long time. Employers don't want to build a business and train a key employee, just to have that person then leave and then open up shop across the street. But, because of concerns around stifling competition, the government has been increasing these restrictions on non-competes.”

Washington, for example, prohibits non-competes for employees and independent contractors, unless those workers make over a certain amount. Those amounts differ for employees and contractors, and change every year based on inflation so it is important to keep track.

What to Do

Review your agreements and handbooks

• Pivot away from relying on non-competes and toward other tools like trade secret limitations

• Look at your employment and contractor agreements that have non-competes and non-solicitation provisions and update as needed

• Be aware of changing laws in this area

  • “The federal government through the FTCC has proposed a rule banning non-competes with employees, and requiring employers to notify employees that their non-competes are no longer enforceable. These laws are coming, and they are only going to be increasing”, notes John.

Moonlighting

Changes and Trends

Moonlighting, or the practice of holding multiple jobs, has gotten more popular lately due to both the flexibility afforded by remote work, and high levels of inflation. In the past, businesses were often very restrictive on whether employees could engage in these side jobs or part time work, but new regulations are challenging that.

“Employers are not allowed to restrict people who make less than twice the minimum wage in Washington from holding multiple jobs” says John. “The state doesn’t want you to prevent people who don’t make a lot of money from holding another job in order to pay the bills. However, the state recognizes there are reasons you may want to restrict an employee from having multiple jobs, so there are broad exceptions for things like conflict of interest.”

What to Do

• Review your employment agreements, employee handbooks, and restrictive covenants agreements so that you are in compliance. Don't just use an old template without looking at it

• Build in clear expectations around performance

  • “One of the things that I hear a lot is CEOs that say “I don't want my employees working for anyone else.” Says Shannon Swift, Founder/CEO of Swift HR Solutions Inc. “When I hear this, I try looking for the true issue. Is there is a conflict of interest? More often than not it comes down to performance management and having clear metrics. If an employee is meeting performance metrics and there is no conflict, then I ask leaders if this is really an issue. If there is a lack of clear expectations around availability and someone is constantly not available, that is impacting the business and we address it as a performance issue.”

In conclusion, the landscape of employee rights is undergoing a shift, marked by an increasing emphasis on transparency and individual freedoms. The traditional practices of enforcing stringent non-compete clauses and moonlighting restrictions are evolving to align with the changing dynamics of the workforce. Employers must navigate this shift by reviewing and updating employment and independent contractor agreements to ensure compliance, while also establishing clear performance expectations to address concerns. As we move forward, the overarching theme is clear: a more equitable and flexible employment landscape is emerging, demanding a proactive approach from employers to navigate these changes effectively.

With these laws come exceptions. To find out how you can protect your business interests while staying in compliance with laws and regulations in the states you operate in, you may need help from a legal or HR professional. Not sure what kind of support you need? Give us a call.

1 - https://www.npr.org/2023/01/13/1148446019/ftc-rule-ban-noncompetes-low-wage-workers-trade-secrets