For many employers, a new year is a new opportunity to update policies, procedures, and agreements—including restrictive covenants. In addition to ensuring compliance with applicable state requirements as to timing, consideration, and restrictions, companies need to be aware of applicable compensation minimums for employees being asked to sign noncompetition and nonsolicitation agreements. With the start of the new year, many states have increased minimum compensation floors for such employees.
- Colorado. The new minimum highly compensated employee threshold is $112,500 for 2023. Noncompetes are prohibited for employees who do not meet the highly compensated employee threshold. Nonsolicitation agreements are prohibited for employees who do not earn at least $67,500, which is 60 percent of the highly compensated employee minimum.
- Maine. Employees must earn wages above 400 percent of the federal poverty level (above $58,320 for 2023) to be bound by a noncompete.
- Oregon. For noncompete agreements without garden leave provisions, Oregon requires employees to be exempt under Oregon's administrative, executive, or professional exemptions, to have earned more than $100,533 in annual gross salary and commissions in 2022, and to have earned more than $108,575.64 in annual gross salary in 2023 at the time of termination from employment, with the foregoing amount adjusted annually to track inflation pursuant to the Consumer Price Index for All Urban Consumers, West Region (All Items).
- Washington. Noncompetes are prohibited for employees who do not earn more than $116,593.18 (in 2023, adjusted annually for inflation).
While the FTC has proposed to ban all noncompetes, there is proposed legislation in at least four additional states—Minnesota, Missouri, New Jersey, and Texas—to join the twelve jurisdictions with income minimums for noncompetes. To assist employers, Ogletree Deakins has created a map of all applicable compensation minimums for restrictive covenants.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.