You might have noticed the increasing number of buildings throughout the City of Chicago displaying signs with the name of the company “WeWork.” WeWork is a fairly new company that provides shared workspaces for businesses. They are popping up everywhere, and WeWork intends to continue its expansion around town and in the suburbs. Like many successful start ups, the company owners want to prevent its employees from poaching their business plan and becoming their competitors. And, as the company grows, it has a growing number of employees to keep from taking their good idea and competing with them.
WeWork had previously required comprehensive non-compete agreements from almost every one of its employees, regardless of the employees’ positions or whether they had knowledge of, or access to, confidential information. This non-compete agreement included employees such as cleaning crews, mailroom workers, executive assistants and baristas. The non-compete agreement prohibited these employees, and many more, from taking jobs with any of its competitors for a period of one year after leaving the company.
New York Attorney General Barbara Underwood and Illinois Attorney General Lisa Madigan filed suit to nullify these non-compete agreements for employees who really wouldn’t have access to much, if any, actual confidential information. Recently, they reached a settlement with WeWork that either limits or completely eliminates these non-compete clauses, both existing and in future employment agreements, covering some 3,300 employees.
Attorney General Underwood stated that the settlement will have a positive impact on both employees and employers.
“Workers should be able to take a new job without living in fear of a lawsuit from their former employer...Yet too often, non-compete agreements are misused, especially when it comes to low-wage workers – limiting employees’ mobility and opportunity and preventing businesses from hiring the best person for the job.”
Attorney General Madigan added that the settlement will "put an end to WeWork’s unnecessary use of noncompete agreements and removes career obstacles for current and former employees, allowing them to make better decisions for their lives”.
Just as we have advised in the past, non-compete clauses can be tricky, and are under greater scrutiny by courts in recent years. (to view, click here and here) The biggest issue faced by employers is that these agreements are often deemed far too broad.
Narrowing the broad definition of both competition and the applicable employees, reducing the boundaries to which the agreement encompasses, and cutting the duration of the agreement are all ways in which employers can make fair and reasonable non-compete agreements.