The Summer of Noncompete Reform: Three Other New England States Get In On the Act – Part 2

Following the Massachusetts legislature’s attempt at reform of the use of employee noncompetition agreements last summer, three other New England states – New Hampshire, Maine and Rhode Island –passed their own noncompetition agreement reform bills in the summer of 2019.

In the first of my two posts on the topic, The Summer of Noncompete Reform: Three Other New England States Get In On the Act – Part 1 (date), I provided a quick refresher on the Massachusetts statute and an overview of the other states’ new acts. In this post, those three new acts will be discussed in greater detail.

As set forth in the prior post, none of the new laws in the other three New England states are nearly as complex, far-ranging or as difficult to interpret and apply as the Massachusetts statute. The only common thread is the banning of noncompetition agreements for certain low wage or low level employees.

That common goal is complicated by definitional language in each of the statutes. While Massachusetts law makes no reference to a specific income level, it prohibits use of noncompetition agreements with employees who are non-exempt under the Fair Labor Standards Act. By this negative reference, noncompetition agreements are therefore permitted for use with exempt employees, incorporating the FLSA’s minimum salary threshold of $455 per week or $23,660 annually.

The other three states are more direct, banning the use of noncompetition agreements with low wage employees defined as follows:

  • New Hampshire (effective September 8, 2019) – an employee who earns less than 200% of the federal minimum wage (currently $7.25) (approximately $30,000 annually for a full-time worker);
  • Maine’s “An Act to Promote Keeping Workers in Maine” (effective September 19, 2019) – an employee who makes less than 400% of the federal poverty threshold for an individual (approximately $50 K annually); and
  • Rhode Island (effective January 15, 2020) – an employee who makes less than 250% of the federal poverty threshold for an individual (approximately $31 K annually).

Beyond that income-based prohibition, each state’s Act addressed only a limited number of the issues embedded in the Massachusetts Act. As a result, none come close to the complexity found in the Massachusetts statute.

The New Hampshire statute is extremely limited in scope. It bans the use of noncompetition agreements with low wage employees as that term is defined above. It has no other impact.

While more detailed than New Hampshire’s, the Maine statute is still quite modest. Like Massachusetts, it imposes advance notice requirements. In that regard, Maine requires that the employee be informed prior to the offer of employment that a noncompetition agreement will be a condition of that employment. It also requires that the employer provide a three business day window prior to signing, arguably to permit the employee time to review and negotiate its terms. These are slightly different than the notice requirements found in the Massachusetts law.

The Maine statute differs from the Massachusetts law in a few other important ways:

  • The restriction on competition only takes effect if (a) the employee is employed for one year or (b) six months pass after the agreement is signed by an existing employee, whichever is later;
  • The Maine statute punishes an overreaching employer by fining it $5,000 if it (a) has any ineligible employee sign one or (b) fails to comply with the advance notice requirements; and
  • It also bans no poaching agreements between employers (referred to as “restrictive employment agreements”) and imposes that same $5,000 fine if an employer (a) signs or (b) threatens or attempts to enforce such an agreement.

The Rhode Island statute on its face has more in common with the Massachusetts statute, but it still pales by comparison in terms of complexity. It defines numerous terms, most in an identical way to the definitions in the Massachusetts statute. As with Massachusetts, the Rhode Island statute also bans noncompetition agreements with non-exempt employees, employees under age 19 or students. It also expressly excludes from its coverage nondisclosure and non-solicitation agreements. Like Massachusetts, Rhode Island also excludes noncompetition agreements executed in connection with a business sale or a severance agreement from the coverage of the Act.

Aside from the definition given to low wage employees in the Rhode Island act, there are other differences. Rhode Island does not require any advance notice to the employee. Its Act also does not apply to independent contractors, unlike its Massachusetts counterpart.

Most conspicuous are the many granular provisions of the Massachusetts Act that do not appear in any of these other New England states’ statutes. Unlike Massachusetts, none have any language referencing consideration or garden leave. None require the express statement in writing of the employee’s right to have counsel review before signing. None have the presumptions of reasonableness (1 year time restriction, certain defined geographic or subject matter restrictions) found in the Massachusetts Act. None have express provisions for enhanced protections against an employee who has taken physical property or electronic files of the employer. None provide that an employer who has elected to provide garden leave in consideration for the noncompetition restrictions can choose to waive those restrictions thereby eliminating the garden leave obligation post-termination. None provide for the “disappearing noncompete” concept found in the Massachusetts law where the employment termination has been without cause.

This and the prior post have addressed the four states in New England to undertake noncompete reform in the last two years. To complete the regional picture, what of the two others – Vermont and Connecticut?

Neither of those two states have passed any similar noncompete reform legislation.  For two years, Vermont has considered a bill to ban non-competes altogether, but that bill does not seem to have made much headway.  Connecticut, on the other hand, has passed piecemeal legislation addressing a strange hodge-podge of specific industries (physicians, homemakers, companions or home health service workers, broadcasters). It has not passed any broader legislation nor does it appear that there are any efforts to do so at the present time.

About Rich Van Nostrand

Rich is a partner at the Firm. He has extensive experience in general civil trial work, with concentrations in business, commercial and employment litigation. He provides advice and representation in a variety of business and commercial litigation matters, including shareholder disputes, corporate dissolutions, intra- and inter-company disagreements, and intra-family business disputes. Rich also provides ongoing employment litigation and counseling services to numerous clients in the private, public and higher education sectors. In the private sector, Rich represents clients in a broad range of industries including health care, professional services, high technology, industrial and manufacturing. In addition, he is also frequently selected by litigants to assist in the resolution of their disputes as an independent arbitrator or mediator.
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