Four More States Enact Laws Limiting Noncompete Agreements
Author: Robert S. Teachout, XpertHR Legal Editor
August 7, 2019
In recent years, several states have passed laws regulating the use and enforcement of noncompete agreements. The trend of states stepping in to limit the use of such agreements is continuing as Maine, Maryland, New Hampshire and Rhode Island have enacted noncompete agreement laws close on the heels of Washington's new law.
Noncompete agreements restrict an employee's ability to work for a competitor after leaving his or her current employer. Criticism of employers overusing and abusing the use of noncompetes has increased in recent years, including many instances where interns and low-wage employees were required to sign such agreements as a condition of employment.
As a result, several states have reevaluated whether noncompete agreements go too far and passed laws enforcing court limits on an agreement's scope (i.e., length of time after employment ends and geographic limits) to ensure they are reasonable. In particular, prohibiting noncompete agreements for low-wage workers has been trending.
Beginning January 15, 2020, noncompetition agreements in Rhode Island will be unenforceable against:
- Employees aged 18 and under;
- Nonexempt employees under the Fair Labor Standards Act;
- Low-wage employees whose average annual earnings are not more than 250 percent of the federal poverty level for individuals; and
- Undergraduate or graduate students that participate in an internship or have a short-term employment relationship with an employer.
Maryland / New Hampshire
The Maryland law, effective October 1, 2019, prohibits employers from including a noncompete or conflict of interest provision in an employment contract with an employee who earns $15 or less per hour or $31,200 or less annually.
New Hampshire's new law also prohibits employers from requiring low-wage employees (those who earns an hourly rate less than or equal to 200% of the federal minimum wage) to enter into a noncompete agreement, effective September 8, 2019.
However, while the new law in Maine also prohibits the use of noncompete agreements with low-wage employees (defined as an employee earning wages at or below 400% of the federal poverty level), it goes further by declaring such agreements to be contrary to public policy and enforceable only in limited circumstances.
To be enforceable, a noncompete agreement in Maine must be reasonable and no broader than necessary to protect one or more of the employer's:
- Trade secrets;
- Confidential information that does not qualify as a trade secret; or
Maine's law will be effective September 19, 2019.