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As of the beginning of May, both houses of the New Hampshire Legislature have passed Senate Bill 351, "an act relative to the requirement for notice of noncompete agreements prior to the start of employment." SB 351 seeks to repeal and replace the provisions of RSA 275:70, the controversial non-compete statute that was enacted two years ago in May of 2012.
RSA 275:70 currently states that "prior to or concurrent with making an offer of employment" all New Hampshire employers must provide prospective employees with a copy of any "non-compete or non-piracy agreement" that the employer will require the employee to execute upon hiring. Additionally, RSA 275:70 requires employers to provide the same advance notice to current employees who will be required to execute a "non-compete or non-piracy agreement" upon a "change of job classification." Any contracts not in compliance with the statute are deemed void and unenforceable.
The current language of RSA 275:70 is troublesome on a variety of levels. For example, although a majority of the New Hampshire business community is familiar with the concept of a "non-compete agreement," there is no correspondingly accepted definition for "non-piracy agreement," which could refer to a variety of agreements, including non-solicitation, non-disclosure, and/or confidentiality agreements. Additionally, while "job classifications" are common in the public sector, most private employers do not utilize them. Therefore, difficulties have arisen regarding how the advance notice requirements of the statute should be implemented with regard to current employees. For additional commentary regarding RSA 275:70, please see Anne G. Scheer, Esq., Recently Passed NH Laws on Employment (June 29, 2012); Peg O'Brien, Esq., New Hampshire Governor Signs New Law Affecting Non-Compete and Non-Piracy Agreements in the Workplace (May 25, 2012).
SB 351 attempts to remedy many of the concerns raised by RSA 275:70's current language by, for example, removing references to "non-piracy agreements" and limiting its application to non-compete agreements presented to individuals at the initial offer of employment. Additionally, SB 351 attempts to further protect employers' legitimate interest in entering into agreements with their employees related to confidentiality and other employment agreements, regardless of whether these agreements are presented with a non-compete that is eventually found to be unenforceable. Although not expressly stated in SB 351, upon passage of the law, employers will presumably be able to request that employees execute non-competes during mid-stream employment without fear of the agreements being found statutorily "void," subject to traditional common law principles of enforceability of non-compete agreements.
As passed by the House and Senate, SB 351 reads as follows:
Any employer who requires an employee who has not previously been employed by the employer to execute a noncompete agreement as a condition of employment shall provide a copy of such agreement to the potential employee prior to the employee's acceptance of an offer of employment. A noncompete agreement that has not been disclosed to an employee as required by this section shall not be enforceable against the employee, but all other provisions of any employment, confidentiality, nondisclosure, trade secret, intellectual property assignment, or any other type of employment agreement or provision shall remain in full force and effect.
The bill was enrolled in both houses on May 15, 2014, but has not yet been presented to the Governor for her review.
Please contact any member of Devine Millimet's Labor, Employment, and Employee Benefits Practice Group if you have questions related to the use of non-compete and/or non-piracy agreements in the workplace.
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