Under the new law, the terms of a non-compete agreement, with the exception of certain medical agreements, cannot enter into force until one year after the employee`s start date or six months after the date of signature of the contract, whichever is later. This means that employees who accept employment and leave in their first year are not bound by the non-compete obligation, even if they have established relationships with key client companies or come into possession of trade secrets or confidential information that could be used to compete with their employer. To protect client relationships and confidential information during this first year of employment, employers must rely on other restrictive agreements such as client solicitation prohibitions, non-disclosure or confidentiality agreements. The law generally states that such agreements are contrary to the public policy of the state, unless they are necessary to protect: (1) an employer`s trade secrets; (2) confidential information of an employer that is not considered a trade secret; or (3) the goodwill of an employer. The law further clarifies that such agreements may be considered necessary “if the legitimate business interest cannot be adequately protected by another restrictive agreement, including but not limited to a non-consolidation agreement or a non-disclosure or confidentiality agreement.” Second, if enforceable, non-compete obligations must not restrict the employee more than necessary to protect the employer`s trade secrets and other confidential or goodwill information (i.e., protect the company`s reputation and customer relationships). The law states that non-compete obligations are deemed necessary if these interests cannot be protected by another restrictive agreement such as a non-solicitation agreement or a non-disclosure agreement. Given that employers often use non-disclosure and non-solicitation agreements to protect confidential information, this seems to mean that non-compete agreements are primarily used to protect goodwill. The law prohibits employers from entering into “restrictive employment contracts” among themselves. A “restrictive employment contract” is an agreement between two or more employers, “including through a franchise or subcontract,” that “prohibits or restricts an employer from recruiting or hiring employees or former employees of another employer.” Unlike the federal antitrust law, which prohibits “naked” non-poaching agreements between employers, the law does not provide an exception for non-poaching agreements that complement legitimate business cooperation.

This part of the law is likely intended to combat the practice of fast food franchisors of including non-poaching clauses for employees in franchise agreements. However, it prohibits a wide range of less controversial practices, . B such as the inclusion of non-poaching language in joint venture agreements or service contracts of personnel service providers. First, employers are not allowed to use non-compete obligations at all with employees earning less than 400% of the federal poverty line [Editor`s note: According to the federal government`s 2019 Poverty Guidelines, this equates to approximately $50,000 for a one-person household, $67,640 for a two-person household, $85,320 for a three-person household and $103,000 for a four-person household. Do you have a larger household? Look at the guidelines for large households.]. This reflects the political belief that low-income workers have less influence to negotiate these agreements. Second, non-compete obligations are frowned upon for employees who earn more than the threshold, but are valid as long as they do not restrict the employee more than necessary to protect the employer`s trade secrets, other confidential information, or goodwill (company reputation and customer relations). However, this raises the question of whether non-competitors can really do more than protect goodwill now, as employers can already use NDAs to protect confidential material. It remains to be seen how creatively companies will treat these agreements in the coming months. In recent weeks, Maine and New Hampshire have each enacted legislation banning the use of non-compete clauses with low-income people.

Shortly after, on July 11, 2019, the Rhode Island Legislature sent a similar bill to Governor Raimondo`s office for signature. In addition, recruitment agencies and companies that use recruitment agencies should review their contracts to ensure that they comply with the legal prohibition on non-solicitation agreements. Effective September 18, 2019, Maine employers will be prohibited from entering into non-compete agreements with workers earning at least 400% of the federal poverty line.1 The Maine Employee Retention Act, signed by Governor Mills on June 20, 2019, also provides that employers must enforce any non-compete obligations or non-poaching agreements used (including all types of Agreements containing these provisions). as well as their practices in concluding these agreements to ensure that they comply with the new law. The law applies to all non-compete bonds issued on or after September 19. September 2019. The new law requires employers to inform potential employees before making a job offer that they must sign a non-compete clause. Employers must inform employees or potential employees of the requirements of the non-compete obligation and provide a copy of the non-compete obligation at least 3 working days before the employer signs the agreement.

Any employer who violates termination provisions or attempts to enforce non-compete obligations against low-wage workers can be fined at least $5,000 per violation by the Ministry of Labour. In addition, Maine has also passed a new law aimed at “anti-poaching deals,” or agreements between two companies not to recruit or hire each other`s employees. The new law categorically prohibits these types of agreements under state law. These types of agreements are no longer enforceable. Following a trend in several other states, including Massachusetts, New Hampshire and Rhode Island, Maine is cracking down on the enforcement of prohibitions on non-competition and poaching. Specifically, Maine Governor Janet Mills signed the “An Act to Promote Keeping Workers in Maine” bill on June 28, 2019. The law restricts the use of non-compete obligations by employers while providing clearer guidance on the applicability of these agreements. Many employers hoped that a recent lawsuit between two of Maine`s largest employers would clarify the law regarding non-compete obligations, but this case has been resolved. The law empowers the Ministry of Labour to impose civil fines on employers who enter into, enforce or threaten to enforce “restrictive employment contracts”.

Companies with employees in Maine should also be aware that the terms of non-compete agreements with most employees (excluding allopathic and osteopathic physicians) will only take effect after one year of the employee`s employment or a period of 6 months from the date of signing the contract, whichever is later. The law expressly prohibits “restrictive employment contracts” defined as an agreement between two or more employers, including through a franchise agreement or a contractor and subcontract that prohibits or restricts an employer from recruiting or hiring employees or former employees of another employer. The law prohibits employers from entering into non-compete agreements with workers earning less than 400% of the federal poverty line ($49,960 per year for 2019). Since the income levels below which employees cannot enter into non-compete obligations are linked to the federal poverty line, which is subject to annual changes, Maine employers should develop procedures to ensure continued compliance with this rule. The law authorizes the Ministry of Labour to impose fines on employers who violate this provision by entering into non-compete agreements with low-income workers, whether or not the employer wants to enforce the agreement. On July 11, 2019, the Rhode Island Legislature sent Governor Raimondo the Rhode Island Non-Competition Agreements Act.5 Bill (S 698) would prohibit non-compete agreements with workers who: (1) are not exempt under the federal Fair Labor Standards Act; (2) students or doctoral students in the context of a short-term internship or employment relationship; (3) 18 years of age or less; or (4) low-income individuals (defined as income below 250% of the federal poverty line). Restrictive employment contracts “restrictive employment contracts” are defined by law as agreements between two or more employers, including through franchise agreements or contractor/subcontractor agreements that “prohibit or restrict an employer from recruiting or hiring current or former employees of another employer.” Restrictive employment contracts, often referred to as solicitation bans, are categorically prohibited by law. With their new laws, Maine and New Hampshire join states that are pushing back non-compete clauses with low-income people. For example, Massachusetts restricts non-compete agreements with non-exempt employees, Illinois prohibits non-compete agreements with employees who earn less than $13.00 per hour, and from 1. As of January 2020, non-compete clauses with Washington employees earning less than $100,000 are void and unenforceable. This trend shows few signs of discoloration. Similar bills were introduced during this term in Connecticut (HB 6913 and HB 6914), Hawaii (HB 1059 HD1 and SB 328), Indiana (SB 348), Maryland (HB 38 and SB 328), Missouri (HB 331), New York (AB 2504), Pennsylvania (HB 563) and Virginia (HB 1792).

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