NH follows the vast majority of states in the US with respect to the enforcement of non-competition agreements (“NCAs”). NH courts will enforce NCAs that are narrowly drawn to protect employers’ business interests in protecting confidential information and goodwill (or, business relationships).
While the applicable law in NH comes from common law — i.e., is contained in written decisions issued by judges — instead of statutes, NH has enacted one law concerning the administration of NCAs and the Legislature is currently considering another law that will limit the use of NCAs.
2012 LEGISLATION REQUIRES ADVANCE NOTICE OF NON-COMPETE AGREEMENTS
In July 2012, NH enacted legislation designed to ensure that employees who are asked to sign NCAs have sufficient notice of the NCA. The law requires any employer to provide a “non-compete” or “non-piracy” agreement before or at the time of an offer of employment or an offer of change in job classification. The law is quite brief. The entire statute is two sentences:
“Prior to or concurrent with making an offer of change in job classification or an offer of employment, every employer shall provide a copy of any non-compete or non-piracy agreement that is part of the employment agreement to the employee or potential employee. Any contract that is not in compliance with this section shall be void and unenforceable.” See NH RSA 275:70.
None of the terms in the statute are defined, which will leave room for courts to interpret their meaning in the future. For example, the term “non-piracy agreement” is not a term that is commonly used in the context of restrictive covenants. Likewise, the term “change in job classification” is also vague.
To be safe, companies seeking to bind employees to NCAs or confidentiality or nonsolicitation restrictions should be careful to provide those restrictions at or before an employment offer is extended, or at or before any substantial job change or promotion is implemented.
NEW BILL INTRODUCED THAT WILL PROHIBIT USE OF NON-COMPETE AGREEMENTS FOR “LOW-WAGE” WORKERS
On January 3, 2018, a bipartisan group of state senators introduced a bill titled “An act relative to noncompete clauses for low-wage employees.” The full text of the bill can be found here: SB 423. The bill is currently referred to the Commerce Committee.
If passed in its current form, it would prohibit employers from entering into a NCA with “low-wage” employees. The bill defines a low-wage employee as someone earning $15.00 per hour or less.
This bill may be focusing too much on a lesser problem associated with NCAs. In general, employers often do not bother utilizing NCAs for low-wage workers. Employers are also less likely to expend resources enforcing a NCA against a low-wage worker. Ultimately, prohibiting non-compete agreements for low-wage, hourly workers could benefit the few low-wage employees who are subject to NCAs.