Know the Law: Non-compete agreements
Answered by Elizabeth Lahey of the McLane Law Firm.
Q.: I would like to require an employee who is planning to move to New Hampshire from Colorado to take the job to sign a non-competition agreement. I have told him I expect him to sign such an agreement. Can I wait to give it to him until he arrives?
A.: The enforceability of non-competition and anti-piracy agreements has traditionally been within the ambit of the courts.
The New Hampshire Legislature, however, recently weighed in on this issue, and by passing HB 1270, created a time limitation for when employers and employees may enter into non-competition and anti-piracy agreements.
The legislation requires employers to provide employees and potential employees with copies of all non-compete or non-piracy agreement that will be part of the employment agreement prior to or concurrent with making the “offer of employment” or “change in job classification.”
The failure to do so will render the non-competition or anti-piracy agreement unenforceable.
Employers should state in an offer letter that the execution of a non-competition and/or anti-piracy agreement is a condition of employment. A copy of the agreement should also be provided. The employee’s signed offer letter will then serve as evidence that the employer complied with the statute.
Things become a little less clear when an employer asks an existing employee to sign a non-competition agreement.
Employers are required to give employees copies of such agreement at the time of “an offer of change in job classification;” yet, the term “job classification” has not been defined.
It is, however, reasonable to infer that a promotion or a change to a different job in a new department would constitute a change in job classification.
The waters become even murkier when an employer who has never asked employees to sign non-competition agreements decides to begin using them, or when a company wants to update its agreements.
Past practice has been for employers to offer the existing employee some consideration, such as a bonus or salary increase, in return for entering into the non-competition agreement.
Questions are now likely to arise as to whether agreements executed under these circumstances are enforceable.
Additionally, the statute only refers to non-compete and anti-piracy agreements. It is unclear as to whether the law applies to other restrictive covenants, such as non-solicitation or non-disclosure agreements.
The bill was signed on May 15, 2012 and will go into effect on July 14, 2012.
Lahey can be reached at firstname.lastname@example.org.
Know the Law is a bi-weekly column sponsored by The McLane Law Firm.
We invite your questions of business law. Questions and ideas for future columns should be addressed to: Know the Law, The McLane Law Firm, P.O. Box 326, Manchester, NH 03105-0326 or emailed to email@example.com.
Know the Law provides general legal information, not legal advice. We recommend that you consult a lawyer for guidance specific to your particular situation.
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