Rhode Island Noncompetition Agreement Act

The law will enter into force in January 2020, which will occur six (6) months after its adoption. In the meantime, employers should review their current non-compete agreements to determine if they comply with the law. The law does not specify whether the non-competition agreements already concluded will remain intact after the entry into force of the new law. While employers are able to argue that the law should not be applied retroactively, Rhode Island courts could consider the new law when accounting for enforcement actions. The Act created Rhode Island`s first comprehensive non-compete legislative system. Employers are expected to spend the coming months reassessing their employment contracts to ensure compliance with the rules until 15 January 2020. While Maine, New Hampshire, and Rhode Island will soon all limit the enforcement of non-compete rules against low-wage workers (and Massachusetts did so last year), each state defines the term “low-wage worker” differently. Rhode Island is the youngest state to take the train with its Rhode Island Noncompetition Agreement Act (the “Act”) to restrict the application of non-compete rules. See these links for our previous contributions, which created the six previous out-of-competition statues, enacted in 2019: Maine; Maryland; New Hampshire; Oregon; Utah; and Washington, D.C. Rhode Island`s law will go into effect on January 15, 2020. The law raises serious concerns for employers trying to enforce its provisions.

The Federal Poverty Line is a calculation that depends on the number of people in a worker`s household and the total household income (not just the income of the worker concerned). This standard creates a logistical nightmare for employers trying to determine – especially when hiring – whether an employee is considered a “low wage” under the law. In addition, the prohibition of non-compete prohibitions for all “non-exempt” employees under the Fair Labor Standards Act seems arbitrary, given that such an exemption is only partially based on income level and is more closely linked to work obligations. As a result, the law will significantly limit employers` ability to use competition bans for many businesspeople, specifically employees, who are usually armed with the type of specific confidential information that allows them to compete unfairly. For a small and relatively sparsely populated state, Rhode Island`s Noncompetition Agreement Act has taken over many aspects of the state`s non-compete legislation that preceded it, particularly those passed in 2019. We expect states considering similar statutes to turn to Rhode Island for advice. The law does not apply to non-competition rules received before a given date. The law only provides for competition agreements in the sense of “non-enforceable”.

However, the law expressly provides that it “does not invalidate” other permitted restrictions, such as .B. restrictions on canvassing. The Act also expressly provides that it does not preclude a restriction of competition imposed by the courts “whether by a request for temporary or permanent omission or by other means, as a remedy against another agreement or against a legal or customary obligation”. Accordingly, for example, the law would not prohibit a court from imposing an injunction for violating Rhode Island`s Trade Secret Act, which prohibits a former employee from working for a competitor for a certain period of time. . . .