House Bill #6019 (2019)

AN ACT RELATING TO LABOR AND LABOR RELATIONS -- RHODE ISLAND NONCOMPETITION AGREEMENT ACT

Creates a comprehensive statutory scheme to address all aspects of noncompetition agreements.

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Changes since original draft

  • 2019 – H 6019
  • 2019 – H 6019 SUBSTITUTE A
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  • LC002416
  • LC002416/SUB A
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  • S T A T E O F R H O D E I S L A N D
  • IN GENERAL ASSEMBLY
  • JANUARY SESSION, A.D. 2019
  • ____________
  • A N A C T
  • RELATING TO LABOR AND LABOR RELATIONS – RHODE ISLAND
  • NONCOMPETITION AGREEMENT ACT
  • Introduced By: Representative Christopher R. Blazejewski
  • Date Introduced: April 24, 2019
  • Referred To: House Labor
  • It is enacted by the General Assembly as follows:
  • SECTION 1. Title 28 of the General Laws entitled "LABOR AND LABOR RELATIONS" is hereby amended by adding thereto the following chapter:
  • CHAPTER 58
  • RHODE ISLAND NONCOMPETITION AGREEMENT ACT
  • 28-58-1. Short title.
  • This chapter shall be known and may be cited as the "Rhode Island Noncompetition Agreement Act."
  • 28-58-2. Definitions.
  • As used in this chapter:
  • (1) "Business entity" means any person or group of persons performing or engaging in any activity, enterprise, profession or occupation, whether for-profit or not-for-profit, including, but not limited to, corporations, limited liability companies, limited partnerships or limited liability partnerships.
  • (2) "Employee" means an individual who works for hire, including an individual employed in a supervisory, managerial, or confidential position, but shall not include an independent contractor.
  • (3) "Employer" means any person, business entity, partnership, individual proprietorship, joint venture, firm, company or other similar legal entity that employs one or more employees, and shall include the state and its instrumentalities and political subdivisions, public corporations, and charitable organizations.
  • (4) "Forfeiture agreement" means an agreement that imposes adverse financial consequences on a former employee as a result of the termination of an employment relationship, regardless of whether the employee engaged in competitive activities, following cessation of the employment relationship. Forfeiture agreements do not include forfeiture for competition agreements.
  • (5) "Forfeiture for competition agreement" means an agreement that by its terms or through the manner in which it is enforced, imposes adverse financial consequences on a former employee as a result of the termination of an employment relationship if the employee engages in competitive activities.
  • (6) "Low-wage employee" means an employee whose average weekly earnings, calculated by dividing the employee's earnings during the period of twelve (12) calendar months immediately preceding the date of termination of employment by fifty-two (52), or the number of weeks that the employee was actually paid during the fifty-two (52) week period, are less than the statewide average weekly remuneration as determined pursuant by § 28-33-20.
  • (7) "Noncompetition agreement" means an agreement between an employer and an employee, or otherwise arising out of an existing or anticipated employment relationship, under which the employee or expected employee agrees that he or she will not engage in certain specified activities competitive with his or her employer, after the employment relationship has ended. Noncompetition agreements include forfeiture for competition agreements, but do not include:
  • S TATE OF RHODE IS L AND
  • IN GENERAL ASSEMBLY
  • JANUARY SESSION, A.D. 2019
  • ____________
  • A N A C T
  • RELATING TO LABOR AND LABOR RELATIONS – RHODE ISLAND
  • NONCOMPETITION AGREEMENT ACT
  • Introduced By: Representative Christopher R. Blazejewski
  • Date Introduced: April 24, 2019
  • Referred To: House Labor
  • It is enacted by the GeneralAssembly as follows:
  • SECTION 1. Title 28 of the General Laws entitled "LABOR AND LABOR RELATIONS"is hereby amended by adding thereto the following chapter:
  • CHAPTER 58
  • RHODE ISLAND NONCOMPETITION AGREEMENT ACT
  • 28-58-1. Short title.
  • This chapter shall be known and may be cited as the "Rhode Island Noncompetition Agreement Act."
  • 28-58-2. Definitions.
  • As used in this chapter:
  • (1) "Business entity" means any person as defined in § 43-3-6 and includes a corporation, business trust, estate trust, partnership, association, joint venture, government, governmental subdivision or agency, or any other legal or commercial entity.
  • (2) "Earnings" means wages or compensation paid to an employee in the first forty (40) hours of work in a given week, not inclusive of hours paid at an overtime, Sunday, or holiday rate.
  • (3) "Employee" means an individual who works for hire, including an individual employed in a supervisory, managerial, or confidential position, but shall not include an independent contractor.
  • (4) "Employer" means any person, business entity, partnership, individual proprietorship, joint venture, firm, company or other similar legal entity that employs one or more employees, and shall include the state and its instrumentalities and political subdivisions, public corporations, and charitable organizations.
  • (5) "Forfeiture agreement" means an agreement that imposes adverse financial consequences on a former employee as a result of the termination of an employment relationship, regardless of whether the employee engaged in competitive activities, following cessation of the employment relationship. Forfeiture agreements do not include forfeiture for competition agreements.
  • (6) "Forfeiture for competition agreement" means an agreement that by its terms or through the manner in which it is enforced, imposes adverse financial consequences on a former employee as a result of the termination of an employment relationship if the employee engages in competitive activities.
  • (7) "Low-wage employee" means an employee whose average annual earnings, as defined in § 28-58-2(2), are not more than two hundred fifty percent (250%) of the federal poverty level for individuals as established by the United States Department of Health and Human Services federalpoverty guidelines.
  • (8) "Noncompetition agreement" means an agreement between an employer and an employee, or otherwise arising out of an existing or anticipated employment relationship, under which the employee or expected employee agrees that he or she will not engage in certain specified activities competitive with his or her employer, after the employment relationship has ended. Noncompetition agreements include forfeiture for competition agreements, but do not include:
  • (i) Covenants not to solicit or hire employees of the employer;
  • (ii) Covenants not to solicit or transact business with customers, clients, or vendors of the employer;
  • (iii) Noncompetition agreements made in connection with the sale of a business entity or all or substantially all of the operating assets of a business entity or partnership, or otherwise disposing of the ownership interest of a business entity or partnership, or division or subsidiary of any of the foregoing, when the party restricted by the noncompetition agreement is a significant owner of, or member or partner in, the business entity who will receive significant consideration or benefit from the sale or disposal;
  • (iv) Noncompetition agreements originating outside of an employment relationship;
  • (v) Forfeiture agreements;
  • LC002416/SUB A - Page 2of 4
  • (vi) Nondisclosure or confidentiality agreements;
  • (vii) Invention assignment agreements;
  • (viii) Noncompetition agreements made in connection with the cessation of or separation from employment if the employee is expressly granted seven (7) business days to rescind acceptance; or
  • (ix) Agreements by which an employee agrees to not reapply for employment to the same employer after termination of the employee.
  • (9) "Trade secret"means information as defined in § 6-41-1.
  • 28-58-3. Enforceability.
  • (a) A noncompetition agreement shall not be enforceable against the following types of workers:
  • (1) An employee who is classified as nonexempt under the Fair Labor Standards Act, 29 U.S.C. 201-219;
  • (2) Undergraduate or graduate students that participate in an internship or otherwise enter a short-term employment relationship with an employer, whether paid or unpaid, while enrolled at an educational institution;
  • (2) Undergraduate or graduate students that participate in an internship or otherwise enter a short-term employment relationship with an employer, whether paid or unpaid, while enrolled at an educationalinstitution;
  • (3) Employees age eighteen (18) or younger; or
  • (4) A low-wage employee.
  • (b) This section does not render void or unenforceable the remainder of a contract or agreement containing the unenforceable noncompetition agreement, nor does it preclude the imposition of a noncompetition restriction by a court, whether through preliminary or permanent injunctive relief or otherwise, as a remedy for a breach of another agreement or of a statutory or common law duty.
  • SECTION 2. This act shall take effect six (6) months after passage.
  • (c) Nothing in this section shall preclude an employer from entering into an agreement with an employee not to share any information, including after the employee is no longer employed by the employer, regarding the employer or the employment that is a trade secret.
  • SECTION 2. This act shalltake effect six (6) months after passage.
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  • LC002416
  • LC002416/SUB A
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  • EXPLANATION
  • BY THE LEGISLATIVE COUNCIL
  • LC002416/SUB A - Page 3of 4
  • EXPLANATION
  • BY THE LEGISLATIVE COUNCIL
  • OF
  • A N A C T
  • RELATING TO LABOR AND LABOR RELATIONS – RHODE ISLAND
  • A N A C T
  • RELATING TO LABOR AND LABOR RELATIONS – RHODE ISLAND
  • NONCOMPETITION AGREEMENT ACT
  • ***
  • This act would create a comprehensive statutory scheme to address all aspects of noncompetition agreements.
  • This act would take effect six (6) months after passage. ======== LC002416 ========
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  • This act would create a comprehensive statutory scheme to address all aspects of noncompetition agreements.
  • This act would take effect six (6) months after passage. ======== LC002416/SUB A ========
  • LC002416/SUB A - Page 4of 4

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