2019 -- H 6019 SUBSTITUTE A

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2019

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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:

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     SECTION 1. Title 28 of the General Laws entitled "LABOR AND LABOR

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RELATIONS" is hereby amended by adding thereto the following chapter:

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CHAPTER 58

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RHODE ISLAND NONCOMPETITION AGREEMENT ACT

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     28-58-1. Short title.

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     This chapter shall be known and may be cited as the "Rhode Island Noncompetition

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Agreement Act."

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     28-58-2. Definitions.

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     As used in this chapter:

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     (1) "Business entity" means any person as defined in § 43-3-6 and includes a corporation,

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business trust, estate trust, partnership, association, joint venture, government, governmental

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subdivision or agency, or any other legal or commercial entity.

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     (2) "Earnings" means wages or compensation paid to an employee in the first forty (40)

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hours of work in a given week, not inclusive of hours paid at an overtime, Sunday, or holiday

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rate.

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     (3) "Employee" means an individual who works for hire, including an individual

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employed in a supervisory, managerial, or confidential position, but shall not include an

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independent contractor.

 

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     (4) "Employer" means any person, business entity, partnership, individual proprietorship,

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joint venture, firm, company or other similar legal entity that employs one or more employees,

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and shall include the state and its instrumentalities and political subdivisions, public corporations,

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and charitable organizations.

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     (5) "Forfeiture agreement" means an agreement that imposes adverse financial

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consequences on a former employee as a result of the termination of an employment relationship,

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regardless of whether the employee engaged in competitive activities, following cessation of the

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employment relationship. Forfeiture agreements do not include forfeiture for competition

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agreements.

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     (6) "Forfeiture for competition agreement" means an agreement that by its terms or

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through the manner in which it is enforced, imposes adverse financial consequences on a former

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employee as a result of the termination of an employment relationship if the employee engages in

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competitive activities.

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     (7) "Low-wage employee" means an employee whose average annual earnings, as

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defined in § 28-58-2(2), are not more than two hundred fifty percent (250%) of the federal

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poverty level for individuals as established by the United States Department of Health and

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Human Services federal poverty guidelines.

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     (8) "Noncompetition agreement" means an agreement between an employer and an

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employee, or otherwise arising out of an existing or anticipated employment relationship, under

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which the employee or expected employee agrees that he or she will not engage in certain

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specified activities competitive with his or her employer, after the employment relationship has

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ended. Noncompetition agreements include forfeiture for competition agreements, but do not

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include:

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     (i) Covenants not to solicit or hire employees of the employer;

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     (ii) Covenants not to solicit or transact business with customers, clients, or vendors of the

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employer;

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     (iii) Noncompetition agreements made in connection with the sale of a business entity or

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all or substantially all of the operating assets of a business entity or partnership, or otherwise

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disposing of the ownership interest of a business entity or partnership, or division or subsidiary of

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any of the foregoing, when the party restricted by the noncompetition agreement is a significant

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owner of, or member or partner in, the business entity who will receive significant consideration

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or benefit from the sale or disposal;

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     (iv) Noncompetition agreements originating outside of an employment relationship;

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     (v) Forfeiture agreements;

 

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     (vi) Nondisclosure or confidentiality agreements;

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     (vii) Invention assignment agreements;

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     (viii) Noncompetition agreements made in connection with the cessation of or separation

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from employment if the employee is expressly granted seven (7) business days to rescind

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acceptance; or

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     (ix) Agreements by which an employee agrees to not reapply for employment to the same

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employer after termination of the employee.

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     (9) "Trade secret" means information as defined in § 6-41-1.

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     28-58-3. Enforceability.

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     (a) A noncompetition agreement shall not be enforceable against the following types of

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workers:

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     (1) An employee who is classified as nonexempt under the Fair Labor Standards Act, 29

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U.S.C. 201-219;

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     (2) Undergraduate or graduate students that participate in an internship or otherwise enter

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a short-term employment relationship with an employer, whether paid or unpaid, while enrolled

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at an educational institution;

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     (3) Employees age eighteen (18) or younger; or

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     (4) A low-wage employee.

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     (b) This section does not render void or unenforceable the remainder of a contract or

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agreement containing the unenforceable noncompetition agreement, nor does it preclude the

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imposition of a noncompetition restriction by a court, whether through preliminary or permanent

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injunctive relief or otherwise, as a remedy for a breach of another agreement or of a statutory or

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common law duty.

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     (c) Nothing in this section shall preclude an employer from entering into an agreement

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with an employee not to share any information, including after the employee is no longer

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employed by the employer, regarding the employer or the employment that is a trade secret.

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     SECTION 2. This act shall take effect six (6) months after passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO LABOR AND LABOR RELATIONS -- RHODE ISLAND

NONCOMPETITION AGREEMENT ACT

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     This act would create a comprehensive statutory scheme to address all aspects of

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noncompetition agreements.

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     This act would take effect six (6) months after passage.

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