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Rhode Island Bans Noncompetes for Low-Wage Employees


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11/6/2019
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In January 2020, Rhode Island's new law banning non-competes for low-wage workers, also known as "The Rhode Island Noncompetition Agreement Act" is set to go into effect. Seems straightforward enough, right?

Not so fast.

The law has a number of carve-outs, which merit discussion and careful consideration.

What the Law Bans

As stated in the title to this article, the law, in broad strokes, targets noncompete agreements for low-wage employees. More specifically, it holds unenforceable as a matter of law noncompete agreements for anyone whose average annual earnings are less than 250 percent of the federal poverty level. In order to provide a frame of reference, for 2019, that number comes to just over $31,000. Two other categories of individuals fall within the ambit of this rule: (1) someone under 18 years old; and, (2) anyone who is a student - whether at college or in graduate school.

What the Law Doesn't Ban

Importantly, the law makes clear that the bans do not apply to those activities the employer has a demonstrative, legitimate interest in protecting, particularly their employee and customer relationships. Consequently, there is a carve-out exempting the following activities (among others) from the ban:

(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,

(iv) Nondisclosure or confidentiality agreements.

The Takeaways

Overall, in my view at least, this seems like a fairly well-drafted law; it balances employers' legitimate interests with those of low-wage employees, and includes a pretty good bright-line test that everyone should understand in terms of enforcement, which should prevent a proliferation of litigation over whether particular clauses should be enforced as to specific employees.



Category: Non-Compete & Employment Agreements

Jonathan Cooper
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Non-Compete, Trade Secret and School Negligence Lawyer

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