Rhode Island Follows in Massachusetts’ Footsteps with Non-Competition Legislation

As we previously reported in the context of low-wage workers, Rhode Island recently passed the Rhode Island Noncompetition Agreement Act, which will be effective January 2020. This legislation extends protections far beyond low-wage workers, however. The Act contains many provisions similar to (and clearly based on) Massachusetts’ recently passed non-competition legislation, but also several major differences.

Like Massachusetts, Rhode Island’s non-compete legislation prohibits non-competes for certain classes of workers. In Rhode Island, employers cannot impose non-competes against employees age 18 or younger, undergraduate or graduate students participating in an internship or otherwise working (paid or unpaid) while enrolled in school, employees classified as non-exempt under the Fair Labor Standards Act (for example, hourly employees), and low-wage employees. A low-wage employee is defined as one whose earnings are not more than 250% or the federal poverty level.

Also like Massachusetts, Rhode Island’s Noncompetition Agreement Act excludes other types of restrictive covenants from the requirements of the statute, including customer non-solicit agreements, employee non-solicit and no-hire agreements, non-disclosure agreements, non-competes arising outside of the employment relationship, forfeiture agreements, agreements arising out of the sale of a business, and like Massachusetts, non-competes contained in a severance agreement where the employee is given seven days to rescind acceptance of the same.

The Rhode Island non-compete legislation does differ from Massachusetts in several key respects, however. Unlike Massachusetts’ Noncompetition Agreement Act, Rhode Island’s law does not require employers to pay departing employees garden leave payments over their restricted period, or other mutually agreed upon consideration, for the non-compete. In addition, while Massachusetts’ law explicitly only applies to non-competes entered into after October 1, 2018, the requirements of Rhode Island’s new law appear to apply retroactively to all non-compete agreements, without any “grandfather” protection. This should cause many more employers to scrutinize their current non-compete agreements to see if they are in compliance with the new law.

In the rapidly changing business world, protecting a company's human capital and proprietary information is critical to maintaining a competitive edge. On this blog, Nutter's experienced Business Litigation and Labor, Employment & Benefits attorneys offer news and insights on all aspects of restrictive covenants and trade secrets—from analyzing a rapidly evolving body of case law, to summarizing new legislation and legislative efforts, to providing other need-to-know updates and more.

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