A new Hawaii law prohibits and makes void noncompete and nonsolicit clauses in the employment contracts of “technology business” employees if the contracts are entered into on or after the law’s effective date of July 1, 2015. The new law does not affect noncompete and nonsolicit provisions entered into before that date or those in employment contracts of employees in other industries.

The act, Haw. Rev. Stat. 480-4(d), defines a “technology business” as one that “derives the majority of its gross income from the sale or license of products or services resulting from its software development or information technology development, or both.” It excludes employers in the broadcast industry and telecommunications carriers. A “noncompete clause” is defined as a provision “in an employment contract that prohibits an employee from working in a specific geographic area for a specific period of time after leaving employment with the employer.” A “nonsolicit clause” is defined as a provision “in an employment contract that prohibits an employee from soliciting employees of the employer after leaving employment with the employer.” These definitions do not specifically address whether a clause restricting employees from soliciting customers of their tech employer would be considered a “noncompete clause.” 

The Hawaii legislature’s purpose in enacting this new law was to “stimulate Hawaii’s economy by preserving and providing jobs for employees in this [technology] sector and by providing opportunities for those technology employees to establish new technology companies and new job opportunities in the State.”  The legislature explained:

Because the geographic area of Hawaii is unique and limited, noncompete agreements unduly restrict future employment opportunities for technology workers and have a chilling effect on the creation of new technology businesses within the State by innovative employees.

. . .

a noncompete atmosphere hinders innovation, creates a restrictive work environment for technology employees in the State, and forces spin-offs of existing technology companies to choose places other than Hawaii to establish their businesses.