On June 28, 2019, Maine Governor Janet Mills signed a bill into law that significantly limits an employer's use of noncompetition agreements; i.e., an agreement that prohibits an employee from working in the same or a similar profession or in a specific geographic area for a certain period of time following termination of employment. The law does not apply to agreements that restrict a former employee's ability to solicit customers or co-workers nor does it restrict an employer's right to protect its confidential information. The new law also prohibits agreements between employers not to solicit each other’s employees.
Limitations on the Use of Noncompetition Agreements
- The law states that “Noncompete Agreements” are contrary to public policy and enforceable only to the extent they are reasonable and no broader than necessary to protect one or more legitimate business reasons (trade secrets, employer’s confidential information, and employer’s goodwill);
- Employees earning less than 400% of the federal poverty level (which works out to about $49,000) cannot enter into a noncompete agreement;
- Employers must disclose the requirement to sign a noncompete before making an offer of employment and provide the employee a copy of the agreement at least three business days before the employee is required to sign;
- Noncompete agreements cannot become effective until 1 year after employment starts or 6 months after the agreement is signed, whichever is later; although, a noncompete agreement for a physician can take effect immediately;
- The law applies to all noncompete agreements entered into or renewed after the effective date of this law, which is September 19, 2019;
- The Maine Department of Labor is responsible for enforcement (there does not appear to be a private right of action by employees).
Prohibition on Agreements Between Employers Not to Solicit or Hire Each Other's Employees
- Two or more employers cannot enter into an agreement that “prohibits or restricts one employer from soliciting or hiring another employer’s employees or former employees”;
- These agreements include franchise agreements or agreements between a contractor or subcontractor;
- The Maine Department of Labor is responsible for enforcement (there does not appear to be a private right of action by employees).
We anticipate employers will need to update their current noncompetition agreements to comply with this law. Moreover, the prohibition of agreements between employers not to solicit each other’s employees may have significant impacts on businesses that engage temporary workers and consultants.
