New Hampshire Legislature Limits Non‐Compete/Non‐Piracy Agreements

[This article originally appeared in the Retail Merchants Association of New Hampshire’s Newsletter, January/February/March 2013.]

By David K. Fries and Cooley A. Arroyo

The New Hampshire legislature recently passed a significant change to the state’s employment law. The new law is brief, but the ramifications of noncompliance could be significant for New Hampshire employers.

The following law, N.H. RSA 275:70, became effective on July 14, 2012:

Prior to or concurrent with making an offer of change in job classification or an offer of employment, every employer shall provide a copy of any non‐compete or non‐piracy agreement that is part of the employment agreement to the employee or potential employee. Any contract that is not in compliance with this section shall be void and unenforceable.

The statute does not provide any guidance as to what constitutes a “non‐compete agreement” or a “non‐piracy agreement.”

Employers should take heed of the law’s restrictive language. An employer may only obtain a non‐compete or non‐piracy agreement from an employee if a copy of that agreement is given to the employee prior to or concurrently with an offer of employment or an offer to change the employee’s “job classification” (another term that is not defined). The law prevents the employer from introducing the agreement on a new employee’s first day of work, on the first day of an existing employee’s change in job classification, or later in the course of an employee’s employment. The new law is designed to ensure that employees know any non‐competitive aspects of their prospective employment before agreeing to take the position.

Cautious employers will comply with this law when seeking any agreement that might reasonably be construed to limit or restrict an employee’s future employment options. Failure to comply with the law will render the agreement void and unenforceable. Compliance is essential to ensuring the validity and enforceability of these agreements that protect trade secrets, goodwill, and business objectives.

In addition to its effect on more typical employment agreements, the law will likely have a significant impact on the purchase and sale of businesses, as some buyers may be prevented from imposing a non‐compete agreement on their new employees after a merger or stock acquisition. Unfortunately, litigation will be required to determine the reaches of this new law for New Hampshire employers, but careful planning can help to minimize litigation risk. The attorneys at Cleveland, Waters and Bass, P.A., are ready to assist you with advice on this new law and on your other employment law matters. Get in touch with us with any questions you may have or assistance you may need.