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Noncompete Agreements: New NH Law Restricts Enforcement

New Hampshire became the latest state to enact a law pertaining to noncompete agreements. Effective July 14, 2012, New Hampshire law (H.B. 1270) now requires that: 

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.

In short, all New Hampshire employers and employers with New Hampshire employees that expect employees to sign and abide by noncompete or non-piracy agreements must provide a copy of the agreement to a potential employee either before or at the same time employment is offered.  Those employers must also provide a copy of the agreement to existing employees when they are offered new positions within the organization.

Please note that nothing in this new law otherwise changes the standards applied to determine either which state’s law applies (if the employer is an out-of-state employer with New Hampshire employees) or the enforceability of a noncompete.  But, it is a new hurdle to be cleared for employers seeking to enforce a non-compete or non-piracy agreement with a New Hampshire employee. Once that hurdle clears, the question of  whether and to what extent an agreement will be enforced will still depend on the usual fact-specific, case-by-case analysis.

The new statute underscores the importance of good administrative practices with respect to non-compete and non-piracy agreements, as it may be necessary to prove when an employee or potential employee actually received a copy of the agreement.  For example, having a system in place to ensure an employee is given a copy of his agreement each time the employee’s job position changes and that he signs an acknowledgment form confirming receipt of the copy, will enable the employer to easily prove compliance with the statute if a dispute arises down the road.  Finally, although it may not be necessary for an employer who is changing the position of an existing employee to obtain a newly-signed agreement, the employer must be comfortable that the agreement is written so that it remains in effect through job changes and must provide the employee with a copy of the agreement.

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Martha Zackin