Advance Notice of Non-Competes Required in New Hampshire

January 18, 2013

As of July 2012, New Hampshire legislation requires that non-competes and “non-piracy” agreements be given to employees in advance of an offer of employment or an offer to change job positions. RSA 275:70 reads, in its entirety:

“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.”

Although stopping short of declaring such agreements void, New Hampshire courts have traditionally been antagonistic towards non-competes foisted upon employees after the commencement of employment. In several cases, the New Hampshire Supreme Court determined that the presentation of a non-compete following the commencement of employment, along with other factors, demonstrated a lack of good faith on behalf of the employer in seeking the non-compete. See Merrimack Valley Wood Products, Inc. v. Near, 152 N.H. 192, 200 (2005); Smith, Batchelder & Rugg v. Foster, 119 N.H. 679, 685 (1979). In both cases, the Court refused to modify an overly-broad restrictive covenant based on the employer’s lack of good faith.

The new legislation goes substantially further than this precedent, and also raises several questions regarding the scope of its reach.

First and foremost, the statute voids any non-compete that is not provided to an employee prior to or concurrent with the offer of employment. Thus, any contemplated non-compete should be discussed during job interviews and provided to the potential employee no later than the date of an offer letter. Even if the non-compete is provided to an employee before employment is accepted but after the offer is made, this statute appears to void such an agreement.

The larger questions raised by this statute are the meaning of the phrases “change in job classification” and “non-piracy agreement.” Neither of these phrases are defined by the statute.

A “change in job classification” should certainly include, for example, a promotion in which an employee receives additional compensation, as well as either additional client contact, access to trade secrets, or strategic information. In such circumstances, before or at the time that the offer of promotion is made, the employee must be presented with a copy of the non-compete agreement. A minor change in a job description, with no additional compensation or significant responsibilities, likely would not justify a non-compete agreement first presented during employment.

The phrase “non-piracy” agreement also leaves the extent of the statute’s application ambiguous. Piracy could be interpreted to include solicitation of client or employees, theft of trade secrets, or misappropriate of other confidential information. As any such agreements are typically presented at the same time as a non-compete agreement, this ambiguity may, however, be of limited practical effect.