Rhode Island SB 698: AN ACT RELATING TO LABOR AND LABOR RELATIONS -- RHODE ISLAND NONCOMPETITION AGREEMENT ACT (Creates a comprehensive statutory scheme to address all aspects of noncompetition agreements.)

Bill Text

2019 -- S 0698 SUBSTITUTE A
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LC001774/SUB A
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S T A T E O F R H O D E I S L A N D
IN GENERAL ASSEMBLY
JANUARY SESSION, A.D. 2019
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A N A C T
RELATING TO LABOR AND LABOR RELATIONS -- RHODE ISLAND
NONCOMPETITION AGREEMENT ACT
Introduced By: Senator Maryellen Goodwin
Date Introduced: March 21, 2019
Referred To: Senate Judiciary

It is enacted by the General Assembly as follows:
SECTION 1. Title 28 of the General Laws entitled "LABOR AND LABOR 1
RELATIONS" is hereby amended by adding thereto the following chapter: 2
CHAPTER 58 3
RHODE ISLAND NONCOMPETITION AGREEMENT ACT 4
28-58-1. Short title. 5
This chapter shall be known and may be cited as the "Rhode Island Noncompetition 6
Agreement Act." 7
28-58-2. Definitions. 8
As used in this chapter: 9
(1) "Business entity" means any person as defined in § 43-3-6 and includes a corporation, 10
business trust, estate trust, partnership, association, joint venture, government, governmental 11
subdivision or agency, or any other legal or commercial entity. 12
(2) "Earnings" means wages or compensation paid to an employee in the first forty (40) 13
hours of work in a given week, not inclusive of hours paid at an overtime, Sunday, or holiday 14
rate. 15
(3) "Employee" means an individual who works for hire, including an individual 16
employed in a supervisory, managerial, or confidential position, but shall not include an 17
independent contractor. 18

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(4) "Employer" means any person, business entity, partnership, individual proprietorship, 1
joint venture, firm, company or other similar legal entity that employs one or more employees, 2
and shall include the state and its instrumentalities and political subdivisions, public corporations, 3
and charitable organizations. 4
(5) "Forfeiture agreement" means an agreement that imposes adverse financial 5
consequences on a former employee as a result of the termination of an employment relationship, 6
regardless of whether the employee engaged in competitive activities, following cessation of the 7
employment relationship. Forfeiture agreements do not include forfeiture for competition 8
agreements. 9
(6) "Forfeiture for competition agreement" means an agreement that by its terms or 10
through the manner in which it is enforced, imposes adverse financial consequences on a former 11
employee as a result of the termination of an employment relationship if the employee engages in 12
competitive activities. 13
(7) "Low-wage employee" means an employee whose average annual earnings, as 14
defined in § 28-58-2(2), are not more than two hundred fifty percent (250%) of the federal 15
poverty level for individuals as established by the United States Department of Health and 16
Human Services federal poverty guidelines. 17
(8) "Noncompetition agreement" means an agreement between an employer and an 18
employee, or otherwise arising out of an existing or anticipated employment relationship, under 19
which the employee or expected employee agrees that he or she will not engage in certain 20
specified activities competitive with his or her employer, after the employment relationship has 21
ended. Noncompetition agreements include forfeiture for competition agreements, but do not 22
include: 23
(i) Covenants not to solicit or hire employees of the employer; 24
(ii) Covenants not to solicit or transact business with customers, clients, or vendors of the 25
employer; 26
(iii) Noncompetition agreements made in connection with the sale of a business entity or 27
all or substantially all of the operating assets of a business entity or partnership, or otherwise 28
disposing of the ownership interest of a business entity or partnership, or division or subsidiary of 29
any of the foregoing, when the party restricted by the noncompetition agreement is a significant 30
owner of, or member or partner in, the business entity who will receive significant consideration 31
or benefit from the sale or disposal; 32
(iv) Noncompetition agreements originating outside of an employment relationship; 33
(v) Forfeiture agreements; 34

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(vi) Nondisclosure or confidentiality agreements; 1
(vii) Invention assignment agreements; 2
(viii) Noncompetition agreements made in connection with the cessation of or separation 3
from employment if the employee is expressly granted seven (7) business days to rescind 4
acceptance; or 5
(ix) Agreements by which an employee agrees to not reapply for employment to the same 6
employer after termination of the employee. 7
(9) "Trade secret" means information as defined in § 6-41-1. 8
28-58-3. Enforceability. 9
(a) A noncompetition agreement shall not be enforceable against the following types of 10
workers: 11
(1) An employee who is classified as nonexempt under the Fair Labor Standards Act, 29 12
U.S.C. 201-219; 13
(2) Undergraduate or graduate students that participate in an internship or otherwise enter 14
a short-term employment relationship with an