Compromise Reached on Bill to Narrow Use of Non-Compete Agreements

A committee of conference between House and Senate members has agreed upon a compromise measure to keep a bill alive that would further restrict the use of non-compete agreements in the health care industry.  Senate Bill 473, relative to employment contract restrictions upon certain health care providers, would expand the type of professionals covered by New Hampshire’s current law that disallows non-competes.  The bill sailed through the Senate earlier this session, but was substantially narrowed in scope by the House.  The House version would only extend the current law to nurses and podiatrists.  The two bodies have now come together to reach a deal to accept this narrower scope of restricting non-competes for nurses and podiatrists and the full Legislature will vote on it next week.  If passed, the bill will then make its way to the Governor’s desk for consideration.

While not as far reaching as originally drafted, the revised bill is another step toward limiting the use of non-compete agreements in employment contracts.  New Hampshire seems to be following a national trend among state legislatures and courts that are now rolling back the enforcement of non-compete agreements.  Some states, such as California and Oklahoma, have gone so far as to enact laws to prohibit them completely except in very limited circumstances.

While the New Hampshire Legislature continues to disallow the use of non-compete agreements for certain professions, employers in all industries should remember that although useful, non-compete agreements must be entered into carefully.  New Hampshire courts have repeatedly held that non-compete agreements are generally disfavored and will be upheld only if reasonable in light of the particular circumstances of the parties because public policy encourages free trade.  This scrutiny means such employment restrictions must be narrowly tailored in both geography and duration to protect the employer’s legitimate business interests.  Non-compete agreements also cannot impose an undue hardship on the employee.  Therefore, employers should ensure that their non-compete agreements are fitted to the circumstances of each employee and are no broader than necessary.  We often see litigation arise over non-compete agreements after an employment relationship has gone sour.  Employers would be wise to review their practices and policies before such situations arise, and should stay up-to-date on the changing landscape as our elected officials continue to tweak this area of law.

For more on this topic, see our prior blog post: https://orr-reno.com/new-hampshire-legislature-seeks-to-restrict-the-use-of-non-compete-agreements-again/

About the Author: Lindsay E. Nadeau

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