Yesterday, Rep. Rosemary Mulligan filed HB 4040 concerning employment covenants not to compete. The proposed legislation is comprehensive, with the following highlights:
(a) it limits non-compete agreements to "key employees" as defined by the act, but does not impact non-solicitation, no-hire or non-disclosure covenants;
(b) blue-penciling of unreasonable terms is discretionary, but will not allow an employer to obtain damages for any breach occurring before an order of modification;
(c) requires 2 weeks notice before an employee is asked to sign a non-compete (unless there is a bona fide advancement or promotion);
(d) defines legitimate business interests;
(e) creates rebuttable presumptions as to reasonableness regarding time (1 year), geography and type of activity;
(f) addresses attorneys' fees in the context of one-sided agreements or declaratory judgment claims.
The proposed act does not apply to stock forfeiture agreements, confidentiality agreements, restrictions among partners, or activity restraints.
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