2025 -- S 0302 SUBSTITUTE A

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2025

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A N   A C T

RELATING TO LABOR AND LABOR RELATIONS -- RHODE ISLAND

NONCOMPETITION AGREEMENT ACT

     Introduced By: Senator Matthew L. LaMountain

     Date Introduced: February 13, 2025

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

     SECTION 1. Sections 28-59-2 and 28-59-3 of the General Laws in Chapter 28-59 entitled

"Rhode Island Noncompetition Agreement Act" are hereby amended to read as follows:

     28-59-2. Definitions.

     As used in this chapter:

     (1) "Annualized earnings" means the compensation, including earned salary, earned

bonuses, earned commissions, or any other form of taxable compensation, reflected or that is

expected to be reflected as wages, tips, and other compensation on the employee's IRS Form W-2

plus any elective deferrals not reflected as wages, tips, and other compensation on the employee's

IRS Form W-2, such as, without limitation, employee contributions to a 401 (k) plan, a 403(b) plan,

a flexible spending account, or a health savings account, or commuter benefit-related deductions.

     (1)(2) “Business entity” means any person as defined in § 43-3-6 and includes a

corporation, business trust, estate trust, partnership, association, joint venture, government,

governmental subdivision or agency, or any other legal or commercial entity.

     (2) “Earnings” means wages or compensation paid to an employee in the first forty (40)

hours of work in a given week, not inclusive of hours paid at an overtime, Sunday, or holiday rate.

     (3) “Employee” means an individual who works for hire, including an individual employed

in a supervisory, managerial, or confidential position, but shall not include an independent

contractor.

     (4) “Employer” means any person, business entity, partnership, individual proprietorship,

joint venture, firm, company, or other similar legal entity who or that employs one or more

employees, and shall include the state and its instrumentalities and political subdivisions, public

corporations, and charitable organizations.

     (5) “Forfeiture agreement” means an agreement that imposes adverse financial

consequences on a former employee as a result of the termination of an employment relationship,

regardless of whether the employee engaged in competitive activities, following cessation of the

employment relationship. Forfeiture agreements do not include forfeiture for competition

agreements.

     (6) “Forfeiture for competition agreement” means an agreement that by its terms or through

the manner in which it is enforced, imposes adverse financial consequences on a former employee

as a result of the termination of an employment relationship if the employee engages in competitive

activities.

     (7) “Low-wage employee” means an employee whose average annual earnings, as defined

in subsection (2), are not more than two hundred fifty percent (250%) of the federal poverty level

for individuals as established by the United States Department of Health and Human Services

federal poverty guidelines.

     (8) “Noncompetition agreement” means an agreement not to compete with a specific

business or entity to include, but not be limited to, an agreement prohibited by the provisions of §

28-59-3(a) between an employer and an employee, or otherwise arising out of an existing or

anticipated employment relationship, under which the employee or expected employee agrees that

he or she will not engage in certain specified activities competitive with his or her employer after

the employment relationship has ended. Noncompetition agreements include forfeiture for

competition agreements, but do not include:

     (i) Covenants not to solicit or hire employees of the employer;

     (ii) Covenants not to solicit or transact business with customers, clients, or vendors of the

employer;

     (iii) Noncompetition agreements made in connection with the sale of a business entity or

all or substantially all of the operating assets of a business entity or partnership, or otherwise

disposing of the ownership interest of a business entity or partnership, or division or subsidiary of

any of the foregoing, when the party restricted by the noncompetition agreement is a significant

owner of, or member or partner in, the business entity who will receive significant consideration or

benefit from the sale or disposal;

     (iv) Noncompetition agreements originating outside of an employment relationship;

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     (v) Forfeiture agreements;

     (vi) Nondisclosure or confidentiality agreements;

     (vii) Invention assignment agreements;

     (viii) Noncompetition agreements made in connection with the cessation of or separation

from employment if the employee is expressly granted seven (7) business days to rescind

acceptance; or

     (ix) Agreements by which an employee agrees to not reapply for employment to the same

employer after termination of the employee;

     (x) Noncompetition agreements made by financial institutions, as defined by the Gramm-

Leach-Bliley Act, engaged in insurance activities and financial institutions subject to Title V of the

Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq.; or

     (xi) Noncompetition agreements made by financial institutions subject to Title V of the

Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq.

     (9) “Trade secret” means information as defined in § 6-41-1.

     28-59-3. Enforceability.

     (a) A Except as provided in this section, a noncompetition agreement shall not be

enforceable against the following types of workers : an employee.

     (1) An employee who is classified as nonexempt under the Fair Labor Standards Act, 29

U.S.C. §§ 201-219;

     (2) Undergraduate or graduate students who participate in an internship or otherwise enter

a short-term employment relationship with an employer, whether paid or unpaid, while enrolled at

an educational institution;

     (3) Employees age eighteen (18) or younger; or

     (4) A low-wage employee.

     (b) A noncompetition agreement may be enforceable if reasonable in scope, time-frame

and application and the noncompetition agreement is entered pursuant to an agreement to sell a

business entity or an equity interest in a business.

     (b)(c) This section does not render void or unenforceable the remainder of a contract or

agreement containing the unenforceable noncompetition agreement, nor does it preclude the

imposition of a noncompetition restriction by a court, whether through preliminary or permanent

injunctive relief or otherwise, as a remedy for a breach of another agreement or of a statutory or

common law duty.

     (c)(d) Nothing in this section shall preclude an employer from entering into an agreement

with an employee not to share any information, including after the employee is no longer employed

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by the employer, regarding the employer or the employment that is a trade secret, customer lists,

including the names, addresses, identities of customers, or future business plans.

     (e) Notwithstanding other provisions to the contrary, a noncompetition agreement is void

and unenforceable against an employee unless the employee's annualized earnings exceed one

hundred twenty-five thousand dollars ($125,000).

     (f) Nothing in this chapter shall be construed to authorize, permit or otherwise enable the

enforcement of a noncompete clause in any profession, occupation, or industry where such clauses

are otherwise prohibited by existing state or federal law.

     SECTION 2. Chapter 28-59 of the General Laws entitled "Rhode Island Noncompetition

Agreement Act" is hereby amended by adding thereto the following sections:

     28-59-4. Civil action by employer.

     An employer may bring a civil action against any employee who, pursuant to an agreement

described in § 28-59-3(d), violates that agreement and discloses or wrongfully utilizes trade secrets,

and the successful employer may be awarded injunctive relief, compensatory damages, punitive

damages, attorneys' fees and costs.

     28-59-5. Severability.

     If any provision of a chapter or the application thereof to any person or circumstances is

held invalid, such invalidity shall not affect other provisions or applications of the chapter which

can be given effect without the invalid provision or application, and to this end the provisions of

this chapter are declared to be severable.

     SECTION 3. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO LABOR AND LABOR RELATIONS -- RHODE ISLAND

NONCOMPETITION AGREEMENT ACT

***

     This act would prohibit noncompetition agreements except for noncompetition agreements

between a seller and buyer of a business. This act would also create a civil action for an employer

for the violation of an agreement by an employee regarding disclosure or wrongful utilization of

trade secrets.

     This act would take effect upon passage.

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