The New Hampshire legislature recently enacted a law designed to protect employees who are required to sign agreements restricting certain competitive activity (the “Notice Law”).  The law, which went into effect on July 14, 2012, is extremely brief:

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.

As originally proposed, the Notice Law only applied to newly hired employees.  It was intended to ensure that new employees who would be required to sign a non-compete or “non-piracy” agreement had advance notice of that requirement before they left their current position.  Later amendments expanded that protection to employees who were offered a change in their “job classification”.

Questions Raised by the Law

In large part because of its brevity, and lack of definitions, the law raises a number of questions.  First, it is not clear what a “non-piracy” agreement is.  Typically, employers require employees to sign one or more so-called “restrictive agreements”, which include confidentiality (or non-disclosure), non-solicitation (of either employees or customers), assignment of invention and non-compete agreements.  The word “piracy” generally refers to theft.  Therefore, it is likely that a court would interpret a “non-piracy” agreement to include any form of non-solicitation agreement.  It is less clear whether a standard confidentiality or assignment of invention agreement would be deemed a “non-piracy” agreement.

Second, most employers consider a “non-compete” agreement to prohibit competitive activity after the employee’s employment ends.  However, the Notice Law provides no definition of that term.  As a result, the advance notice requirement may also apply to any agreements forbidding employees to compete with their employer during their employment.

Third, the law requires employers to give a copy of non-compete or non-piracy agreements to employees who are offered a change in their job classification.  However, the Notice Law provides no guidance on what actions would constitute a change in an employee’s job classification.  For example, if an employee is reclassified from non-exempt to exempt, receives a different title or a revised internal classification, but continues to perform the same duties, it is unclear whether the Notice Law would require advance notice of any covered restrictive agreement the employee must sign.

Recommendations

If an employer does not give an employee the advance notice required by the law, the restrictive agreement will be unenforceable.  Therefore, New Hampshire employers would be well advised to broadly construe the statute.  Employers should give an advance copy of any restrictive agreement to all new employees and all employees who will have any change in their job classification or position which will require the employee to sign such an agreement (including confidentiality, non-solicitation and non-compete agreements).

It is also wise to receive and retain written confirmation that the employee received the required advance copy of the agreement.  The simplest way to obtain such confirmation is to include a statement in the restrictive agreement specifically acknowledging that the employee received an advance copy of the agreement.  In addition, all offer letters to New Hampshire employees who will be required to sign a restrictive agreement should clearly state that requirement and enclose a copy of the agreement.  The employee should be asked to sign, date and return a copy of the offer letter.

In addition, if a New Hampshire employee’s job classification will be changed to one in which s/he will be required to sign a restrictive agreement, the employee should be given a copy of the agreement prior to the change in job classification and should sign a form acknowledging the receipt of the agreement on a specific date.

The law does not specify any particular advance notice period.  However, employees should have a full and fair opportunity to review and consider the proposed restrictive agreement before accepting a job offer or a change in job classification.

Finally, although the Notice Law only applies to New Hampshire employees, it is advisable for employers to give all new employees an advance copy of any restrictive agreement s/he will be required to sign.  Such advance notice will both enhance the enforceability of the agreement and avoid unfair surprise.  Employers with employees in multiple states, including New Hampshire, may find it simpler to include a copy of any restrictive agreements employees will be required to sign in all offer letters.

If you have any questions about the Guidance or any other employment matter, please do not hesitate to contact us.