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November 28, 2022

New Hampshire business groups worried about plan to nullify noncompete agreements

New Hampshire business groups are raising concerns about a proposal that would scrap non-compete agreements at private companies if those entities impose vaccine mandates or other changes in employment.

The proposal, which got an airing before the Senate Commerce Committee on Tuesday, would nullify those pacts if an employee leaves their job as a result of a “material change” in the terms of their employment, such as requirement to get a COVID-19 vaccine or be tested for virus.

“There is legal precedent, both New Hampshire and other states, to support this principle that a material change in the terms and employment renders a noncompete agreement null and void,” state Rep. Jim Kofalt, R-Wilton, the bill’s sponsor, told the committee.

Lawmakers amended the proposal from the original bil, which had called for voiding noncompete agreements at companies that required employees to be vaccinated for COVID-19. It was part of a raft of legislation filed by GOP lawmakers last year in response to the Biden administration’s efforts to require workers at private companies to get the vaccine.

Kofalt said he filed the bill after hearing from constituents who were told they need to get the COVID-19 vaccine “or they won’t have a job.” He said current state laws on how those employment changes impact noncompete agreements are too vague.

But the latest manifestation of the bill includes a clause that would void noncompete agreements following any “material change” in the terms of employment at a business.

Business leaders say that would unleash a torrent of civil lawsuits between businesses and their employees while forcing many companies to pack up and leave the state.

Dave Juvet, senior vice president of public policy at the Business & Industry Association, told committee members the proposal would turn noncompete agreements “on their head” and pointed out that the term “material change” was too vaguely defined.

“A lot of things could be considered a material change, such as a change in salary, a promotion, a change in offices, or a move from one side of town to another,” he said Tuesday.

Andrea Chatfield, an attorney with the HR State Council of New Hampshire, told the panel the changes would “impair the ability of employers to effectively manage their workplace.”

Noncompete agreements, which are typically signed when a worker accepts a new job, prevent workers from going to a competitor or starting a competing business within a certain period of time after leaving their previous job. The agreements are used by large corporations but also contractors, small high-tech companies and even hairdressing businesses.

Supporters of the proposal pointed out that it would exempt noncompete agreements related to confidentiality, trade secrets and intellectual property.

But business leaders said Tuesday those exemptions wouldn’t prohibit employees from pursuing a company’s customers if they quit, which would have a chilling effect on the labor market.

If the Commerce Committee votes to advance the measure, it would still need to pass the full Senate and House before landing on Gov. Chris Sununu’s desk.

This article was originally posted on New Hampshire business groups worried about plan to nullify noncompete agreements