Arkansas 2023 Regular Session

Arkansas House Bill HB1628 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	Stricken language would be deleted from and underlined language would be added to present law.
2	2	ANS015 3/14/2023 2:00:27 PM ANS015
3	3
4	4	State of Arkansas 1
5	5	94th General Assembly A Bill 2
6	6	Regular Session, 2023 HOUSE BILL 1628 3
7	7	4
8	8	By: Representatives S. Meeks, Gazaway 5
9	9	By: Senator M. Johnson 6
10	10	7
11	11	For An Act To Be Entitled 8
12	12	AN ACT TO PROHIBIT C OVENANT NOT TO COMPE TE 9
13	13	AGREEMENTS; TO AMEND THE LAW CONCERNING A COVENANT 10
14	14	NOT TO COMPETE AGREE MENT; AND FOR OTHER PURPOSES. 11
15	15	12
16	16	13
17	17	Subtitle 14
18	18	TO PROHIBIT COVENANT NOT TO COMPETE 15
19	19	AGREEMENTS; AND TO AMEND THE LAW 16
20	20	CONCERNING A COVENANT NOT TO COMPETE 17
21	21	AGREEMENT. 18
22	22	19
23	23	20
24	24	BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 21
25	25	22
26	26	SECTION 1. Arkansas Code § 4 -75-101 is amended to read as follows: 23
27	27	4-75-101. Covenant not to compete agreements — Prohibited — Definition. 24
28	28	(a) A covenant not to compete agreement is enforceable if the 25
29	29	agreement is ancillary to an employment relationship or part of an otherwise 26
30	30	enforceable employment agreement or contract to the extent that: 27
31	31	(1) The employer has a protectable business interest; and 28
32	32	(2) The covenant not to compete agreement is limited with 29
33	33	respect to time and scope in a manner that is not greater than necessary to 30
34	34	defend the protectable business interest of the employer. 31
35	35	(b) For the purposes of subsection ( a) of this section, the 32
36	36	protectable business interest of the employer includes the employer's: 33
37	37	(1) Trade secrets; 34
38	38	(2) Intellectual property; 35
39	39	(3) Customer lists; 36 HB1628
40	40
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43	43
44	44	(4) Goodwill with customers; 1
45	45	(5) Knowledge of his or her business practices; 2
46	46	(6) Methods; 3
47	47	(7) Profit margins; 4
48	48	(8) Costs; 5
49	49	(9) Other confidential business information that is 6
50	50	confidential, proprietary, and increases in value from not being known by a 7
51	51	competitor; 8
52	52	(10) Training and education of the employer's employees; and 9
53	53	(11) Other valuable employer data that the employer has provided 10
54	54	to an employee that an employer would reasonably seek to protect or safeguard 11
55	55	from a competitor in the interest of fairness. 12
56	56	(c)(1) The lack of a specific or defined geographic descript ive 13
57	57	restriction in a covenant not to compete agreement does not make the covenant 14
58	58	not to compete agreement overly broad under subdivision (a)(2) of this 15
59	59	section if the covenant not to compete agreement is limited with respect to 16
60	60	time and scope in a manner that is not greater than necessary to defend the 17
61	61	protectable business interest of the employer. 18
62	62	(2) The reasonableness of a covenant not to compete agreement 19
63	63	shall be determined after considering: 20
64	64	(A) The nature of the employer's protectable busines s 21
65	65	interest; 22
66	66	(B) The geographic scope of the employer's business and 23
67	67	whether or not a geographic limitation is feasible under the circumstances; 24
68	68	(C) Whether or not the restriction placed on the employee 25
69	69	is limited to a specific group of customers or other individuals or entities 26
70	70	associated with the employer's business; and 27
71	71	(D) The nature of the employer's business. 28
72	72	(d) A post-termination restriction of two (2) years is presumptively 29
73	73	reasonable as to length of time under subdivision (a)(2) of this section 30
74	74	unless the facts and circumstances of a particular case clearly demonstrate 31
75	75	that two (2) years is unreasonable compared to the employer's protectable 32
76	76	business interest. 33
77	77	(e)(1) In a private court action, a court may award the employer 34
78	78	damages for a breach of a covenant not to compete agreement, appropriate 35
79	79	injunctive relief, or both, if appropriate. 36 HB1628
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84	84	(2) The immediate harm associated with the breach of a covenant 1
85	85	not to compete agreement shall be considered irreparable to establish the 2
86	86	appropriateness of a preliminary injunction. 3
87	87	(3) This subsection does not limit: 4
88	88	(A) Any other defense available to a party against a claim 5
89	89	for preliminary injunctive relief; or 6
90	90	(B) An employer's right to monetary damages for breach of 7
91	91	a covenant not to compete agreement. 8
92	92	(f)(1) If restrictions in a covenant not to compete agreement are 9
93	93	found to be unreasonable and impose a greater restraint than is necessary to 10
94	94	protect the protectable business interest of the employer under subdivision 11
95	95	(a)(1) of this section, the court shall reform the covenant not to compete 12
96	96	agreement to the extent necessary to: 13
97	97	(A) Cause the limitations contained in the covenant not to 14
98	98	compete agreement to be reasonable; and 15
99	99	(B) Impose a restraint that is not greater than necessary 16
100	100	to protect the protectable business interest. 17
101	101	(2) The court shall enforce the covenant not to compete 18
102	102	agreement under the reformed terms and conditions. 19
103	103	(g) An employee's continued employment is sufficient consideration for 20
104	104	a covenant not to compete agreement. 21
105	105	(h)(1) This subsection does not apply to a covenant not to compete 22
106	106	agreement that is ancillary to other contractual relationships, including any 23
107	107	type of agreement for the sale and purchase of a business, franchise 24
108	108	agreement, and any o ther agreement not ancillary to an employment 25
109	109	relationship or employment contract. 26
110	110	(2) Existing common law standards governing a covenant not to 27
111	111	compete agreement outside the employment background shall remain in effect. 28
112	112	(i)(1) This section shall not apply to other types of agreements 29
113	113	between employers and employees that do not concern competition or 30
114	114	competitive work, including: 31
115	115	(A) Agreements not to solicit, recruit, or hire employees; 32
116	116	(B) Confidentiality agreements; 33
117	117	(C) Nondisclosure agre ements; and 34
118	118	(D) The terms and conditions of an employment or 35
119	119	employment agreement. 36 HB1628
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124	124	(2) Existing common law standards governing these types of 1
125	125	agreements shall remain in effect. 2
126	126	(j) This section shall not: 3
127	127	(1) Be read to impair, limit, or change a party's protections 4
128	128	and rights under the Arkansas Trade Secrets Act, § 4 -75-601 et seq.; or 5
129	129	(2) Apply to a person holding a professional license under 6
130	130	Arkansas Code Title 17, Subtitle 3. 7
131	131	(a)(1) A "covenant not to compete" means a covenant or agreem ent, 8
132	132	including a provision of a contract of employment, between an employer and 9
133	133	employee that restrains, prohibits, or otherwise restricts an individual's 10
134	134	ability, following the termination of the individual's employment, to compete 11
135	135	with his or her former employer. 12
136	136	(2) A covenant not to compete includes every written or oral 13
137	137	covenant, agreement, or contract by which an employee or independent 14
138	138	contractor is prohibited or restrained from engaging in a lawful profession, 15
139	139	trade, or business of any kind. 16
140	140	(3) A covenant not to compete does not include a: 17
141	141	(A) Nonsolicitation agreement; 18
142	142	(B) Confidentiality agreement; 19
143	143	(C) Covenant prohibiting use or disclosure of trade 20
144	144	secrets or inventions; 21
145	145	(D) Covenant entered into by a person purchasing or 22
146	146	selling the goodwill of a business or otherwise acquiring or disposing of an 23
147	147	ownership interest; or 24
148	148	(E) Covenant entered into by a franchisee when the 25
149	149	franchise sale complies with the Arkansas Franchise Practices Act, § 4 -72-201 26
150	150	et seq. 27
151	151	(b) A covenant not to compete agreement is prohibited in this state. 28
152	152	(c) An individual who makes an agreement with an employer, whether in 29
153	153	writing or verbally, not to compete with the employer after the employment 30
154	154	relationship has been terminated, shall be permitted to engage in the same 31
155	155	business as that conducted by the former employer or in a similar business as 32
156	156	that conducted by the former employer as long as the former employee does not 33
157	157	directly solicit the sale of goods, services, or a combination of goods and 34
158	158	services from the established customers of the former employer. 35
159	159	36