North Carolina 2025-2026 Regular Session

North Carolina House Bill H973 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1	1		GENERAL ASSEMBLY OF NORTH CAROLINA
2	2		SESSION 2025
3		-	H 1
4		-	HOUSE BILL 973
	3	+	H D
	4	+	HOUSE BILL DRH40494-LR-129
	5	+
5	6
6	7
7	8		Short Title: Uniform Restrictive Employment Agreement Act. (Public)
8		-	Sponsors: Representatives Longest, Cohn, Dahle, and Harrison (Primary Sponsors).
9		-	For a complete list of sponsors, refer to the North Carolina General Assembly web site.
10		-	Referred to: Rules, Calendar, and Operations of the House
11		-	April 14, 2025
12		-	H973 -v-1
	9	+	Sponsors: Representative Longest.
	10	+	Referred to:
	11	+
	12	+	DRH40494 -LR-129
13	13		A BILL TO BE ENTITLED 1
14	14		AN ACT TO ENACT THE UNIFORM RESTRICTIVE EMPLOYMENT AGREEMENT ACT. 2
15	15		The General Assembly of North Carolina enacts: 3
16	16		SECTION 1. The General Statutes are amended by adding a new Chapter to read: 4
17	17		"Chapter 1H. 5
18	18		"Uniform Restrictive Employment Agreement Act. 6
19	19		"§ 1H-1. Title. 7
20	20		This Chapter shall be known and may be cited as the "Uniform Restrictive Employment 8
21	21		Agreement Act." 9
22	22		"§ 1H-2. Definitions. 10
23	23		The following definitions apply in this Chapter: 11
24	24		(1) Confidentiality agreement. – A restrictive employment agreement that: 12
25	25		a. Prohibits a worker from using or disclosing information; and 13
26	26		b. Is not a condition of settlement or other resolution of a dispute. 14
27	27		(2) Electronic. – Relating to technology having electrical, digital, magnetic, 15
28	28		wireless, optical, electromagnetic, or similar capabilities. 16
29	29		(3) Employer. – A person that hires or contracts with a worker to work for the 17
30	30		person. 18
31	31		(4) No-business agreement. – A restrictive employment agreement that prohibits 19
32	32		a worker from working for a client or customer of the employer. 20
33	33		(5) Noncompete agreement. – A restrictive employment agreement that prohibits 21
34	34		a worker from working other than for the employer. The term does not include 22
35	35		a no-business agreement. 23
36	36		(6) Nonsolicitation agreement. – A restrictive employment agreement that 24
37	37		prohibits a worker from soliciting a client or customer of the employer. 25
38	38		(7) No-recruit agreement. – A restrictive employment agreement that prohibits a 26
39	39		worker from hiring or recruiting another worker of the employer. 27
40	40		(8) Payment-for-competition agreement. – A restrictive employment agreement 28
41	41		that imposes an adverse financial consequence on a worker for working other 29
42	42		than for the employer but does not expressly prohibit the work. 30
43	43		(9) Person. – An individual, estate, business or nonprofit entity, or other legal 31
44	44		entity. The term does not include a public corporation or government or 32
45	45		governmental subdivision, agency, or instrumentality. 33
46	46		(10) Record. – Information inscribed on a tangible medium or stored in an 34
47		-	electronic or other medium and retrievable in perceivable form. 35 General Assembly Of North Carolina Session 2025
48		-	Page 2 House Bill 973-First Edition
	47	+	electronic or other medium and retrievable in perceivable form. 35
	48	+	H.B. 973
	49	+	Apr 10, 2025
	50	+	HOUSE PRINCIPAL CLERK General Assembly Of North Carolina Session 2025
	51	+	Page 2 DRH40494-LR-129
49	52		(11) Restrictive employment agreement. – An agreement or part of another 1
50	53		agreement between an employer and worker that prohibits, limits, or sets a 2
51	54		condition on working other than for the employer after the work relationship 3
52	55		ends or a sale of a business is consummated. The term includes a 4
53	56		confidentiality agreement, no-business agreement, noncompete agreement, 5
54	57		nonsolicitation agreement, no-recruit agreement, payment-for-competition 6
55	58		agreement, and training-repayment agreement. 7
56	59		(12) Sale of a business. – Sale, merger, consolidation, or amalgamation of all or 8
57	60		part of a business or nonprofit entity or association, or all or part of its assets, 9
58	61		or of a substantial ownership interest in the entity or association. 10
59	62		(13) Sign. – To, with present intent to authenticate or adopt a record, execute or 11
60	63		adopt a tangible symbol, or attach to or logically associate with the record an 12
61	64		electronic symbol, sound, or process. 13
62	65		(14) Signed agreement. – A restrictive employment agreement signed by the 14
63	66		worker and employer. 15
64	67		(15) Special training. – Instruction or other education a worker receives from a 16
65	68		source other than the employer that is designed to enhance the ability of the 17
66	69		worker to perform the worker's work, is not normally received by other 18
67	70		workers, and requires a significant and identifiable expenditure by the 19
68	71		employer distinct from ordinary on-the-job training. 20
69	72		(16) Stated rate of pay. – The compensation, calculated on an annualized basis, an 21
70	73		employer agrees to pay a worker. The term includes a wage, salary, 22
71	74		professional fee, other compensation for personal service, and the fair market 23
72	75		value of all remuneration other than cash. The term does not include: 24
73	76		a. A healthcare benefit, severance pay, retirement benefit, or expense 25
74	77		reimbursement; 26
75	78		b. Distribution of earnings and profit that is not compensation for 27
76	79		personal service; or 28
77	80		c. Anticipated but indeterminable compensation, including a tip, bonus, 29
78	81		or commission. 30
79	82		(17) Trade secret. – As defined in G.S. 66-152(3). 31
80	83		(18) Training-repayment agreement. – A restrictive employment agreement that 32
81	84		requires a worker to repay the employer for training costs incurred by the 33
82	85		employer. 34
83	86		(19) Work. – Providing service. 35
84	87		(20) Worker. – An individual who works for an employer. The term includes an 36
85	88		employee, independent contractor, extern, intern, volunteer, apprentice, sole 37
86	89		proprietor who provides service to a client or customer, and an individual who 38
87	90		provides service through a business or nonprofit entity or association. The 39
88	91		term does not include an individual, even if the individual performs incidental 40
89	92		service for the employer, whose sole relationship with the employer is (i) as a 41
90	93		member of a board of directors or other governing or advisory board, (ii) an 42
91	94		individual under whose authority the powers of a business or nonprofit entity 43
92	95		or association are exercised, (iii) an investor, or (iv) a vendor of goods. 44
93	96		"§ 1H-3. Scope. 45
94	97		(a) This Chapter applies to a restrictive employment agreement. If a restrictive 46
95	98		employment agreement is part of another agreement, this Chapter does not affect other parts of 47
96	99		the other agreement. 48
97	100		(b) This Chapter supersedes common law only to the extent that it applies to a restrictive 49
98	101		employment agreement but otherwise does not affect principles of law and equity consistent with 50
99	102		this Chapter. 51 General Assembly Of North Carolina Session 2025
100		-	~~House Bill 973-First Edition~~ Page 3
	103	+	DRH40494-LR-129 Page 3
101	104		(c) This Chapter does not affect an agreement to take an action solely to transfer, perfect, 1
102	105		or enforce a patent, copyright, trade secret, or similar right. 2
103	106		(d) This Chapter does not affect a noncompetition obligation arising solely as a result of 3
104	107		an existing ownership interest in a business entity. 4
105	108		(e) This Chapter does not affect an agreement that requires a worker to forfeit 5
106	109		compensation after the work relationship ends, including vacation or retirement benefits, the right 6
107	110		to which accrued before the work relationship ends. 7
108	111		"§ 1H-4. Notice requirements. 8
109	112		(a) Except as provided in subsection (e) of this section, a restrictive employment 9
110	113		agreement is prohibited and unenforceable unless: 10
111	114		(1) The employer provides a copy of the proposed agreement in a record to: 11
112	115		a. Subject to subsection (b) of this section, a prospective worker, at least 12
113	116		14 days before the prospective worker accepts work or commences 13
114	117		work, whichever is earlier; 14
115	118		b. A current worker who receives a material increase in compensation, at 15
116	119		least 14 days before the increase or the worker accepts a change in job 16
117	120		status or responsibilities, whichever is earlier; or 17
118	121		c. A departing worker who is given consideration in addition to anything 18
119	122		of value to which the worker already is entitled, at least 14 days before 19
120	123		the agreement is required to be signed. 20
121	124		(2) With the copy of the proposed agreement provided under subdivision (1) of 21
122	125		this subsection, the employer provides the worker in a record the separate 22
123	126		notice, in the preferred language of the worker if available, prescribed by the 23
124	127		North Carolina Department of Labor under subsection (d) of this section; 24
125	128		(3) The proposed agreement and the signed agreement clearly specify the 25
126	129		information, type of work activity, or extent of competition that the agreement 26
127	130		prohibits, limits, or sets conditions on after the work relationship ends; 27
128	131		(4) The agreement is in a record separately signed by the worker and employer 28
129	132		and the employer promptly provides the worker a copy of the signed 29
130	133		agreement; and 30
131	134		(5) Subject to subsection (c) of this section, the employer provides an additional 31
132	135		copy of the agreement to the worker, not later than 14 days after the worker, 32
133	136		in a record, requests a copy, unless the employer reasonably and in good faith 33
134	137		is unable to provide the copy not later than 14 days after the request and the 34
135	138		worker is not prejudiced by the delay. 35
136	139		(b) A worker may waive the 14-day requirement of subdivision (1) of subsection (a) of 36
137	140		this section if the worker receives the signed agreement before beginning work. If the worker 37
138	141		waives the requirement, the worker may rescind the entire employment agreement not later than 38
139	142		14 days after the worker receives the agreement. 39
140	143		(c) An employer is not required under subdivision (5) of subsection (a) of this section to 40
141	144		provide an additional copy of the agreement more than once during a calendar year. 41
142	145		(d) The North Carolina Department of Labor shall prescribe the notice an employer must 42
143	146		provide under subdivision (2) of subsection (a) of this section. The notice must inform the 43
144	147		worker, in language an average reader can understand, of the requirements of this Chapter, 44
145	148		including the requirements of subsection (a) of this section and G.S. 1H-5 through G.S. 1H-14 45
146	149		and state that this Chapter establishes penalties against an employer that enters into a prohibited 46
147	150		agreement. The North Carolina Department of Labor shall make the notice available to employers 47
148	151		on its publicly accessible website or in other appropriate ways. The North Carolina Department 48
149	152		of Labor may produce a separate notice for each type of restrictive employment agreement and 49
150	153		translate the notice into languages other than English used by a substantial portion of the State's 50
151	154		labor force. 51 General Assembly Of North Carolina Session 2025
152		-	Page 4 ~~House Bill 973-First Edition~~
	155	+	Page 4 DRH40494-LR-129
153	156		(e) This section does not apply to a restrictive employment agreement in connection with 1
154	157		the sale of a business of which the worker is a substantial owner and consents to the sale. 2
155	158		"§ 1H-5. Low-wage worker. 3
156	159		A restrictive employment agreement, other than a confidentiality agreement or 4
157	160		training-repayment agreement, is: 5
158	161		(1) Prohibited and unenforceable if, when the worker signs the agreement, the 6
159	162		worker has a stated rate of pay less than the annual mean wage of employees 7
160	163		in this State as determined by the North Carolina Department of Labor; and 8
161	164		(2) Unenforceable if, at any time during the work relationship, the worker's 9
162	165		compensation from the employer, calculated on an annualized basis, is less 10
163	166		than the annual mean wage of employees in this State as determined by the 11
164	167		North Carolina Department of Labor. 12
165	168		"§ 1H-6. Effect of termination of work. 13
166	169		A restrictive employment agreement, other than a confidentiality agreement or 14
167	170		training-repayment agreement, is unenforceable if: 15
168	171		(1) The worker resigns for good cause attributable to the employer; or 16
169	172		(2) The employer terminates the worker for a reason other than misconduct or the 17
170	173		completion of the agreed work or the term of the contract. 18
171	174		"§ 1H-7. Reasonableness requirement. 19
172	175		A restrictive employment agreement is prohibited and unenforceable unless it is reasonable. 20
173	176		"§ 1H-8. Noncompete agreement. 21
174	177		A noncompete agreement is prohibited and unenforceable unless: 22
175	178		(1) The agreement protects any of the following legitimate business interests: 23
176	179		a. The sale of a business of which the worker is a substantial owner and 24
177	180		consents to the sale; 25
178	181		b. The creation of a business in which the worker is a substantial owner; 26
179	182		c. A trade secret; or 27
180	183		d. An ongoing client or customer relationship of the employer. 28
181	184		(2) When the worker signs the agreement and through the time of enforcement, 29
182	185		the agreement is narrowly tailored in duration, geographical area, and scope 30
183	186		of actual competition to protect an interest under subdivision (1) of this 31
184	187		section, and the interest cannot be protected adequately by another restrictive 32
185	188		employment agreement; and 33
186	189		(3) The prohibition on competition lasts not longer than: 34
187	190		a. Five years after the work relationship ends when protecting an interest 35
188	191		under sub-subdivision a. or b. of subdivision (1) of this section; or 36
189	192		b. One year after the work relationship ends when protecting an interest 37
190	193		under sub-subdivision c. or d. of subdivision (1) of this section but not 38
191	194		an interest under sub-subdivision a. or b. of subdivision (1) of this 39
192	195		section. 40
193	196		"§ 1H-9. Confidentiality agreement. 41
194	197		A confidentiality agreement is prohibited and unenforceable unless the worker may use and 42
195	198		disclose information that (i) arises from the worker's general training, knowledge, skill, or 43
196	199		experience, whether gained on the job or otherwise, (ii) is readily ascertainable to the relevant 44
197	200		public, or (iii) is irrelevant to the employer's business. 45
198	201		"§ 1H-10. No-business agreement. 46
199	202		A no-business agreement is prohibited and unenforceable unless the agreement (i) applies 47
200	203		only to a prospective or ongoing client or customer of the employer with which the worker had 48
201	204		worked personally and (ii) lasts not longer than six months after the work relationship between 49
202	205		the employer and worker ends. 50
203	206		"§ 1H-11. Nonsolicitation agreement. 51 General Assembly Of North Carolina Session 2025
204		-	~~House Bill 973-First Edition~~ Page 5
	207	+	DRH40494-LR-129 Page 5
205	208		A nonsolicitation agreement is prohibited and unenforceable unless the agreement (i) applies 1
206	209		only to a prospective or ongoing client or customer of the employer with which the worker had 2
207	210		worked personally and (ii) lasts not longer than one year after the work relationship between the 3
208	211		employer and worker ends. 4
209	212		"§ 1H-12. No-recruit agreement. 5
210	213		A no-recruit agreement is prohibited and unenforceable unless the agreement prohibits hiring 6
211	214		or recruiting only: 7
212	215		(1) Another worker currently working for the employer with whom the worker 8
213	216		had worked personally; and 9
214	217		(2) Lasts not longer than six months after the work relationship between the 10
215	218		employer and worker ends. 11
216	219		"§ 1H-13. Payment-for-competition agreement. 12
217	220		A payment-for-competition agreement is prohibited and unenforceable unless the agreement 13
218	221		(i) imposes a financial consequence that is not greater than the actual competitive harm to the 14
219	222		employer and (ii) lasts not longer than one year after the work relationship between the employer 15
220	223		and worker ends. 16
221	224		"§ 1H-14. Training-repayment agreement. 17
222	225		A training-repayment agreement is prohibited and unenforceable unless the agreement: 18
223	226		(1) Requires repayment only of the cost of special training; 19
224	227		(2) Lasts not longer than two years after the special training is completed; and 20
225	228		(3) Prorates the repayment for work done during the post-training period. 21
226	229		"§ 1H-15. Nonwaivability. 22
227	230		Except as provided in G.S. 1H-4(b) or in the context of resolving an issue in litigation or 23
228	231		other dispute resolution, a party to a restrictive employment agreement may not waive a 24
229	232		requirement of this Chapter or stipulate to a fact to avoid a requirement of this Chapter. 25
230	233		"§ 1H-16. Enforcement; remedy. 26
231	234		(a) The court may not modify a restrictive employment agreement to make the agreement 27
232	235		enforceable. 28
233	236		(b) A worker who is a party to a restrictive employment agreement or a subsequent 29
234	237		employer that has hired or is considering hiring the worker may seek a declaratory judgment that 30
235	238		the agreement is unenforceable. 31
236	239		(c) In addition to other judicial remedies, a court may award statutory damages under 32
237	240		subsection (e) of this section and in a private action reasonable attorneys' fees to a party that 33
238	241		successfully challenges or defends against enforceability of a restrictive employment agreement 34
239	242		or proves a violation of this Chapter. 35
240	243		(d) An employer seeking to enforce a restrictive employment agreement has the burden 36
241	244		of proving compliance with this Chapter. 37
242	245		(e) An employer that enters a restrictive employment agreement that the employer knows 38
243	246		or reasonably should know is prohibited by this Chapter commits a civil violation. The Attorney 39
244	247		General may bring an action on behalf of the worker, or the worker may bring a private action, 40
245	248		against the employer to enforce this subsection. The court may award statutory damages of not 41
246	249		more than five thousand dollars ($5,000) per worker per agreement for each violation of this 42
247	250		subsection. 43
248	251		"§ 1H-17. Choice of law; venue. 44
249	252		(a) A choice of law provision that applies to a restrictive employment agreement is 45
250	253		prohibited and unenforceable unless it requires that a dispute arising under the agreement be 46
251	254		governed by the law of the jurisdiction where the worker primarily works for the employer or, if 47
252	255		the work relationship has ended, the jurisdiction where the worker primarily worked when the 48
253	256		relationship ended. 49 General Assembly Of North Carolina Session 2025
254		-	Page 6 ~~House Bill 973-First Edition~~
	257	+	Page 6 DRH40494-LR-129
255	258		(b) A choice of venue provision that applies to a restrictive employment agreement is 1
256	259		prohibited and unenforceable unless it requires that a dispute arising under the agreement be 2
257	260		decided in a jurisdiction where: 3
258	261		(1) The worker primarily works or, if the work relationship has ended, a 4
259	262		jurisdiction where the worker primarily worked when the relationship ended; 5
260	263		or 6
261	264		(2) The worker resides at the time of the dispute. 7
262	265		"§ 1H-18. Uniformity of application; construction. 8
263	266		In applying and construing this Chapter, a court shall consider the promotion of uniformity 9
264	267		of the law among jurisdictions that enact it. 10
265	268		"§ 1H-19. Savings provision. 11
266	269		Except as provided in G.S. 1H-20, this Chapter does not affect the validity of a restrictive 12
267	270		employment agreement in effect before the effective date of this Chapter. 13
268	271		"§ 1H-20. Transitional provision. 14
269	272		G.S. 1H-4(a)(4) and (a)(5) apply to a restrictive employment agreement entered into before, 15
270	273		on, or after the effective date of this Chapter. 16
271	274		"§ 1H-21. Severability. 17
272	275		If a provision of this Chapter or its application to a worker or employer is held invalid, the 18
273	276		invalidity does not affect another provision or application that can be given effect without the 19
274	277		invalid provision." 20
275	278		SECTION 2. This act becomes effective January 1, 2026. 21