2023 -- S 0888
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LC001991
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S T A T E O F R H O D E I S L A N D
IN GENERAL ASSEMBLY
JANUARY SESSION, A.D. 2023
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A N A C T
RELATING TO LABOR AND LABOR RELATIONS -- RHODE ISLAND
NONCOMPETITION AGREE MENT ACT
Introduced By: Senators LaMountain, Lauria, McKenney, Tikoian, Burke, and Valverde
Date Introduced: March 30, 2023
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 1
"Rhode Island Noncompetition Agreement Act" are hereby amended to read as follows: 2
28-59-2. Definitions. 3
As used in this chapter: 4
(1) “Business entity” means any person as defined in § 43-3-6 and includes a corporation, 5
business trust, estate trust, partnership, association, joint venture, government, governmental 6
subdivision or agency, or any other legal or commercial entity. 7
(2) “Earnings” means wages or compensation paid to an employee in the first forty (40) 8
hours of work in a given week, not inclusive of hours paid at an overtime, Sunday, or holiday rate. 9
(3) “Employee” means an individual who works for hire, including an individual employed 10
in a supervisory, managerial, or confidential position, but shall not include an independent 11
contractor. 12
(4) “Employer” means any person, business entity, partnership, individual proprietorship, 13
joint venture, firm, company, or other similar legal entity who or that employs one or more 14
employees, and shall include the state and its instrumentalities and political subdivisions, public 15
corporations, and charitable organizations. 16
(5) “Forfeiture agreement” means an agreement that imposes adverse financial 17
consequences on a former employee as a result of the termination of an employment relationship, 18
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regardless of whether the employee engaged in competitive activities, following cessation of the 1
employment relationship. Forfeiture agreements do not include forfeiture for competition 2
agreements. 3
(6) “Forfeiture for competition agreement” means an agreement that by its terms or through 4
the manner in which it is enforced, imposes adverse financial consequences on a former employee 5
as a result of the termination of an employment relationship if the employee engages in competitive 6
activities. 7
(7) “Low-wage employee” means an employee whose average annual earnings, as defined 8
in subsection (2), are not more than two hundred fifty percent (250%) of the federal poverty level 9
for individuals as established by the United States Department of Health and Human Services 10
federal poverty guidelines. 11
(8) “Noncompetition agreement” means an agreement not to compete with a specific 12
business or entity to include, but not be limited to, an agreement prohibited by the provisions of § 13
28-59-3(a) between an employer and an employee, or otherwise arising out of an existing or 14
anticipated employment relationship, under which the employee or expected employee agrees that 15
he or she will not engage in certain specified activities competitive with his or her employer after 16
the employment relationship has ended. Noncompetition agreements include forfeiture for 17
competition agreements, but do not include: 18
(i) Covenants not to solicit or hire employees of the employer; 19
(ii) Covenants not to solicit or transact business with customers, clients, or vendors of the 20
employer; 21
(iii) Noncompetition agreements made in connection with the sale of a business entity or 22
all or substantially all of the operating assets of a business entity or partnership, or otherwise 23
disposing of the ownership interest of a business entity or partnership, or division or subsidiary of 24
any of the foregoing, when the party restricted by the noncompetition agreement is a significant 25
owner of, or member or partner in, the business entity who will receive significant consideration or 26
benefit from the sale or disposal; 27
(iv) Noncompetition agreements originating outside of an employment relationship; 28
(v) Forfeiture agreements; 29
(vi) Nondisclosure or confidentiality agreements; 30
(vii) Invention assignment agreements; 31
(viii) Noncompetition agreements made in connection with the cessation of or separation 32
from employment if the employee is expressly granted seven (7) business days to rescind 33
acceptance; or 34
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(ix) Agreements by which an employee agrees to not reapply for employment to the same 1
employer after termination of the employee. 2
(9) “Trade secret” means information as defined in § 6-41-1. 3
28-59-3. Enforceability. 4
(a) Except as provided in subsection (d) of this section, A a noncompetition agreement 5
shall not be enforceable against an employee. the following types of workers: 6
(1) An employee who is classified as nonexempt under the Fair Labor Standards Act, 29 7
U.S.C. §§ 201-219; 8
(2) Undergraduate or graduate students who participate in an internship or otherwise enter 9
a short-term employment relationship with an employer, whether paid or unpaid, while enrolled at 10
an educational institution; 11
(3) Employees age eighteen (18) or younger; or 12
(4) A low-wage employee. 13
(b) A noncompetition agreement may be enforceable if reasonable in scope, time-frame 14
and application and the noncompetition agreement is entered pursuant to an agreement to sell a 15
business entity or an equity interest in a business. 16
(b)(c) This section does not render void or unenforceable the remainder of a contract or 17
agreement containing the unenforceable noncompetition agreement, nor does it preclude the 18
imposition of a noncompetition restriction by a court, whether through preliminary or permanent 19
injunctive relief or otherwise, as a remedy for a breach of another agreement or of a statutory or 20
common law duty. 21
(c)(d) Nothing in this section shall preclude an employer from entering into an agreement 22
with an employee not to share any information, including after the employee is no longer employed 23
by the employer, regarding the employer or the employment that is a trade secret, customer lists, 24
including the names, addresses, identities of customers, or future business plans. 25
(e) Any noncompetition agreement in violation of subsection (a) of this section shall be 26
null and void as a violation of public policy. 27
SECTION 2. Chapter 28-59 of the General Laws entitled "Rhode Island Noncompetition 28
Agreement Act" is hereby amended by adding thereto the following section: 29
28-59-4. Civil action by employer. 30
An employer may bring a civil action against any employee who, pursuant to an agreement 31
described in § 28-59-3(d), violates that agreement and discloses or wrongfully utilizes trade secrets, 32
and the successful employer may be awarded injunctive relief, compensatory damages, punitive 33
damages, attorneys' fees and costs. 34
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SECTION 3. This act shall take effect upon passage. 1
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EXPLANATION
BY THE LEGISLATIVE COUNCIL
OF
A N A C T
RELATING TO LABOR AND LABOR RELATIONS -- RHODE ISLAND
NONCOMPETITION AGREE MENT ACT
***
This act would prohibit noncompetition agreements except for noncompetition agreements 1
between a seller and buyer of a business. 2
This act would take effect upon passage. 3
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