BILL AS INTRODUCED H.205
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VT LEG #379828 v.1
H.205 1
Introduced by Representatives Marcotte of Coventry, Bosch of Clarendon, 2
Christie of Hartford, Cooper of Pownal, Duke of Burlington, 3
Graning of Jericho, LaLonde of South Burlington, Micklus of 4
Milton, Olson of Starksboro, and White of Bethel 5
Referred to Committee on 6
Date: 7
Subject: Commerce and trade; consumer protection; noncompete agreements 8
Statement of purpose of bill as introduced: This bill proposes to prohibit 9
noncompete agreements that restrict the ability of franchisees from operating 10
their businesses after separating from franchisors and of employees from 11
competing with their former employers following the conclusion of their 12
employment. 13
An act relating to agreements not to compete 14
It is hereby enacted by the General Assembly of the State of Vermont: 15
Sec. 1. 9 V.S.A. chapter 153 is added to read: 16
CHAPTER 153. FRANCHISE AGREEMENTS 17
§ 6061. DEFINITIONS 18
As used in this chapter: 19 BILL AS INTRODUCED H.205
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(1)(A) “Agreement not to compete” means an agreement between a 1
franchisor and franchisee that restricts the franchisee after separating from the 2
franchisor from operating its business: 3
(i) in a certain geographic area; 4
(ii) for a certain period of time; or 5
(iii) in any other way that significantly impacts the ability of the 6
franchisee to compete with the franchisor. 7
(B) An agreement not to compete does not include an agreement that 8
prohibits the disclosure of trade secrets as defined in section 4601 of this title 9
or a nondisclosure agreement that protects confidential business information 10
that does not constitute a trade secret. 11
(2) “Franchise agreement” means an agreement in which a franchisor 12
grants a franchisee the right to operate a business or to offer, sell, or distribute 13
goods or services identified or associated with the franchisor’s trademark. 14
(3) “Franchisee” means a person who currently operates or formerly 15
operated a business under a franchisor’s name, trademark, or other identifying 16
information, pursuant to a franchise agreement. 17
(4) “Franchisor” means a person that sells the right to operate a business 18
to a franchisee pursuant to a franchise agreement. 19 BILL AS INTRODUCED H.205
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§ 6062. AGREEMENTS NOT TO COMPETE; PROHIBITION; NOTICE 1
(a) Prohibition. Any agreement not to compete, including an agreement 2
not to compete contained within a contract or franchise agreement, is void and 3
unenforceable. 4
(b) Notice. For existing agreements not to compete that violate subsection 5
(a) of this section, the franchisor must notify each franchisee that is party to the 6
agreement that the agreement not to compete is void and legally unenforceable. 7
Notice shall be in the form of a written individualized communication 8
addressed to the franchisee or former franchisee and shall be delivered to the 9
last known address and email address of the franchisee or former franchisee. 10
Sec. 2. 21 V.S.A. § 495q is added to read: 11
§ 495q. AGREEMENTS NOT TO COMPETE; PROHIBITION; 12
EXCEPTIONS; NOTICE; EMPLOYEE RIGHTS 13
(a) Definitions. As used in this section: 14
(1)(A) “Agreement not to compete” means an agreement between an 15
employer and an employee that restricts the employee after separating from 16
employment from performing: 17
(i) work for another employer for a specified period of time; 18
(ii) work in a specified geographical area; or 19 BILL AS INTRODUCED H.205
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(iii) work for another employer in a capacity similar to the 1
employee’s work for the employee’s former employer that is party to the 2
agreement. 3
(B) “Agreement not to compete” does not include: 4
(i) an agreement that prohibits the disclosure of trade secrets as 5
defined in 9 V.S.A. § 4601 or a nondisclosure agreement that protects 6
confidential business information that does not constitute a trade secret; or 7
(ii) a nonsolicitation agreement between an employer and an 8
employee, provided that the limitations set forth in the agreement are 9
reasonable in time, geographical area, and the scope of activity to be 10
restrained. 11
(2) “Nonsolicitation agreement” means an agreement between an 12
employer and employee pursuant to which the employee agrees not to: 13
(A) solicit or recruit the employer’s employees; or 14
(B) solicit or transact business with customers or clients of the 15
employer who were customers or clients while the employee was employed by 16
the employer. 17
(3) “Severance agreement” means an agreement between an employer 18
and employee pursuant to which the employee voluntarily agrees to leave 19
employment with the employer for a sum of money or other consideration. 20 BILL AS INTRODUCED H.205
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(b) Prohibition. An agreement not to compete, including an agreement not 1
to compete contained within a contract, is void and unenforceable. 2
(c) Exceptions. Nothing in this section shall be construed to prohibit an 3
individual from entering into an agreement not to compete in relation to: 4
(1) the sale of all or substantially all of the individual’s ownership 5
interest in: 6
(A) a business or its operating assets; or 7
(B) a subsidiary or division of a business or the operating assets of a 8
subsidiary or division of a business; 9
(2) the dissolution of a partnership in which the individual is a partner or 10
the dissociation of the individual from a partnership; 11
(3) the dissolution of a limited liability company in which the individual 12
is a member or the termination of an individual’s interest in a limited liability 13
company; or 14
(4) a severance agreement, provided that the limitations set forth in the 15
agreement are reasonable in: 16
(A) time, provided further that the limitation on time cannot exceed 17
the number of weeks or months of pay, however appropriately calculated, that 18
the employer offers to the employee in consideration to sign the agreement; 19
(B) geographical area; and 20
(C) the scope of activity to be restrained. 21 BILL AS INTRODUCED H.205
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(d) Wage threshold. 1
(1) Subject to subdivision (2) of this subsection, this section shall not 2
apply to an agreement not to compete between an employer and an employee 3
to whom the employer pays $100,000.00 or more annually in gross wages. 4
(2) An employer requiring a prospective employee to sign an agreement 5
not to compete that is in accordance with this section shall: 6
(A) provide the prospective employee with the proposed agreement 7
at the time the offer of employment to the prospective employee is made; and 8
(B) not rescind the offer of employment to the prospective employee 9
any earlier than three business days after the prospective employee receives the 10
agreement not to compete. 11
(e) Notice. For existing agreements not to compete that violate subsection 12
(b) of this section, the employer must notify each employee that is party to the 13
agreement that the agreement not to compete is void and legally unenforceable. 14
Notice shall be in the form of a written individualized communication 15
addressed to the employee or former employee and shall be delivered to the 16
last known address and email address of the employee or former employee. 17
(f) Employee rights. The provisions against retaliation in subdivision 18
495(a)(8) of this title and the penalty and enforcement provisions of section 19
495b of this title shall apply to this section. 20 BILL AS INTRODUCED H.205
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Sec. 3. EFFECTIVE DATE 1
This act shall take effect on July 1, 2025. 2