Vermont 2025-2026 Regular Session

Vermont House Bill H0205 Compare Versions

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

Old	New	Differences
1	1	BILL AS INTRODUCED H.205
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5	5	VT LEG #379828 v.1
6	6	H.205 1
7	7	Introduced by Representatives Marcotte of Coventry, Bosch of Clarendon, 2
8	8	Christie of Hartford, Cooper of Pownal, Duke of Burlington, 3
9	9	Graning of Jericho, LaLonde of South Burlington, Micklus of 4
10	10	Milton, Olson of Starksboro, and White of Bethel 5
11	11	Referred to Committee on 6
12	12	Date: 7
13	13	Subject: Commerce and trade; consumer protection; noncompete agreements 8
14	14	Statement of purpose of bill as introduced: This bill proposes to prohibit 9
15	15	noncompete agreements that restrict the ability of franchisees from operating 10
16	16	their businesses after separating from franchisors and of employees from 11
17	17	competing with their former employers following the conclusion of their 12
18	18	employment. 13
19	19	An act relating to agreements not to compete 14
20	20	It is hereby enacted by the General Assembly of the State of Vermont: 15
21	21	Sec. 1. 9 V.S.A. chapter 153 is added to read: 16
22	22	CHAPTER 153. FRANCHISE AGREEMENTS 17
23	23	§ 6061. DEFINITIONS 18
24	24	As used in this chapter: 19 BILL AS INTRODUCED H.205
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29	29	(1)(A) “Agreement not to compete” means an agreement between a 1
30	30	franchisor and franchisee that restricts the franchisee after separating from the 2
31	31	franchisor from operating its business: 3
32	32	(i) in a certain geographic area; 4
33	33	(ii) for a certain period of time; or 5
34	34	(iii) in any other way that significantly impacts the ability of the 6
35	35	franchisee to compete with the franchisor. 7
36	36	(B) An agreement not to compete does not include an agreement that 8
37	37	prohibits the disclosure of trade secrets as defined in section 4601 of this title 9
38	38	or a nondisclosure agreement that protects confidential business information 10
39	39	that does not constitute a trade secret. 11
40	40	(2) “Franchise agreement” means an agreement in which a franchisor 12
41	41	grants a franchisee the right to operate a business or to offer, sell, or distribute 13
42	42	goods or services identified or associated with the franchisor’s trademark. 14
43	43	(3) “Franchisee” means a person who currently operates or formerly 15
44	44	operated a business under a franchisor’s name, trademark, or other identifying 16
45	45	information, pursuant to a franchise agreement. 17
46	46	(4) “Franchisor” means a person that sells the right to operate a business 18
47	47	to a franchisee pursuant to a franchise agreement. 19 BILL AS INTRODUCED H.205
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51	51	VT LEG #379828 v.1
52	52	§ 6062. AGREEMENTS NOT TO COMPETE; PROHIBITION; NOTICE 1
53	53	(a) Prohibition. Any agreement not to compete, including an agreement 2
54	54	not to compete contained within a contract or franchise agreement, is void and 3
55	55	unenforceable. 4
56	56	(b) Notice. For existing agreements not to compete that violate subsection 5
57	57	(a) of this section, the franchisor must notify each franchisee that is party to the 6
58	58	agreement that the agreement not to compete is void and legally unenforceable. 7
59	59	Notice shall be in the form of a written individualized communication 8
60	60	addressed to the franchisee or former franchisee and shall be delivered to the 9
61	61	last known address and email address of the franchisee or former franchisee. 10
62	62	Sec. 2. 21 V.S.A. § 495q is added to read: 11
63	63	§ 495q. AGREEMENTS NOT TO COMPETE; PROHIBITION; 12
64	64	EXCEPTIONS; NOTICE; EMPLOYEE RIGHTS 13
65	65	(a) Definitions. As used in this section: 14
66	66	(1)(A) “Agreement not to compete” means an agreement between an 15
67	67	employer and an employee that restricts the employee after separating from 16
68	68	employment from performing: 17
69	69	(i) work for another employer for a specified period of time; 18
70	70	(ii) work in a specified geographical area; or 19 BILL AS INTRODUCED H.205
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74	74	VT LEG #379828 v.1
75	75	(iii) work for another employer in a capacity similar to the 1
76	76	employee’s work for the employee’s former employer that is party to the 2
77	77	agreement. 3
78	78	(B) “Agreement not to compete” does not include: 4
79	79	(i) an agreement that prohibits the disclosure of trade secrets as 5
80	80	defined in 9 V.S.A. § 4601 or a nondisclosure agreement that protects 6
81	81	confidential business information that does not constitute a trade secret; or 7
82	82	(ii) a nonsolicitation agreement between an employer and an 8
83	83	employee, provided that the limitations set forth in the agreement are 9
84	84	reasonable in time, geographical area, and the scope of activity to be 10
85	85	restrained. 11
86	86	(2) “Nonsolicitation agreement” means an agreement between an 12
87	87	employer and employee pursuant to which the employee agrees not to: 13
88	88	(A) solicit or recruit the employer’s employees; or 14
89	89	(B) solicit or transact business with customers or clients of the 15
90	90	employer who were customers or clients while the employee was employed by 16
91	91	the employer. 17
92	92	(3) “Severance agreement” means an agreement between an employer 18
93	93	and employee pursuant to which the employee voluntarily agrees to leave 19
94	94	employment with the employer for a sum of money or other consideration. 20 BILL AS INTRODUCED H.205
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99	99	(b) Prohibition. An agreement not to compete, including an agreement not 1
100	100	to compete contained within a contract, is void and unenforceable. 2
101	101	(c) Exceptions. Nothing in this section shall be construed to prohibit an 3
102	102	individual from entering into an agreement not to compete in relation to: 4
103	103	(1) the sale of all or substantially all of the individual’s ownership 5
104	104	interest in: 6
105	105	(A) a business or its operating assets; or 7
106	106	(B) a subsidiary or division of a business or the operating assets of a 8
107	107	subsidiary or division of a business; 9
108	108	(2) the dissolution of a partnership in which the individual is a partner or 10
109	109	the dissociation of the individual from a partnership; 11
110	110	(3) the dissolution of a limited liability company in which the individual 12
111	111	is a member or the termination of an individual’s interest in a limited liability 13
112	112	company; or 14
113	113	(4) a severance agreement, provided that the limitations set forth in the 15
114	114	agreement are reasonable in: 16
115	115	(A) time, provided further that the limitation on time cannot exceed 17
116	116	the number of weeks or months of pay, however appropriately calculated, that 18
117	117	the employer offers to the employee in consideration to sign the agreement; 19
118	118	(B) geographical area; and 20
119	119	(C) the scope of activity to be restrained. 21 BILL AS INTRODUCED H.205
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124	124	(d) Wage threshold. 1
125	125	(1) Subject to subdivision (2) of this subsection, this section shall not 2
126	126	apply to an agreement not to compete between an employer and an employee 3
127	127	to whom the employer pays $100,000.00 or more annually in gross wages. 4
128	128	(2) An employer requiring a prospective employee to sign an agreement 5
129	129	not to compete that is in accordance with this section shall: 6
130	130	(A) provide the prospective employee with the proposed agreement 7
131	131	at the time the offer of employment to the prospective employee is made; and 8
132	132	(B) not rescind the offer of employment to the prospective employee 9
133	133	any earlier than three business days after the prospective employee receives the 10
134	134	agreement not to compete. 11
135	135	(e) Notice. For existing agreements not to compete that violate subsection 12
136	136	(b) of this section, the employer must notify each employee that is party to the 13
137	137	agreement that the agreement not to compete is void and legally unenforceable. 14
138	138	Notice shall be in the form of a written individualized communication 15
139	139	addressed to the employee or former employee and shall be delivered to the 16
140	140	last known address and email address of the employee or former employee. 17
141	141	(f) Employee rights. The provisions against retaliation in subdivision 18
142	142	495(a)(8) of this title and the penalty and enforcement provisions of section 19
143	143	495b of this title shall apply to this section. 20 BILL AS INTRODUCED H.205
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148	148	Sec. 3. EFFECTIVE DATE 1
149	149	This act shall take effect on July 1, 2025. 2