New Maine Law Limits Noncompete Agreements

A new Maine law An Act to Promote Keeping Workers in Maine will take effect September 18, 2019. This act contains provisions that limit noncompete agreements between an employer and employee and prohibit restrictive employment agreements between employers.

Noncompete Agreement Limits

Noncompete agreements are defined as contracts that prohibit employees or prospective employees from working in the same or a similar profession or in a specified geographic area for a certain period of time following termination of employment.

The act states that noncompete agreements are contrary to public policy and enforceable only to the extent they are reasonable and no broader than necessary to protect the following business interests of the employer:

  • Employer’s trade secrets
  • Employer’s confidential information; or
  • An employer’s goodwill.

The act requires the following related to noncompete agreements:

  • Employers must disclose prior to job offer that a noncompete is required.
  • Employers must provide job candidates/employees a copy of the noncompete agreement not less than three days before it must be signed.
  • Terms cannot take effect until one year after start of employment or six months from the date the agreement is signed, whichever is later.
  • Employers cannot require noncompete agreements for employees earning at or below 400% of the federal poverty level (approximately $49,00 per year – may be revised annually).
  • This act does not apply to nondisclosure or confidentiality agreements or non-solicitation

A penalty of not less than $5,000 applies for violations of the notice provision or violations on the prohibition of noncompetes for workers earning at or below the federal poverty level.

Restrictive Employment Agreement Prohibition

Also prohibited are restrictive employment agreements between two or more employers that prohibit or restrict one employer from soliciting or hiring another employer’s employees or former employees. A fine of not less than $5,000 may apply for violations.

Employer Action

Employers who have or are considering noncompete or restrictive employment agreements should consult with their legal counsel to ensure their agreements are in accordance with the new requirements.

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If you have compliance or other HR or employment questions, contact the experts at KMA today!

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