131st MAINE LEGISLATURE

Printed on recycled paper

FIRST SPECIAL SESSION-2023

Legislative Document

No. 1496

H.P. 951

House of Representatives, April 5, 2023

An Act to Prohibit Noncompete Clauses

Reference to the Committee on Labor and Housing suggested and ordered printed.

ROBERT B. HUNT

Clerk

Presented by Representative WARREN of Scarborough.

Cosponsored by Senator TIPPING of Penobscot and

Representative: ROEDER of Bangor.

Page 1 - 131LR1713(01)

1 Be it enacted by the People of the State of Maine as follows:

2 Sec. 1. 26 MRSA §599-A, as enacted by PL 2019, c. 513, §1, is amended to read:

3 §599-A. Noncompete agreements

4 1. Definitions. As used in this section, unless the context otherwise indicates, the

5 following terms have the following meanings.

6 A. "Federal poverty level" means the nonfarm income official poverty line for an

7 individual, as defined by the federal Office of Management and Budget and revised

8 annually in accordance with the Omnibus Budget Reconciliation Act of 1981, Section

9 673(2).

10 B. "Noncompete agreement" means a contract or contract provision that prohibits an

11 employee or prospective employee from working in the same or a similar profession

12 or in a specified geographic area for a certain period of time following termination of

13 employment.

14 2. Public policy; enforceability of noncompete agreements. Noncompete

15 agreements are contrary to public policy and are enforceable only in situations described

16 in subsection 3-B and only to the extent that they are reasonable and are no broader than

17 necessary to protect one or more of the following legitimate business interests of the

18 employer:.

19 A. The employer's trade secrets, as defined in Title 10, section 1542, subsection 4;

20 B. The employer's confidential information that does not qualify as a trade secret; or

21 C. The employer's goodwill.

22 A noncompete agreement may be presumed necessary if the legitimate business interest

23 cannot be adequately protected through an alternative restrictive covenant, including but

24 not limited to a nonsolicitation agreement or a nondisclosure or confidentiality agreement.

25 3. Prohibited for certain workers. Notwithstanding subsection 2, an employer may

26 not require or permit an employee earning wages at or below 400% of the federal poverty

27 level to enter into a noncompete agreement with the employer.

28 3-A. Noncompete agreements prohibited. An employer may not require or permit

29 an employee to enter into a noncompete agreement with the employer.

30 3-B. Exceptions. Noncompete agreements are allowable in the following situations,

31 in accordance with subsection 2 and subject to the requirements of this section.

32 A. A seller of a business in this State may be bound by a noncompete agreement

33 prohibiting the seller from opening a competing business in the same geographic area

34 as the business that was sold;

35 B. A shareholder in a limited liability company organized under the laws of this State

36 may be bound by a noncompete agreement if the shareholder sells or disposes of all of

37 the shareholder's shares; or

38 C. A member of a partnership organized under the laws of this State may be bound by

39 a noncompete agreement if the partnership is dissolved.

Page 2 - 131LR1713(01)

1 3-C. Out-of-state agreements. A noncompete agreement between an out-of-state

2 employer and a resident of this State is unenforceable. If the noncompete agreement made

3 between an out-of-state employer and a resident of this State includes a choice of law

4 provision, this State may not enforce that provision if it violates the State's public policy

5 described under subsection 2.

6 4. Disclosure; notice. An employer shall disclose prior to an offer of employment

7 with the employer that will require the acceptance of a noncompete agreement a statement

8 that a noncompete agreement will be required.

9 An employer shall notify an employee or prospective employee of a noncompete agreement

10 requirement and provide a copy of the noncompete agreement not less than 3 business days

11 before the employer requires the agreement to be signed to allow time for the employee or

12 prospective employee to review the agreement and negotiate the terms of the agreement or

13 employment with the employer if the employee or prospective employee wishes to do so.

14 4-A. Posted notice required. The Department of Labor shall create a poster

15 containing the laws governing noncompete agreements under this section that employers

16 shall post in a central workplace location. The poster must be printed in a minimum font

17 size, as determined by the Department of Labor, in accordance with provisions of law

18 governing disability-related accommodations.

19 5. Effective date of a noncompete agreement. Except for a noncompete agreement

20 between an employer and an allopathic physician or an osteopathic physician licensed

21 under Title 32, chapter 48 or chapter 36, respectively, the terms of a noncompete agreement

22 do not take effect until after one year of the employee's employment with the employer or

23 a period of 6 months from the date the agreement was signed, whichever is later.

24 6. Penalty; enforcement. An employer that violates subsection 3 or 4 3-A commits

25 a civil violation for which a fine of not less than $5,000 may be adjudged. The Department

26 of Labor is responsible for enforcement of this section.

27 7. Application. This section applies to all noncompete agreements entered into or

28 renewed after the effective date of this section.

29 SUMMARY

30 This bill prohibits an employer from requiring or permitting an employee to enter into

31 a noncompete agreement with the employer, regardless of the amount of the employee's

32 earned wages. It prohibits noncompete agreements between an out-of-state employer and

33 a resident of this State. It authorizes noncompete agreements in specific nonemployment-

34 related situations, subject to certain conditions.