UPDATED | Legislation Banning Non-Compete Agreements Still Under Consideration

The House Commerce and Economic Development Committee Friday received a revised version of H.1, legislation intended to severely limit non-compete agreements in Vermont.  The Committee is expected to review the new draft and work further on the legislation this Tuesday.  It is far from clear that the new draft will sufficiently address serious concerns with the bill.

AIV will continue to engage the Committee on this legislation, and members are strongly encouraged to familiarize themselves with the bill, follow up with us to learn about further developments and opportunities to engage the Committee, and to contact their own Representative(s) with any concerns and questions.  Links to the new version of the bill and contact information for legislators can be found at the end of this post, and you can contact AIV at info@aivt.org for more information.

Overview of the Bill and New Version

As introduced, H.1 would have voided and prohibited any non-compete agreement other than those that addressed:

  • With respect to a business entity, the sale of all or substantially all of the person’s ownership interest in the business entity or its operating assets; or all or substantially all of the person’s ownership interest in a subsidiary or division of the business entity or the operating assets of a subsidiary or division of the business entity.
  • With respect to a partnership in which the person is a partner, the dissolution of the partnership or the dissociation of the person from the partnership.
  • With respect to a limited liability company in which the person is a member, the dissolution of the limited liability company or the termination of the person’s interest in the limited liability company.

Further, the bill included a provision that “Nothing in this section shall be construed to prohibit an agreement that prohibits the disclosure of trade secrets as defined in 9 VSA §4601.”

This language would have been sweeping and has raised significant concerns from a wide range of businesses.

In response to increasing opposition, the Committee is reviewing a new draft this week.  It is our understanding that the new draft adds “or a nondisclosure agreement that protects a legitimate business interest of the employer.” To the trade secrets language above.  It also allows non-solicitation agreements with “key employees” that address legitimate business interests of the employer, last no longer than a year, are geographically limited, and meet a number of other criteria.  For the full list of new proposed conditions, see the link for the new draft that will be linked below once it is publicly available, or email us at info@aivt.org for a copy directly.

To review the updated version of H.1, click here.

To find contact information for the House Commerce and Economic Development Committee, click here.

To find contact information for your Representative(s), click here.

To contact House Speaker Mitzi Johnson:  (802) 828-2245  |  speaker@leg.state.vt.us