The COVID-19 pandemic brought unprecedented changes to the labor market, as workers now seem more and more willing to change jobs on a regular basis. With that level of worker mobility, restrictive covenants in employment agreements are arguably more important than ever before, in order to protect businesses’ legitimate interests in their confidential and proprietary information, trade secrets, intellectual property, and customer relationships. This article provides an overview of New Hampshire law regarding the three primary types of restrictive covenants in employment agreements—(1) non-compete agreements, (2) non-solicitation agreements, and (3) non-disclosure agreements / confidentiality agreements—and how businesses may consider using each type of restrictive covenant to protect their interests. While this article discusses New Hampshire law at a high level, state laws on these issues can vary significantly in certain respects, so businesses should be mindful that the analysis in any given situation can become complex when an employer has locations across multiple states and/or employees working remotely.
Non-compete agreements: Non-compete agreements typically prohibit employees from working for or starting a competing business after leaving their current employer. Such covenants are generally enforceable under New Hampshire law so long as certain conditions are met. (As an aside, there is a pending regulation that has been adopted by the Federal Trade Commission (“FTC”) which would ban and render unenforceable most non-compete agreements, but the FTC’s rule has been enjoined by a federal court as of the date of this article, and litigation surrounding the enforceability of the FTC’s rule is expected to continue for the next several months.) In order to be enforceable under New Hampshire law, non-compete agreements generally (i) must be no greater than necessary for the protection of the employer’s legitimate interests, (ii) must not impose undue hardship on the employee, and (iii) must not be injurious to the public interest. Courts typically review the second prong for the reasonableness of the restriction’s scope as to geography and duration. While the reasonableness of any given non-compete agreement is a fact-dependent inquiry based on the industry and totality of circumstances, courts typically uphold non-compete agreements that last six months to a year after employment, with sometimes a two-year non-compete being enforceable in the right circumstances. One important caveat, though, is that non-compete agreements executed in connection with the bona fide sale of a business may justify a broader geographic scope or duration than normally allowable, given that non-competes in that context are often considered part of the buyer’s investment in purchasing of the business. New Hampshire law also allows courts the ability to reform an overbroad non-compete agreement, if needed to make it enforceable.
Beyond the case law that has developed, the New Hampshire legislature has enacted certain key statutes that codify public policy concerns in this area. Specifically, RSA 275:70 provides that for a non-compete agreement to be enforceable, the employer must provide a copy of such agreement to the potential employee prior to the employee’s acceptance of an employment offer. Additionally, RSA 275:70-a prohibits non-compete agreements for low-wage employees, who are defined as earning an hourly rate less than or equal to 200% of the federal minimum wage. Lastly, RSA 329:31-a makes most post-employment non-compete agreements for physicians void and unenforceable, given the special public policy issues that such agreements implicate for patients receiving the health care they need.
Non-solicitation agreements: There are two types of non-solicitation agreements typically used in employment agreements. The first is a client non-solicitation agreement, which prohibits an employee from contacting or otherwise soliciting clients for a set duration after their employment ends. Such provisions may include current and prospective clients. The more focused that a client non-solicitation agreement is—by, for example, identifying specific clients by name, rather than relying on general descriptions of the company’s clients—the more likely a New Hampshire court would be to enforce the provision as being reasonably tailored to protecting the company’s legitimate interests.
The other type of non-solicitation provision is an employee non-solicitation. This covenant requires that once an employee departs to work in a competitive business, she may not contact or otherwise solicit the company’s other employees for a certain period of time, so that those others do not also leave and join her at that competitor. Most employee non-solicitation agreements are enforceable, so long as the employer has acted in good faith.
Non-disclosure agreements (NDAs) / confidentiality agreements: NDAs and confidentiality agreements are the types of restrictive covenants that New Hampshire courts are most likely to uphold, as they normally require employees to maintain the confidentiality of trade secrets, intellectual property, and/or other information that is proprietary to the organization. Where a former employee had access to this type of sensitive information, however, policing her use of that sensitive information post-employment can be difficult, unless the company’s trade secrets and intellectual property are so unique that her reuse or misuse of that information cannot be disputed.