NH Law: Significant Changes to Non-Competition & Non-Piracy Agreements

By Karen Aframe | July 2, 2012

As of July 14, 2012, employers in New Hampshire seeking to enforce their non-competition and/or non-piracy agreements will likely face new challenges because of a new law, N.H. RSA 275:70. This statute imposes new requirements on when employers, who wish to use these agreements to protect their legitimate business interests, must present the agreement to the employee.

RSA 275:70 is only two sentences, but will immediately affect the likelihood that an employee can successfully challenge the enforceability of these agreements. The law states that in order for an employer to have a valid and enforceable non-competition or non-piracy agreement, the employer must comply with the following notice requirements:

(1) Provide a copy of the agreement before or at the time an offer of employment is made

(2) Provide a copy of the agreement before or at the time an offer of change in job classification is made

Steps for Employers

To protect the enforceability of the agreements, employers should immediately review their agreements and practices surrounding providing the agreements to potential and current employees and consider the following steps:

• Draft and/or revise offer letters to reflect that the non-competition and/or non-piracy agreement is part of the offer, and include the agreement as an attachment

• Cease the practice of including non-competition and/or non-piracy agreements among all other orientation documents, such as the handbook acknowledgement, benefits acknowledgement and IRS forms

• Revise current agreements to reflect the change in the law

• Update human resources practices used to document changes in employee status to comply with this statute’s notice requirements

Important Considerations

As noted above, this statute is brief and it is not entirely clear as to the breadth of its application. Noticeably absent from the statute are the definitions of two of its key terms: “non-piracy agreement” and “change in job classification.”

Generally, non-piracy agreements, like non-competition agreements, are designed to protect an employer’s legitimate business interests. Unlike a non-competition agreement, a non-piracy agreement does not have a generally accepted meaning. A non-piracy agreement likely includes an agreement by an employee neither to solicit a former employer’s customers, nor to recruit employees from the former employer, but also could arguably include confidentiality or non-disclosure agreements – those agreements designed to protect an employer’s confidential and proprietary information.

Without a definition of “change in job classification,” it is not entirely clear when the statute’s required notice must be provided. For instance, must an employer comply with this statute when an employee is involuntarily transferred to a new position? Or when an employee is placed in a new position as a result of a reduction in force?

The statute is even less clear as to whether it will affect the enforceability of an agreement provided to current employees when the employer has never used a non-competition or non-piracy agreement before.

For more information regarding your business’ use of these agreements and assistance with complying with this new law, please contact Karen Aframe at kaframe@bernsteinshur.com or 603 623-8700 or Ned Sackman at nsackman@bernsteinshur.com or 603 623-8700.