Governor Mills Vetoes L.D. 1496, An Act to Prohibit Noncompete Clauses: What Maine Employers Need to Know

What happened?

On March 29, the Governor of Maine, Janet Mills, vetoed L.D. 1496, An Act to Prohibit Noncompete Clauses. The veto was sustained by the Maine State Legislature on April 2. The proposed law – which was introduced by Representative Sophia B. Warren (D-Scarborough) and cosponsored by Senator Mike Tipping (D-Penobscot) and Representative Amy J. Roeder (D-Bangor) – was far more restrictive on non-compete agreements than a previously adopted law on the same topic, L.D. 733, An Act to Promote Keeping Workers in Maine.

In her veto letter, Governor Mills called noncompete agreements “a critical tool” in preventing employees from taking unfair advantage of their former employers and highlighted a largely negative response from employers across the state to L.D. 1496. Mills stated that she felt that L.D. 733 offered the right restrictions on non-compete agreements, and that L.D. 1496 went too far by “rendering most noncompete agreements unenforceable, even when they are designed to protect a former employer’s confidential information from disclosure to commercial competitors.” Governor Mills found “no evidence that the recently enacted statute [L.D. 733] is inadequate, or that noncompete agreements are being abused in Maine,” and therefore vetoed the bill.

What does it mean for Maine employers, and what should they do next?

Because L.D. 1496 was vetoed and that veto was sustained by the Maine State Legislature, Maine employers should continue to reference L.D. 733 when drafting and negotiating noncompete agreements. That law lays out:

• Requirements related to which employees can be required to sign a noncompete agreement, including a prohibition on noncompete agreements for employees earning 400% of the federal poverty level or less ($60,240 in 2024);
• Limits on the breadth and length of noncompete agreements; and
• Requirements related to providing advanced notice of an employer’s intention to have its prospective employees sign a noncompete agreement.

For further information about L.D. 733, you can reference a prior client alert issued by our labor and employment team here. To access the full law, click here.

Since noncompete agreements continue to be a hot topic in Maine, now is the time for Maine-based businesses to revisit their processes and policies around noncompete agreements to ensure compliance with L.D. 733. Additionally, employers should follow federal updates on this topic, including an upcoming final rule that will be issued by the Federal Trade Commission (FTC) potentially this month.

In Conclusion

Our labor and employment team will continue to keep clients apprised as updates are published by the FTC and cases are decided in Maine which may shed light on the application of L.D. 733. For more information about the status of noncompete agreements in Maine, reach out to Shiloh Theberge, Shareholder, Chair, Labor & Employment Practice Group, stheberge@bernsteinshur.com, or Carolyn Liegner, Associate, Labor & Employment Practice Group, cliegner@bernsteinshur.com.