With the amount of mobility in the current labor market, restrictive covenants in employment agreements are arguably more important than ever. Restrictive covenants are intended to protect businesses’ legitimate interests in their proprietary information, trade secrets, intellectual property, and customer relationships. This article provides an overview of New Hampshire law on (1) non-compete agreements, (2) non-solicitation agreements, and (3) non-disclosure / confidentiality agreements. While this article discusses NH law at a high level, state laws can vary on these issues, so businesses should be mindful that the analysis can become complex when an employer has locations across multiple states and/or employees are working remotely.
Non-compete agreements: Non-compete agreements prohibit employees from working for or starting a competing business after leaving their employer. A non-compete is generally enforceable in NH so long as it (i) is no greater than necessary for the protection of the employer’s legitimate interests, (ii) does not impose undue hardship on the employee, and (iii) is not 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 reasonableness depends on the industry and totality of circumstances, courts typically uphold non-compete agreements that last six months to a year after employment, with a two-year non-compete being enforceable in certain 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, given that non-competes in that context are often considered part of the buyer’s investment in purchasing the business.
Beyond the case law that has developed, the NH legislature has enacted key statutes to codify certain public policy concerns. RSA 275:70 provides that for a non-compete agreement to be enforceable, the employer must provide a copy of it to the potential employee prior to the employee’s acceptance of an offer. Additionally, RSA 275:70-a prohibits non-compete agreements for low-wage employees (i.e., earning an hourly rate less than or equal to 200% of the federal minimum wage). Lastly, RSA 329:31-a makes most non-compete agreements for physicians unenforceable, given the public policy of 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, which prohibits an employee from contacting or otherwise soliciting clients for a set duration after employment. The more focused that a client non-solicitation is—by, for example, identifying specific clients by name, rather than relying on general descriptions—the more likely a NH court would be to enforce the provision as being reasonably tailored to protecting the company’s legitimate interests.
The other type is an employee non-solicit. 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. 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 NH courts are most likely to uphold, as they normally require employees to maintain the confidentiality of trade secrets, intellectual property, and/or other proprietary information. Where a former employee had access to this type of sensitive information, however, policing her use of it post-employment can be difficult, unless the company’s trade secrets and intellectual property are so unique that her reuse or misuse cannot be disputed.