Bill Summaries: H 812 UNIFORM RESTRICTIVE EMPLOYMENT AGREEMENT ACT.

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  • Summary date: Apr 21 2023 - View Summary

    Creates new GS Chapter 1H (Uniform Restrictive Employment Agreement Act), which adopts the uniform act regulating agreements that prohibit or limit employees from working elsewhere after their relationship with the original employer ends, such as noncompete, nonsoliciation, and no-recruit agreements. Also regulates restrictive agreements after the sale of a business is completed. Does not affect agreements related to the transfer or enforcement of patents, copyrights, trade secrets, or similar rights. Provides definitions for the chapter.

    Creates notice requirements applicable to restrictive employment agreements. Directs the North Carolina Department of Labor to prepare required notice to be included with any proposed agreement, and outlines requirements that must be met for enforceability of an agreement. 

    Prohibits restrictive employment agreements for low-wage workers, which are defined as employees earning less than the annual mean wage for North Carolina. Establishes that restrictive employment agreements are not enforceable if the employee resigns for good cause attributable to the employer or if the employer terminates the employee for a reason other than misconduct or completion of agreed work or contract term. Requires all restrictive employment agreements to be reasonable for enforceability.

    Provides that a noncompete agreement, which is an agreement that prohibits an employee for working for other employers, is only enforceable if it meets certain criteria provided in new GS 1H-8. Requires noncompete agreements to be narrowly tailored and limited in time as provided in that section.

    Sets requirements for the enforceability of confidentiality agreements, including the ability of employees to use or disclose information in specified circumstances.

    Establishes requirements for the enforceability of no-business agreements, which are agreements that prohibit an employee from working for a prospective or current client or customer of the employer. Requirements include a limitation on applicability only to prospective and ongoing clients/customers the employee worked with personally, and a six-month time period limitation.

    Provides requirements for the enforceability of nonsolicitation agreements, which are agreements that prohibit an employee from contacting the clients or customers of an employer. Requirements include a limitation on applicability only to prospective and ongoing clients/customers the employee worked with personally, and a one-year time period limitation.

    Enacts requirements for the enforceability of no-recruit agreements, which are agreements that prohibit an employee from recruiting current or former employees of the employer. Requirements include a limitation on applicability only to employees of the employer that the employee worked with personally, and a six-month time period limitation.

    Mandates requirements for the enforceability of payment-for-competition agreements, which are agreements that impose financial consequences on employees for working for other employers, but does not directly prohibit the employee working for another employer. Requirements include a limitation on the financial penalty cannot be more than the competitive harm to the employer, and that the agreement cannot last more than one year after employment has ended.

    Provides limitations on training-repayment agreements, including that the repayment must be only for the special training, the agreement cannot last longer than two years after the training is completed, and that the agreement must prorate the payments for the training.

    Prevents a party to an agreement under the chapter from waiving a requirement of the Chapter, except in specific circumstances such as litigation or other dispute resolution. Outlines enforceability provisions, including judicial remedies and civil penalties for violating the chapter. Prohibits choice of law and choice of venue provisions unless they require the choice of law or venue to be the location where the employee primarily works or worked when the relationship ended, or the venue where the employee resides at the time of the dispute.

    Directs a court to consider the uniform application of the act in other jurisdictions that have adopted the uniform act. Contains a severability provision. 

    Contains a savings provision that allows agreements entered into before the effective date of the Chapter to remain in effect, except that the Chapter also contains a transitional provision that makes GS 1H-4(a)(4)-(5), requiring the agreement to be separately signed by the employee and that an employee receives a copy of the agreement when signed and an additional copy within 14 days of request, applicable to agreements entered into before, on, or after the effective date of the Chapter. 

    Effective January 1, 2024.