News & Thought Leadership from Sulloway & Hollis

School’s … Oops, That’s Legislature’s Out for Summer

This article was written for publication in the August, 2012 New Hampshire Employment Law Letter, a newsletter written for New Hampshire employers by the labor and employment attorneys at Sulloway & Hollis and published by Business & Legal Resources, and is posted on their Human Resources News webpage.

Yes, the New Hampshire Legislature has concluded its 2012 session for the year and, still, there are things we want to tell you about, particularly because two of the statutory changes go into effect this Summer!

NEW LIMITS ON NONCOMPETE AND “NON-PIRACY” AGREEMENTS

In HB1270, the New Hampshire Legislature imposed a new limit on employers who use non-compete and “non-piracy” agreements with employees. Specifically, the Legislature added a new Section 70 to RSA 275 – New Hampshire’s “Protective Legislation” – that requires that every employer provide a copy of any non-compete and non-piracy agreement that is part of an employment arrangement to the employee or potential employee prior to or concurrent with making an offer of change in job classification or an offer of employment. Any non-compete or non-piracy agreement that does not comply with the provision is void and unenforceable. These requirements go into effect on July 14, 2012.

There are outstanding questions about how the statutory language will be interpreted. For example, people have wondered about the meaning of the terms “non-compete” and “non-piracy” when it comes to agreements. Non-competes are commonly understood to restrict a person from competing with his or her current or former employer by working for or being involved with a competitor or setting up a competing business. Non-piracy agreements – which many assume are the more commonly-called non-solicitation agreements – typically provide that an employee will not solicit clients, customers, or employees of his/her former employer for a period of time.

There are also questions about how significant a job change must be to require their employers provide the non-compete or non-piracy agreement prior to or concurrent with the job change. The legislative history of the provision indicates that the legislators were concerned that applicants and employees who were offered the agreements after they accepted a new position (and presumably gave notice they were leaving another position) do not truly enter into the agreements voluntarily. Therefore, prudent employers will, first, provide the agreement(s) any time the opportunity the employee or applicant is considering is dependent upon acceptance of the non-compete and/or non-piracy provision and, second, provide the agreement(s) before the applicant leaves (or gives notice he or she is leaving) his or her prior job. That timing both ensures that the employee or applicant is aware of the required agreement before accepting the position and allows the applicant to consider, and potentially negotiate, the terms of the agreement(s) before resigning from his or her current employment.

Commentators have also voiced concerns about other vague aspects of the new law. For example, they point out a lack of clarity about the scope of the law and whether it intends to cover narrower non-compete agreements (e.g., ones that prohibit an employee from soliciting or selling products or services to the employer’s customers) as well as broad non-compete agreements (e.g., ones that prohibit an employee from working for a competing company). Others point out that “non-piracy” agreement is not a term familiar to employers in New Hampshire. Most believe it is intended to refer to non-solicitation agreements but the legislation is not clear in that regard.

People also worry about unanticipated consequences of the legislation. For example, employers wonder whether the statute covers situations where an employee’s responsibilities change – even though there is no promotion or other change to the employee’s position or title – or where one employer is purchased by another and a non-compete agreement is requested or required. Even if the employer is willing to compensate the employee for the non-compete, people wonder whether – since the employer cannot provide the employee with the non-compete before the employee accepts his or her current position – the new statute will prevent the employer from requiring that the employee sign the non-compete.

There will be a period of uncertainty until employers can see how the new language is applied. Until then, employers should be very careful regarding the scope of the statute’s requirements.

The text of the new statutory section is available at www.gencourt.state.nh.us/legislation/2012/HB1270.html.

TIP POOLING LANGUAGE CHANGES

Effective July 22, 2012, changes in the language of NH’s minimum wage statute – RSA 279 – may permit employers who have tipped employees to be more actively involved in managing tip pooling arrangements. SB49 adds new definitions for “tip pooling,” “tip sharing,” and “coercion” to the definitional section statute (RSA 279:1) and modifies the section on tip pools (RSA 279:26-b) to provide that:

• Tips are wages and shall be the property of the employee receiving the tip and shall be retained by the employee, unless the employee voluntarily and without coercion from his or her employer agrees to participate in a tip pooling or tip sharing arrangement.
• No employer is precluded from administering a valid tip pooling or tip sharing arrangement at the request of the employee, including suggesting reasonable and customary practices, and mediating disputes between employees regarding a valid tip pooling or tip sharing arrangement.

The text of the new statutory sections is available at www.gencourt.state.nh.us/legislation/2012/sb0049.html.

EMPLOYER SAFETY PROGRAMS CHANGE TOO

Effective January 1, 2013, changes implemented by HB1587 will change NH’s requirements for employer safety programs. The new law provides:

• Employers with 15 or more employees (used to be 10 or more employees) must have a written safety program to be filed with the NH Department of Labor (NHDOL).
• Once filed, the safety plan must be updated and filed with the NHDOL every 2 years (used to be biennially on January 1).
• Employers with 15 or more employees (used to be 5 or more employees) must establish a joint loss safety committee.
• The NHDOL can assess administrative penalties up to $250 (used to be $1,000) per day for each day of noncompliance.
• The safety inspection fund is repealed.
• Penalties collected now go to the State’s General Fund rather than the workers’ compensation safety inspection fund.

See www.gencourt.state.nh.us/legislation/2012/HB1587.html to review the new text for the statute.

If you have any questions concerning the impact these changes may have on you, please contact our Labor and Employment Practice Group.