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6/13/2024
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General Assembly OKs LaMountain, Baginski bill that would prohibit noncompetition agreements
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PLEASE NOTE: The governor vetoed this bill on June 26.
STATE HOUSE — The General Assembly today passed legislation introduced by Sen. Matthew L. LaMountain (D-Dist. 31, Warwick, Cranston) and Rep. Jacquelyn M. Baginski (D-Dist. 17, Cranston) that would ban noncompetition agreements.
The bill (2024-S 2436A, 2024-H 8059A) would prohibit the agreements except for those between a seller and buyer of a business. A noncompetition agreement is a legal accord or clause in a contract specifying that an employee must not enter into competition with an employer after the employment period is over.
“This is a widespread and unfair practice that suppresses wages, hampers innovation and blocks entrepreneurs from starting new businesses,” said Senator LaMountain. “The Federal Trade Commission estimates that a ban on noncompete agreements could increase wages by nearly $300 billion a year by allowing workers to pursue better opportunities.”
Noncompetition agreements are signed when the relationship between employer and employee begins. They give the employer control over specific actions of the employee —even after that relationship ends.
“Originally, these agreements were designed to stop highly paid executives from leaving one company and bringing trade secrets or other sensitive information to their competitors,” said Representative Baginski. “But more and more, these agreements are being used to keep lower-wage workers in jobs they might otherwise leave for better pay or benefits. There is no legitimate business need to do that beyond restricting a worker’s bargaining power.”
According to the FTC, companies use these agreements for workers across industries and job levels, from hairstylists and warehouse workers to doctors and business executives. In many cases, employers use their outsized bargaining power to coerce workers into signing these contracts. Noncompetition agreements harm competition in U.S. labor markets by blocking workers from pursuing better opportunities and by preventing employers from hiring the best available talent.
The legislation would not apply to agreements between employers and employees that prohibit sharing information on trade secrets or customer lists.
The measure now moves to the governor’s office.
For more information, contact:
Daniel Trafford, Publicist
State House Room 20
Providence, RI 02903
(401)222-1922
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