Are Non-Compete Agreements Enforceable in New Hampshire? Know Your Rights

Understanding Non-Compete Agreements in New Hampshire: A Comprehensive Guide

Navigating the intricacies of non-compete agreements can feel like traversing a dense New Hampshire forest – challenging, often unclear, and full of potential pitfalls. For both employees seeking new opportunities and employers striving to protect their business interests, understanding the landscape of non-compete enforcement in the Granite State is absolutely crucial. This article cuts through the legal jargon to provide a clear, practical guide to non-compete agreements under New Hampshire law, helping you understand your rights and obligations.

What Makes a Non-Compete Enforceable in New Hampshire? The Core Principles

In New Hampshire, non-compete agreements are not automatically enforceable. Courts generally view them with a degree of skepticism because they restrict an individual's ability to earn a living. To be upheld, an employer must prove that the agreement meets specific criteria, primarily focusing on two key pillars: legitimate business interest and reasonableness.

Legitimate Business Interest

An employer must demonstrate that they have a genuine, protectable business interest that the non-compete agreement is designed to safeguard. This isn't about preventing general competition; it's about protecting specific assets or relationships. Common legitimate interests include:

• 🌳 Trade Secrets and Confidential Information: This includes proprietary formulas, manufacturing processes, specific customer lists with detailed purchasing habits, or confidential strategic business plans not generally known to the public or competitors. For example, a software company's proprietary code or a marketing firm's confidential client database would likely qualify.
• 🤝 Customer Goodwill: This refers to the positive relationships and trust an employee builds with a company's clients, especially in roles where personal relationships drive sales or service. Think of a long-term sales representative who has cultivated strong bonds with a client base over many years.
• 🎓 Specialized Training or Unique Skills: If an employer has invested significantly in providing unique, expensive, and specialized training that gives the employee a competitive edge, this can be a legitimate interest. However, general on-the-job training or common professional development courses typically won't suffice.

Reasonableness of Scope

Even with a legitimate business interest, the agreement's restrictions must be "reasonable" in terms of their scope. New Hampshire courts scrutinize three main aspects:

• ⏳ Duration: How long does the non-compete prevent the employee from working for a competitor or engaging in specific activities? Generally, agreements lasting more than one to two years are viewed with increasing skepticism, though specific industries or roles might justify longer periods. A six-month or one-year restriction is often considered more reasonable than, say, a three-year one.
• 🗺️ Geographic Area: How wide is the restricted geographical area? Is it limited to where the employer actually does business and where the employee had client contact or access to confidential information? A restriction covering the entire United States for a local sales representative in Nashua would almost certainly be deemed unreasonable, while a restriction within a 50-mile radius of their former sales territory might be acceptable.
• 💼 Scope of Prohibited Activity: What specific activities or types of employment are restricted? The agreement should be narrowly tailored to prevent competition in the specific areas where the employee's prior role gives them an unfair advantage. Prohibiting an engineer from working "in any capacity" for a competitor is usually too broad, while restricting them from working "as an engineer developing similar products" might be acceptable.

The burden of proving that a non-compete is reasonable and protects a legitimate business interest rests squarely on the employer. If a court finds an agreement too broad, it may "blue-pencil" or modify it to make it reasonable, but it is not obligated to do so and may simply invalidate the entire agreement.

The Critical Role of Consideration in New Hampshire Non-Competes

Beyond legitimate interest and reasonableness, an enforceable non-compete agreement must be supported by "consideration." In simple terms, this means there must be an exchange of value between the employer and employee. This is a common point of contention and a key area where agreements can fail.

• 🤝 For New Hires: If a non-compete is presented as part of the initial offer of employment, the offer of employment itself (and the subsequent employment) is generally considered sufficient consideration.
• 💰 For Existing Employees: This is where it gets tricky. If an employer asks an already-employed individual to sign a non-compete after they have started working, continued employment alone is often NOT sufficient consideration in New Hampshire. The employee must receive something new and valuable in exchange for signing the agreement. This "new consideration" could be:
  • ⬆️ A promotion to a higher position.
  • 📈 A significant pay raise or bonus.
  • 🌟 Access to new, highly confidential information or specialized training not previously available.
  • 💼 A change in job duties or responsibilities that significantly enhances the employee's role and access to sensitive information.

Without adequate new consideration for an existing employee, the non-compete agreement is likely to be unenforceable. It's not enough for the employer to simply say, "sign this or you're fired."

The RSA 275:70 Notice Requirement: A Critical NH Specific

New Hampshire has a specific statute, RSA 275:70, that adds an extra layer of protection for employees regarding non-compete agreements. This statute is often overlooked by employers, leading to unenforceable agreements.

RSA 275:70 mandates that an employer must provide a copy of any non-compete agreement to a prospective employee no later than the time a job offer is made, or at least 10 business days before the employee's first day of employment, whichever is earlier. For example, if an offer is made on June 1st for a start date of June 15th, the non-compete must be provided with the offer on June 1st. If the start date is June 5th, the non-compete must still be provided by May 22nd (10 business days prior).

• 📝 For Employees: If you were not given the non-compete agreement within this timeframe, the agreement may be unenforceable, regardless of its reasonableness or consideration. Keep records of when you received documents.
• 🏢 For Employers: Strict adherence to this notice period is paramount. Failure to comply can render your non-compete agreement completely invalid, leaving your business interests unprotected. It's a procedural requirement that carries significant weight.

New Hampshire's Low-Wage Employee Protection: A Game Changer

In a significant development that took effect on January 1, 2023, New Hampshire amended RSA 275:70 to prohibit non-compete agreements for "low-wage employees." This is a major change designed to protect workers who typically have less bargaining power and whose roles are unlikely to pose a significant threat to an employer's legitimate business interests.

Under the amended law, a "low-wage employee" is defined as an employee who earns less than or is paid on an hourly basis at a rate equal to or less than 200% of the federal minimum wage. Given the current federal minimum wage of $7.25 per hour, this means any employee earning $14.50 per hour or less cannot be bound by a non-compete agreement in New Hampshire. This applies regardless of the type of job or access to information.

• 🚫 Examples of Low-Wage Roles: This would typically include fast-food workers, many retail associates, entry-level administrative staff, and certain service industry positions.
• 💡 Employer Takeaway: If your employee falls within this income bracket, any non-compete agreement you attempt to enforce against them is void and unenforceable under New Hampshire law.
• 🛡️ Employee Takeaway: If your hourly wage is $14.50 or less and your employer tries to enforce a non-compete, know that it is legally prohibited in New Hampshire, and you have strong grounds to challenge it.

Practical Scenarios & Examples

Scenario 1: An Enforceable Non-Compete

Imagine Sarah, a highly specialized software engineer at "Granite Tech Solutions" in Nashua. Sarah spent two years developing proprietary algorithms for Granite Tech's unique data analytics platform, gaining intimate knowledge of their trade secrets and future product roadmap. Upon her hiring, she signed a non-compete agreement that was provided with her job offer on May 1st for a June 1st start date. The agreement stipulated she could not work for a direct competitor on similar software development within a 50-mile radius of Nashua for 12 months after leaving Granite Tech. She was paid an annual salary of $120,000.

If Sarah leaves Granite Tech and immediately takes a job with a competitor, "White Mountain Data," located 10 miles away, doing the exact same kind of algorithm development, Granite Tech might have a strong case for enforcement. The agreement is likely enforceable because:

• ✅ Legitimate Interest: Protection of trade secrets (proprietary algorithms) and highly specialized knowledge.
• ✅ Reasonableness: 12 months is generally considered reasonable; 50-mile radius is tied to the business's operational area; the scope of prohibited activity is specific to her specialized role.
• ✅ Consideration: She signed it as part of her initial employment offer.
• ✅ RSA 275:70 Notice: She received it with her offer, well before the 10-business-day window.
• ✅ Not Low-Wage: Her salary of $120,000 (approx. $57/hour) is well above the low-wage threshold.

Granite Tech could seek an injunction to prevent Sarah from working for White Mountain Data in that capacity for the remainder of the 12-month period, potentially leading to immediate financial implications for Sarah if she cannot work or must seek a different type of job.

Scenario 2: An Unenforceable Non-Compete

Consider Mike, an administrative assistant at "Lakeside Legal Services" in Laconia, earning $18.00 per hour. Mike's primary duties involve scheduling appointments, filing, and managing office supplies. Six months into his employment, Lakeside Legal Services asked him to sign a non-compete agreement. This agreement prohibited him from working for any law firm within the entire state of New Hampshire for two years after leaving, and no new consideration (like a raise or promotion) was offered when he signed it. He was given the agreement to sign on the spot, with no prior notice.

If Mike leaves Lakeside and attempts to work for "Riverbend Law Group" in Concord, Lakeside would likely find it very difficult to enforce their non-compete. Here's why:

• ❌ Lack of Legitimate Interest: An administrative assistant typically doesn't have access to trade secrets or unique customer goodwill that requires such broad protection. His role is not specialized in a way that would pose a significant competitive threat.
• ❌ Unreasonable Scope: A two-year restriction covering the entire state for an admin assistant is almost certainly too broad in both duration and geographic area.
• ❌ Lack of Consideration: Mike was an existing employee and received no new consideration for signing the agreement.
• ❌ RSA 275:70 Violation: He was not given the required 10-business-day notice before signing the agreement after employment.
• ❌ Low-Wage (Potentially): While $18.00/hour is above $14.50, if the firm later tried to argue his duties were not specialized enough, or if his wage was closer to the threshold, it could be another factor in his favor. Even without being "low-wage," the other factors are strong enough to invalidate it.

A court would almost certainly rule this agreement unenforceable, allowing Mike to work at Riverbend Law Group without restriction.

Scenario 3: The Low-Wage Employee Case

Jamie works part-time at a coffee shop in Portsmouth, "Coastal Brews," earning $12.00 per hour. When hired, she was asked to sign a non-compete prohibiting her from working at any other coffee shop within 5 miles for six months. Even if Coastal Brews argued they had secret coffee bean suppliers or special brewing techniques (unlikely to be considered trade secrets for a general coffee shop), Jamie's non-compete would be unenforceable simply because of her wage.

• 💲 Wage Threshold: At $12.00/hour, Jamie is definitively a "low-wage employee" under New Hampshire law (below $14.50/hour).
• ⚖️ Statutory Ban: RSA 275:70 explicitly prohibits non-compete agreements for employees earning below 200% of the federal minimum wage.

Jamie could freely work for any other coffee shop in Portsmouth, and Coastal Brews would have no legal standing to enforce the non-compete against her.

For Employees: Navigating a Non-Compete Agreement

Before You Sign

• 👀 Read Carefully: Don't skim. Understand every clause: what activities are restricted, for how long, and in what geographic area.
• ❓ Ask Questions: If anything is unclear, ask your prospective employer for clarification in writing.
• 🧑‍⚖️ Seek Legal Counsel: This is paramount. An attorney specializing in employment law can review the agreement, explain its implications, identify potential issues (like lack of consideration or unreasonable terms), and advise you on your options before you commit. This minimal upfront investment can save you significant headaches and financial strain later.
• 📅 Note Dates: Record when you received the agreement relative to your job offer and start date. This is crucial for RSA 275:70 compliance.

When You Leave Your Job or After You've Left

• 📄 Review Your Agreement: Before accepting a new position, re-read your non-compete. Understand what you can and cannot do.
• 🗣️ Be Transparent with New Employer (Carefully): While you don't need to hand over your old non-compete, if you have one, you should generally inform your prospective new employer. They might be able to structure your role or duties to avoid violations, or at least be aware of the potential risks. However, be cautious not to reveal any confidential information from your previous employer.
• 🛑 Avoid Direct Violation: If your new role clearly violates an enforceable non-compete, reconsider or seek legal advice immediately. Moving forward could lead to costly litigation.
• 📞 Contact a Lawyer Immediately: If your former employer sends a cease and desist letter or threatens legal action, do not ignore it. Gather all relevant documents (your non-compete, offer letter, termination letter, job description, new job offer) and contact an employment law attorney specializing in non-competes.

Challenging Enforcement

If an employer attempts to enforce a non-compete against you, you may have strong grounds to challenge it based on the criteria discussed:

• ⚖️ Unreasonable Terms: The restrictions are too broad in time, scope, or geography.
• 🤷‍♀️ No Legitimate Business Interest: Your role didn't involve trade secrets, significant customer goodwill, or truly specialized training.
• 💸 Lack of Consideration: You were an existing employee and received nothing new of value for signing.
• 📜 RSA 275:70 Violation: You did not receive the agreement within the statutory notice period.
• 💵 Low-Wage Employee: Your earnings fall below 200% of the federal minimum wage (currently $14.50/hour).
• 😡 Undue Hardship: The agreement effectively prevents you from earning a living in your chosen profession.

Your attorney can help you determine the best strategy, which might involve negotiating with the former employer or, if necessary, defending against an injunction request in court.

For Employers: Crafting and Enforcing Effective Agreements

Drafting Best Practices

• 🎯 Tailor Agreements: Avoid generic, one-size-fits-all non-competes. Each agreement should be specific to the employee's role, access to information, and interaction with clients.
• ✨ Identify Legitimate Interests Clearly: Explicitly state what legitimate business interest the agreement is designed to protect (e.g., "to protect proprietary software code and confidential customer lists").
• 📏 Ensure Reasonableness: Keep duration and geographic scope as narrow as possible while still protecting your interests. Focus on specific activities rather than broad prohibitions.
• 🎁 Provide Adequate Consideration: For new hires, the offer of employment suffices. For existing employees, provide clear, new, and valuable consideration, and document it.
• 🗓️ Adhere to RSA 275:70 Notice: Provide the non-compete agreement with the job offer or at least 10 business days before the start date. Document the date the agreement was provided to the prospective employee.
• 🚫 Exclude Low-Wage Employees: Do not, under any circumstances, require low-wage employees (earning $14.50/hour or less) to sign non-compete agreements in New Hampshire.
• ✍️ Seek Legal Counsel: Have an experienced New Hampshire employment law attorney draft or review your non-compete agreements to ensure compliance with current state law and best practices.

Enforcement Actions and Remedies for Employers

If an employee violates an enforceable non-compete agreement, employers typically seek:

• ⚖️ Injunctive Relief: This is the most common and often the most critical remedy. An employer seeks a court order (a Temporary Restraining Order or a Preliminary Injunction) to immediately stop the former employee from working for a competitor or engaging in prohibited activities. The goal is to prevent immediate, irreparable harm to the business.
• 💸 Damages: While harder to prove, an employer can seek monetary damages for lost profits directly attributable to the former employee's breach of the non-compete. This might include lost sales or the cost of mitigating the damage caused by the breach.
• 📜 Attorney's Fees: Some non-compete agreements include provisions allowing the prevailing party to recover attorney's fees. If your agreement has this clause and you win, you might recover your legal costs.

Risks of Overly Broad Agreements for Employers

Drafting and attempting to enforce an overly broad or non-compliant non-compete agreement carries significant risks for employers:

• 🗑️ Unenforceability: The primary risk is that a court will declare the agreement invalid, leaving your business unprotected.
• 💰 Legal Costs: Even if you win, litigation is expensive. If you lose, you bear your own costs and potentially some of the employee's costs if the court deems your enforcement efforts vexatious or if the contract allows for fee shifting.
• 📉 Reputation Damage: Aggressive enforcement of questionable non-competes can harm your company's reputation and make it harder to attract top talent.

Conclusion: Knowledge is Your Best Defense

Non-compete agreements are powerful legal tools, but their enforcement in New Hampshire is highly nuanced and depends on a specific set of criteria. For employees, understanding your rights and the legal limitations on these agreements is your best defense against unfair restrictions on your career. For employers, meticulously drafting and properly implementing these agreements, with a keen eye on current NH law (especially RSA 275:70 and the low-wage employee exclusion), is vital for genuine protection of your business assets.

Whether you're an employee presented with a non-compete or an employer considering their use, the takeaway is clear: do not proceed without expert legal guidance. An experienced New Hampshire employment law attorney can provide tailored advice, help you navigate complex situations, and protect your interests effectively.

Disclaimer: This article provides general information about non-compete agreements under New Hampshire law for educational purposes only. It is not intended as, and should not be relied upon for, legal advice. Employment law is complex and fact-specific. For advice specific to your situation, you should consult with a qualified attorney in New Hampshire.