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Can I require employees to sign non-compete agreements in Rhode Island? What are the requirements?

Non-Compete Agreements in Rhode Island

Non-compete agreements are generally enforceable in Rhode Island, subject to certain requirements [1.2].

Requirements for Non-Compete Agreements in Rhode Island

Rhode Island General Laws § 28-58-1 et seq. governs non-compete agreements in Rhode Island. To be enforceable, a non-compete agreement must meet the following requirements:

  1. Consideration: The agreement must be supported by consideration, which means that the employee must receive something of value in exchange for agreeing to the non-compete [1.2].
  2. Reasonable Scope: The non-compete agreement must be reasonable in scope. This means that it must be no broader than necessary to protect the employer’s legitimate business interests, such as trade secrets, confidential information, or customer goodwill [1.2].
  3. Limited Duration: The non-compete agreement must be limited in duration. Rhode Island courts have generally held that a non-compete period of six months or less is reasonable, but longer periods may be enforceable in certain circumstances [1.2].
  4. Geographic Limitations: The non-compete agreement must be limited in geographic scope. The agreement must be no broader than necessary to protect the employer’s legitimate business interests [1.2].
  5. Notice: The employer must provide the employee with notice of the non-compete agreement at the time of hiring or at least ten days before the agreement is to be effective [1.2].

Exceptions

Rhode Island law provides certain exceptions to the enforceability of non-compete agreements. For example, non-compete agreements are not enforceable against employees who are terminated without cause or laid off [1.2].

Co-Employment Relationship

It is important to note that if the employer is using a professional employer organization (PEO) to manage its employees, the co-employment relationship between the client and the PEO, and between each co-employer and each covered employee, shall be governed by the professional employer agreement [2.1].

Unemployment Compensation Insurance

For purposes of unemployment compensation insurance, the client company shall be considered to be an employer of its covered employees under any agreement with a professional employer organization established under Rhode Island law [2.3].

Conclusion

In summary, non-compete agreements are generally enforceable in Rhode Island, subject to certain requirements. To be enforceable, the agreement must be supported by consideration, be reasonable in scope and duration, be limited in geographic scope, and the employee must receive notice of the agreement. There are also exceptions to the enforceability of non-compete agreements. If the employer is using a professional employer organization, the co-employment relationship shall be governed by the professional employer agreement. For purposes of unemployment compensation insurance, the client company shall be considered to be an employer of its covered employees under any agreement with a professional employer organization established under Rhode Island law. [1.2][2.1][2.3]

Source(s):
Jurisdiction

Rhode Island