Business & Economy

Lawmakers seeking to limit non-compete clauses

Rep. Emilie Kornheiser, D-Brattleboro, speaks as the House Committee on Commerce and Economic Development considers a bill Tuesday dealing with anti-compete employment contracts. Photo by Glenn Russell/VTDigger

Lawmakers are taking another run this year at a bill that would limit how much employers can control what their workers do when they leave for another job.

The House Commerce Committee took testimony on H.1 last year, seeking to balance the needs of workers who didn’t want to be unfairly restricted with those of business owners who didn’t want their trade secrets, customer lists or other property to be used by a competitor.

“We felt like at the end of the session we had come to a point where people were in agreement generally as close as we were going to get,” Rep. Charles Kimbell, D-Woodstock, said Tuesday. “We were trying to satisfy everyone, and maybe in the process satisfy no one.”

The House Commerce Committee, of which Kimbell is ranking member, will take up the matter again Jan. 17. 

Several states are examining legislation to limit non-compete agreements. Workers have complained that the agreements effectively block them from seeking a new job in their area. 

“Non-compete agreements can be reasonably and fairly used, especially in business sales and can be critical protection for a company when dealing with a high-level employee or those who have access to sensitive or secret information which could unfairly damage the company if the employee were to go to a competitor,” said William Towle, a South Burlington employment lawyer who has represented workers and employers on the issue of non-competes.

“But non-compete agreements can be unfairly used on rank-and-file employees who the company does not reasonably or fairly need to restrict from future employment,” said Towle.

Lawmakers considering the measure last year heard from groups like the Vermont Bankers Association and from individuals who said their careers had been damaged by non-compete agreements.

Alexandra Vitale was threatened with a lawsuit last year after she left her position as a regional product manager at Sojourn Bicycling & Active Vacations and took a job at Discovery Bicycle Tours in Woodstock.

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Sojourn’s lawyer wrote to Discovery’s owners, Scott and Thistle Cone, demanding that they immediately fire Vitale and return any trade secrets or proprietary information.

“As Regional Product Manager, Ms. Vitale was directly involved with highly sensitive decision making within the company and Ms. Vitale had direct access to our company’s trade secrets and the company’s protected customer lists,” said Sojourn owner Raja Mukherjee in an email. “Sojourn is in a highly competitive business and Sojourn therefore asked her to sign a non-competition and non-solicitation agreement at the time of hire. She did so voluntarily.

“We wish her no personal ill will, but her decision to leave Sojourn and work directly for one of our competitors, has left us with little choice but to enforce the agreement she made with us in order to protect Sojourn and the livelihood of Sojourn’s  employees,” Mukherjee wrote.

Vitale said the contract she was asked to sign was different from the information she was given when she was offered the job. And she added that there wasn’t any proprietary information for her to take with her. Both companies have that information on their websites, she said. 

Alexandra Vitale, a bike tour organizer who is being threatened with a lawsuit by her former employer. Supplied photo

“It’s just unusual because it’s vacations, and it’s usually not enforced in this industry,” said Vitale, who makes $50,000 annually. 

Cases like Vitale’s are the reason why lawmakers should get involved, said Rep. Emilie Kornheiser, D-Brattleboro. She said more and more lower-wage employees are being inappropriately limited by non-competes.

“I’ve had dozens and dozens of people who are prevented from working, or feel trapped in their jobs by non-competes that they agreed to because they were desperate,” said Kornheiser. She said she’s heard from chimney sweeps, computer programmers and restaurant employees.

“Most of the folks who contacted me don’t feel safe testifying for fear of retribution. It makes it hard to have a dynamic conversation in committee.”

Non-compete agreements are more commonly used with high-level employees who have strategic information that is unique to their employer, said Towle. The agreements are common in the banking industry, for example, he said. Towle emphasized that his comments referred to proposed legislation, and he was not referring to specific cases.

“It needs some guidance so non-competes can be fairly and reasonably applied,” said Towle. “It’s typically highly paid professional people or people who are handling very sensitive commercial information and it needs to be clear that it doesn’t apply to your average person with an average job.”

The Vermont Technology Alliance supports the use of non-compete agreements, said Jeff Couture, the group’s executive director, although they are uncommon among members of the alliance. 

“However, there are some instances where these agreements are used and make sense, especially during start-up and early growth stages where there are unique skills involved,” Couture said. “While we support an effort to prevent the abuse of non-competition agreements, an outright ban could present problems for companies that use them appropriately.”

Chris D’Elia, the president of the Vermont Bankers Association, also wants to make sure non-competes aren’t banned altogether.

“We recommend codifying existing caselaw and setting an income threshold that below a certain level, a non-compete would not be allowed,” he said. “We also suggest staying away from vague language that could lead to litigation.”

That vague language is common and is the primary cause of problems in non-compete agreements, said Towle. He thinks clearing that up would remove a lot of the problems he sees.

“Here in Vermont, the law that’s out there is not bad,” he said. “It’s just ambiguous in a lot of areas for most workers, and so some sort of statutory guidance from the Legislature would be great for both sides.”

Clarification: An earlier version of this story did not specifically state that lawyer Will Towle’s comments referred only to proposed legislation. Towle was not referring in the story to any specific legal case.

Correction: Rep. Charles Kimbell is ranking member of the House Commerce Committee, not vice chair. Also, Jeff Couture is executive director of the Vermont Technology Alliance, not the Vermont Technology Council.

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