There are big changes ahead in the Maine employment market, though you may not have heard about it. Thursday, September 19, 2019 was a landmark day for Maine as many new laws took effect. In the face of other hot topics, Maine employment laws aren’t getting much attention, but they should.
Last Thursday, Maine’s new non-compete law hit the books and employers should be aware of what that means for them. On June 28, 2019, Governor Mills signed “An Act to Promote Keeping Workers in Maine”(L.C. 733). This Act provides specific rules for Employers who may wish to limit employee future actions in the same industry or profession for the sake of business competition and trade secrets.
Historically, Maine has played it loose when it comes to non-compete agreements, providing standards of “reasonableness” as opposed to clear rules for employers to follow. Thus, enforcing a non-compete agreement in Maine could, at times, feel like a bit of a guessing game. The new law took effect September 19th providing some clear cut rules for employers to follow. These changes have taken some of the guesswork out of the game, for employers and employees alike.
First, the new law explicitly carves out a prohibition of non-compete agreements for certain employees. An employer may not enter into a non-compete agreement with an employee if that employee earns wages “at or below 400% of the federal poverty level”, or $49,960 in 2019. This is a big change that could impact a lot of Maine employees. Practically, for those employees, it means increased employment mobility within particular industries and geographic regions.
Additionally, the law implements notice requirements for employers. Employers must disclose to a potential employee whether acceptance of a non-compete agreement is a requirement of the position. The employer must give this notice in advance of the job offer, and provide the employee at least three days to look over the agreement before requiring a signature. Further, the terms of the non-compete agreement are not immediately effective for most employees. Instead, they do not take effect until one year after employment, or six months after the agreement is signed. Lastly, employers may not enter into no-poach agreements with each other.
What does this mean for employers? Non-compete agreements cannot be afterthoughts. They must be planned, refined and intended to protect the employer’s trade secrets and confidential information, but no more than reasonably necessary to protect a legitimate business interest.
Why do employers need to pay attention? The new law also levies a minimum $5,000 penalty to employers who fail to abide by these new requirements. In a state where small business plays a big role, this penalty could be a hefty blow. This new law only applies to non-compete agreements entered on or after September 19th, 2019. All employers should take a close look at their hiring practices with an eye to these new requirements. Employers who have questions on the Act’s restrictions should contact their attorney to ensure they are in compliance with this new Maine law.
Danelle Milone is an attorney with Drummond & Drummond, LLP. She practices employment law, as well as other general litigation matters.