Make a Rhode Island Non-Compete Agreement

Applicable State Laws - R.I. Gen. Laws 28-59-1-3, 5-37-33 Rhode Island Noncompetition Agreement Act 

Effective January 15, 2020, a new law known as the Rhode Island Noncompetition Agreement Act protects trade secrets, confidential information, customer lists, goodwill, and special training. All non-competition agreements must be reasonable in nature, including reasonable in their geographic area and time restriction.

However, there are multiple exemptions. Non-compete agreements cannot be used with:

• Physicians in the healthcare industry;
• Employees who are 18 years old or younger;
• Students who are short-term or interns (including graduate students);
• Fair Labor Standards Act nonexempt employees and other low-wage employees who earn no more than two and a half (2.5) times less than the federal poverty level ($31,225 for one individual plus $11,050 for each additional person in the household). The poverty guidelines are based on a worker's regular salary and do not include additional pay for overtime, holidays, etc. So, the average annual earnings of an employee must be above the federal poverty level. Therefore, minimum wage workers and low-wage workers generally would not qualify to sign this type of agreement.

A non-compete agreement must be reasonable in its time and geographic restrictions. However, given its size, business owners should consult with a law firm to determine a reasonable geographic reach in New England. This helps ensure that public policy is not violated if a former employee must be sued.

Protect your Rhode Island business by also using a Rhode Island non-disclosure agreement form. Download a Rhode Island non-disclosure agreement form now!

How to Write a Rhode Island Non-Compete Agreement

To write a Rhode Island non-compete agreement, first review the Rhode Island Noncompetition Agreement Act and its restrictions. Include the following clauses:

• Purpose. This clause explains the reason for the non-compete: to protect the legitimate interests of the business. It also identifies the parties and their roles and provides the effective date of the agreement.
• Non-compete. This clause states the restrictions the new employee is obligated to honor. It includes the time, geographic area, general and specific business practices, working for general or specific competitors, and non-solicitation of customers, clients, and employees.
• Time period. This clause explains when the time restriction begins: either when the employment relationship begins or when it is terminated.
• Purchase option. This clause explains whether the employer will allow the employee to buy out the contract. If so, the amount that must be paid is listed in this clause.
• Jurisdiction. This clause explains that Rhode Island laws will be used to govern the agreement.
• Confidential information. This clause defines "confidential information" as any and all technical and non-technical information provided by your business including, and not limited to, any data or other proprietary information related to products, inventions, plans, methods, processes, developmental or experimental products, intellectual property, software, databases, customer lists, vendor lists, supplier lists, marketing information, reports, business information, financial information, or other information about your business or any of your customers, clients, or consultants that is made available to the employee under the terms of the agreement.
• Permitted disclosure. This clause explains when disclosure of certain confidential information is permitted. Common examples include when the business provides written consent to release specific information to the public, when the employee discovers information on their own and there isn't a breach of another party, or when information is made public without any fault of the employee.
• Confidentiality. This clause states that the employee understands that the information they may access is confidential. They agree that they will not directly or indirectly communicate the information to another party unless they receive written permission from their employer. They also state that they will not use the information for any reason except to further the business unless they receive written permission from their employer.
• Consultants and employees bound. This clause states that this agreement binds both consultants and employees to keep confidential information in the strictest of confidence. It also states that they are on a need-to-know basis when it comes to accessing the information.
• Return of materials. This clause states that when the relationship between the parties is terminated or upon request of the employer, the employee must promptly return any and all documents and other tangible materials that represent the confidential information of the business and existing copies. The clause also states that your business will inform the employee of any loss of confidential information.
• Remedies. This clause explains the legal remedies the employer may be entitled to pursue under state law if the employee does not uphold their obligations as listed in the non-compete agreement. Examples include the recovery of court costs and reasonable attorney fees, the award by a Rhode Island court of a temporary restraining order or preliminary injunction against the unauthorized use of information, as well as any other available remedies under Rhode Island law or as a matter of equity.
• Choice of law. This clause states that the parties choose Rhode Island law to govern their agreement and any dispute that may arise from the agreement.
• Entire agreement. This is the final clause of the non-compete. It states that the entire agreement may only be amended in writing, but only if the parties sign the amendment.

Both the employer and the employee must sign and print their names. The signatures should be dated. Finally, each party should keep a copy of the completed agreement.