A New Hampshire non-compete agreement prohibits employees from working for or starting a business that competes with their former employer. Business owners will often use these agreements to protect their company from the misappropriation of trade secrets and the solicitation of their customers/clients. A non-compete agreement must be drafted in accordance with state statutes and common law for the restrictive provisions therein to be deemed enforceable. While the contracts can be used in many fields, NCAs can’t be applied to attorneys, nurses, physicians, or podiatrists.
Non-competes are enforceable in New Hampshire if the courts find the restrictions reasonable. New Hampshire courts will determine reasonableness based on the three-pronged test, which uses the following factors to decide the validity of a restrictive covenant related to an employment contract:
- Whether the limitations exceed what is necessary to protect the employer’s legitimate business interests;
- Whether the employee faces disproportionate hardship as a result of the restrictions; and
- Whether the restrictions harm public interest.
- Legitimate business interests. Non-compete agreements may be enforced to protect an employer’s business interests, including trade secrets, confidential information, the employer’s development of a positive image, and the employee’s influence over customers and contacts made during employment.
- Sale of a business. Restrictive covenants made due to the sale of a business are permitted and are enforced with more flexibility than agreements made between employee and employer.
- Low-wage employees. Any non-compete agreement between an employer and a low-wage employee is prohibited. New Hampshire law defines low-wage employees as earning “an hourly rate less than or equal to 200 percent of the federal minimum wage.”
- Lawyers. Attorneys are not allowed to enter into any agreement that would restrict their ability to practice law, except as it applies to retirement benefits.
- Nurses. As of June 25, 2018, employers may not restrict nurses’ ability to practice in another geographical region for any duration. This law is for new contracts only and does not affect any agreements put into place before the aforementioned date.
- Physicians. Any non-compete signed by a physician on or after August 5, 2016, shall be considered void. Any agreements made before August 5, 2016, will not be affected.
- Podiatrists. Podiatrists are not permitted to enter any agreement affecting their ability to carry out their profession. This law came into effect on June 25, 2018, and does not affect prior arrangements.
New Hampshire courts look to the three-pronged test to determine the fairness of the non-compete period, as there are no state statutes governing the duration of these agreements.
In the case of Concord Orthopaedics Prof Assoc. v. Forbes, the trial court determined that any non-compete should only last long enough for the employee’s replacement to “have a reasonable opportunity to demonstrate their effectiveness to customers.”
In another case, a two (2) year duration was upheld because the employee was employed for several years, and the court determined that duration was enough for the public to disassociate the employee from the employer’s business and for the replacements to establish themselves.
More extended restrictions have also been upheld but are generally less likely to be enforced. The Supreme Court of New Hampshire upheld a five (5) year covenant in the Moore v. Dover Veterinary Hospital case to protect the hospital’s “goodwill.”
New Hampshire courts will consider what is necessary to protect the legitimate business interests of an employer when determining the reasonableness of geographical restrictions.
In one case, the court upheld a twenty-five-mile restriction imposed on a physician to protect the former employer from losing patients.
In another case, it was determined that the radius of the limitations placed on the former employee was too broad as it went beyond their sales territory and did not threaten the employer’s legitimate business interests.
New Hampshire courts operate on a case-by-case basis in determining what constitutes sufficient consideration to support a non-compete agreement.
In the case of Smith v. Foster, the court concluded that continued employment is sufficient consideration for an enforceable non-compete.
Another court held that a 24-month restriction was reasonable and had sufficient consideration because the executive employee had a 12-month severance package and a portion of an incentive bonus.
It should be noted that all newly hired employees must be presented with a copy of any non-compete agreement before the acceptance of a job offer for the contract to be valid.
- Technical Aid Corp. v. Allen, 134 N.H. 1, 591 A.2d 262 (N.H. 1991)
- Syncom Indus. v. Wood, 155 N.H. 73, 920 A.2d 1178 (N.H. 2007)
- Centorr-Vacuum Industries v. Lavoie, 135 N.H. 651, 654, 609 A.2d 1213, 1215 (N.H. 1992)
- N.H. RSA § 275:70-a
- NH R RPC Rule 5.6
- N.H. RSA § 326-B:45-a
- N.H. RSA 329:31-a
- N.H. RSA 315:18
- Concord Orthopaedics Prof. Assoc. v. Forbes, 142 N.H. 440, 702 A.2d 1273 (N.H. 1997)
- ACAS Acquisitions Inc., 923 A.2d at 1088-89, 1094
- Moore v. Dover Veterinary Hosp., Inc., 116 N.H. 680, 681, 367 A.2d at 1048 (N.H. 1976)
- Smith v. Foster, 119 N.H. 679, 406 A.2d 1310 (N.H. 1979)
- N.H. RSA § 275:70
- Merrimack Valley Wood Prods. v. Near, 152 N.H. 192, 876 A.2d at 764 (N.H. 2005)
New Hampshire Non-Disclosure Agreement – Employees that sign this agreement promise to keep confidential information secret from unauthorized parties.
New Hampshire Non-Solicitation Agreement – A contract that prohibits an employee or entity from soliciting a business owner’s clientele and/or employees.