Hawaii bans noncompetes for tech employees
Blog Post
Hawaii, a state that has been historically favorable towards noncompete agreements, has reversed course and enacted a sweeping ban on noncompetes for employees of technology companies.
Act 158, which took effective July 1, 2015, states:
Hawaii joins a small handful of states (most notably California) that prohibit or sharply limit employee noncompete agreements. Hawaii’s law is unique, however, in that it is limited to tech companies. The statute defines a “technology business” as one that “derives the majority of its gross income from the sale or license of products or services resulting from its software development or information technology development, or both.” Other industries – most notably tourism, Hawaii’s biggest industry, as a recent Forbes article points out – are not affected by the new law.
In addition to non-compete clauses, the new law also prohibits “non-solicit” clauses for tech employees, which are defined as “a clause in an employment contract that prohibits an employee from soliciting employees of the employer after leaving employment with the employer.” Importantly, the statute does not appear to limit agreements requiring non-solicitation of an employer’s customers.
Employee noncompete agreements continue to be valid and enforceable in the vast majority of jurisdictions, though the rules vary by state.
Act 158, which took effective July 1, 2015, states:
“[I]t shall be prohibited to include a noncompete clause or a nonsolicit clause in any employment contract relating to an employee of a technology business. The clause shall be void and of no force and effect.”
Hawaii joins a small handful of states (most notably California) that prohibit or sharply limit employee noncompete agreements. Hawaii’s law is unique, however, in that it is limited to tech companies. The statute defines a “technology business” as one that “derives the majority of its gross income from the sale or license of products or services resulting from its software development or information technology development, or both.” Other industries – most notably tourism, Hawaii’s biggest industry, as a recent Forbes article points out – are not affected by the new law.
In addition to non-compete clauses, the new law also prohibits “non-solicit” clauses for tech employees, which are defined as “a clause in an employment contract that prohibits an employee from soliciting employees of the employer after leaving employment with the employer.” Importantly, the statute does not appear to limit agreements requiring non-solicitation of an employer’s customers.
Employee noncompete agreements continue to be valid and enforceable in the vast majority of jurisdictions, though the rules vary by state.