Senate OKs LaMountain bill that would prohibit noncompetition agreements

STATE HOUSE — The Senate today passed legislation introduced by Sen. Matthew L. LaMountain (D-Dist. 31, Warwick, Cranston) that would ban noncompetition agreements.

The bill (2024-S 2436) would prohibit the agreements except for those between a seller and buyer of a business. A noncompetition agreement is a legal accord or clause in a contract specifying that an employee must not enter into competition with an employer after the employment period is over.

“This is a widespread and unfair practice that suppresses wages, hampers innovation and blocks entrepreneurs from starting new businesses,” said Senator LaMountain. “The Federal Trade Commission estimates that a ban on noncompete agreements could increase wages by nearly $300 billion a year by allowing workers to pursue better opportunities.”

Noncompetition agreements are signed when the relationship between employer and employee begins. They give the employer control over specific actions of the employee —even after that relationship ends.

According to the FTC, companies use these agreements for workers across industries and job levels, from hairstylists and warehouse workers to doctors and business executives. In many cases, employers use their outsized bargaining power to coerce workers into signing these contracts. Noncompetition agreements harm competition in U.S. labor markets by blocking workers from pursuing better opportunities and by preventing employers from hiring the best available talent.

The legislation would not apply to agreements between employers and employees that prohibit sharing information on trade secrets or customer lists.

The measure now moves to the House of Representatives, where similar legislation (2024-H 8059) has been introduced by Rep. Jacquelyn M. Baginski (D-Dist. 17, Cranston).