Bill Text: IA SF304 | 2023-2024 | 90th General Assembly | Introduced
Bill Title: A bill for an act relating to prohibitions on noncompete covenants and including applicability provisions.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2023-02-21 - Subcommittee: Driscoll, Boulton, and J. Taylor. S.J. 371. [SF304 Detail]
Download: Iowa-2023-SF304-Introduced.html
Senate
File
304
-
Introduced
SENATE
FILE
304
BY
BOULTON
A
BILL
FOR
An
Act
relating
to
prohibitions
on
noncompete
covenants
and
1
including
applicability
provisions.
2
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
3
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Section
1.
Section
84A.5,
subsection
4,
Code
2023,
is
1
amended
to
read
as
follows:
2
4.
The
division
of
labor
services
is
responsible
for
the
3
administration
of
the
laws
of
this
state
under
chapters
88
,
4
88A
,
88B
,
89
,
89A
,
89B
,
90A
,
91
,
91A
,
91C
,
91D
,
91E
,
92
,
and
5
94A
,
and
95,
and
sections
73A.21
and
85.68
.
The
executive
head
6
of
the
division
is
the
labor
commissioner,
appointed
pursuant
7
to
section
91.2
.
8
Sec.
2.
Section
91.4,
subsection
2,
Code
2023,
is
amended
9
to
read
as
follows:
10
2.
The
director
of
the
department
of
workforce
development,
11
in
consultation
with
the
labor
commissioner,
shall,
at
the
12
time
provided
by
law,
make
an
annual
report
to
the
governor
13
setting
forth
in
appropriate
form
the
business
and
expense
of
14
the
division
of
labor
services
for
the
preceding
year,
the
15
number
of
remedial
actions
taken
under
chapter
89A
,
the
number
16
of
disputes
or
violations
processed
by
the
division
and
the
17
disposition
of
the
disputes
or
violations,
and
other
matters
18
pertaining
to
the
division
which
are
of
public
interest,
19
together
with
recommendations
for
change
or
amendment
of
the
20
laws
in
this
chapter
and
chapters
88
,
88A
,
88B
,
89
,
89A
,
89B
,
21
90A
,
91A
,
91C
,
91D
,
91E
,
92
,
and
94A
,
and
95,
and
section
22
85.68
,
and
the
recommendations,
if
any,
shall
be
transmitted
23
by
the
governor
to
the
first
general
assembly
in
session
after
24
the
report
is
filed.
25
Sec.
3.
NEW
SECTION
.
95.1
Definitions.
26
For
purposes
of
this
chapter:
27
1.
“Commissioner”
means
the
labor
commissioner
appointed
28
pursuant
to
section
91.2
29
2.
“Covenant
not
to
solicit”
means
an
agreement
that
is
30
entered
into
between
an
employer
and
an
employee
that
does
any
31
of
the
following:
32
a.
Restricts
the
employee
from
soliciting
for
employment
the
33
employer’s
employees.
34
b.
Restricts
the
employee
from
soliciting,
for
the
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purpose
of
selling
products
or
services
of
any
kind
to,
or
1
from
interfering
with
the
employer’s
relationships
with,
the
2
employer’s
clients,
prospective
clients,
vendors,
prospective
3
vendors,
suppliers,
prospective
suppliers,
or
other
business
4
relationships.
5
3.
“Earnings”
means
the
compensation,
including
earned
6
salary,
earned
bonuses,
earned
commissions,
or
any
other
form
7
of
taxable
compensation,
reflected
or
that
is
expected
to
8
be
reflected
as
wages,
tips,
and
other
compensation
on
the
9
employee’s
internal
revenue
service
form
W-2
plus
any
elective
10
deferrals
not
reflected
as
wages,
tips,
and
other
compensation
11
on
the
employee’s
internal
revenue
service
form
W-2,
such
as,
12
without
limitation,
employee
contributions
to
a
401(k)
plan,
a
13
403(b)
plan,
a
flexible
spending
account,
or
a
health
savings
14
account,
or
commuter
benefit-related
deductions.
15
4.
a.
“Noncompete
covenant”
means
an
agreement
between
an
16
employer
and
an
employee
that
is
entered
into
that
restricts
17
the
employee
from
performing:
18
(1)
Any
work
for
another
employer
for
a
specific
period
of
19
time.
20
(2)
Any
work
in
a
specified
geographical
area.
21
(3)
Work
for
another
employer
that
is
similar
to
any
22
employee’s
work
for
the
employer
included
as
a
party
to
the
23
agreement.
24
b.
“Noncompete
covenant”
also
means
an
agreement
between
25
an
employer
and
an
employee
that
by
its
terms
imposes
adverse
26
financial
consequences
on
the
former
employee
if
the
employee
27
engages
in
competitive
activities
after
the
termination
of
the
28
employee’s
employment
with
the
employer.
29
c.
“Noncompete
covenant”
does
not
include
any
of
the
30
following:
31
(1)
A
covenant
not
to
solicit.
32
(2)
A
confidentiality
agreement
or
covenant.
33
(3)
A
covenant
or
agreement
prohibiting
use
or
disclosure
34
of
trade
secrets
or
inventions.
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(4)
Invention
assignment
agreements
or
covenants.
1
Sec.
4.
NEW
SECTION
.
95.2
Impermissible
noncompete
2
covenants.
3
The
following
noncompete
covenants
are
void
and
violate
this
4
chapter:
5
1.
A
noncompete
covenant
within
an
employment
agreement
6
or
contract
in
which
an
employee’s
earnings
are
less
than
one
7
hundred
fifty
percent
of
the
state
or
federal
minimum
wage.
8
2.
A
noncompete
covenant
with
an
employee
unless
the
9
employer
can
show
beyond
a
preponderance
of
the
evidence
that
10
there
is
a
clear
and
inherent
risk
of
unfair
competition
11
absent
the
noncompete
covenant
and
the
noncompete
covenant
12
was
narrowly
tailored
to
address
the
risk
in
restrictions
to
13
geographic
area
and
duration
of
the
noncompete
covenant.
14
Sec.
5.
NEW
SECTION
.
95.3
Exceptions.
15
1.
A
covenant
or
agreement
entered
into
by
a
person
that
16
sells
the
goodwill
of
a
business
and
the
person’s
partners,
17
members,
or
shareholders
may
agree
with
the
buyer
to
refrain
18
from
carrying
on
a
similar
business
within
a
reasonable
19
geographic
area
and
for
a
reasonable
length
of
time,
if
the
20
buyer
or
any
person
deriving
title
to
the
goodwill
from
the
21
buyer
carries
on
a
like
business
in
that
area.
22
2.
A
covenant
or
agreement
entered
into
by
partners,
23
members,
or
shareholders,
upon
or
in
anticipation
of
a
24
dissolution
of
a
partnership,
limited
liability
company,
or
25
corporation;
upon
or
in
anticipation
of
a
dissociation
of
a
26
partner
or
member;
or
as
part
of
an
agreement
addressing
the
27
dissociation
or
sale
of
a
partner,
member,
or
shareholder's
28
ownership
interest,
may
agree
that
all
or
any
number
of
them
29
will
not
carry
on
a
similar
business
within
a
reasonable
30
geographic
area
where
the
partnership,
limited
liability
31
company,
or
corporation
business
has
been
transacted,
or
within
32
a
specified
part
of
the
area.
33
Sec.
6.
NEW
SECTION
.
95.4
Remedies.
34
1.
In
addition
to
any
remedies
available
under
any
agreement
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between
the
employer
and
the
employee
or
under
any
other
1
statute,
in
a
civil
action,
if
an
employer
is
found
to
have
2
violated
this
chapter,
the
employee
shall
recover
from
the
3
employer
all
reasonable
attorney
fees
regarding
an
attempt
to
4
enforce
a
noncompete
covenant,
court
costs,
lost
wages,
and
5
at
the
discretion
of
the
court,
liquidated
damages
of
up
to
6
triple
the
amount
of
lost
wages
for
willful
violations
of
this
7
chapter.
8
2.
An
employer
found
to
have
violated
this
chapter
may
be
9
fined
a
five
thousand
dollar
civil
penalty
per
violation
by
the
10
commissioner.
Penalties
shall
be
paid
to
the
commissioner
and
11
transferred
to
the
general
fund.
12
Sec.
7.
NEW
SECTION
.
95.5
Rules.
13
The
commissioner
shall
adopt
rules
pursuant
to
chapter
17A
14
to
administer
and
enforce
this
chapter.
15
Sec.
8.
APPLICABILITY.
This
Act
applies
to
covenants
not
16
to
compete
entered
into
on
or
after
the
effective
date
of
this
17
Act.
18
EXPLANATION
19
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
20
the
explanation’s
substance
by
the
members
of
the
general
assembly.
21
This
bill
relates
to
noncompete
covenants,
as
defined
in
the
22
bill,
contained
within
employment
contracts
and
provisions
that
23
are
prohibited
and
void.
24
The
bill
provides
that
if
a
person
makes
less
than
150
25
percent
of
the
minimum
wage,
a
noncompete
covenant
is
26
unenforceable
and
violates
the
bill.
The
bill
provides
27
that
a
noncompete
covenant
with
a
non-low-wage
employee
is
28
unenforceable
and
violates
the
bill
unless
the
employer
can
29
show
that
the
noncompete
covenant
is
necessary
due
to
a
clear
30
and
inherent
risk
of
unfair
competition
and
the
noncompete
31
covenant
was
narrowly
tailored
to
mitigate
the
risk.
The
bill
32
includes
exceptions
to
these
provisions.
33
A
prevailing
employee
is
entitled
to
recover
reasonable
34
attorney
fees,
court
costs,
lost
wages,
and
at
the
discretion
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of
the
court,
liquidated
damages
of
up
to
triple
the
amount
of
1
lost
wages
for
willful
violations
of
the
bill.
An
employer
2
found
to
be
in
violation
of
the
bill
is
subject
to
a
$5,000
3
penalty
per
violation
payable
to
the
labor
commissioner
for
4
deposit
in
the
general
fund.
5
The
bill
applies
to
covenants
not
to
compete
entered
into
on
6
or
after
the
effective
date
of
the
bill.
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