Bill Text: IA SSB1031 | 2021-2022 | 89th General Assembly | Introduced
Bill Title: A bill for an act concerning the circumstances under which employers can enter into noncompete agreements with employees and including applicability provisions.
Spectrum: Committee Bill
Status: (Introduced - Dead) 2021-01-12 - Subcommittee: Taylor, J., Boulton, and Schultz. [SSB1031 Detail]
Download: Iowa-2021-SSB1031-Introduced.html
Senate
Study
Bill
1031
-
Introduced
SENATE
FILE
_____
BY
(PROPOSED
COMMITTEE
ON
LABOR
AND
BUSINESS
RELATIONS
BILL
BY
CHAIRPERSON
WHITING)
A
BILL
FOR
An
Act
concerning
the
circumstances
under
which
employers
1
can
enter
into
noncompete
agreements
with
employees
and
2
including
applicability
provisions.
3
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
4
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Section
1.
NEW
SECTION
.
94.1
Definitions.
1
For
purposes
of
this
chapter,
unless
the
context
otherwise
2
requires:
3
1.
“Bona
fide
advancement”
means
an
increase
or
enhancement
4
in
job
duties
or
responsibilities
accompanied
by
an
increase
or
5
enhancement
of
an
employee’s
pay
or
benefits
and
a
modification
6
of
the
employee’s
job
title.
7
2.
“Confidentiality
agreement”
means
an
agreement
between
8
an
employer
and
employee
by
which
an
employee
agrees
not
to
9
disclose
specified
information
designated
by
the
employer
as
10
confidential.
11
3.
“Earnings”
means
the
compensation
reflected
on
box
one
12
of
the
employee’s
United
States
internal
revenue
service
form
13
W-2
that
is
paid
to
an
employee
over
the
prior
year,
or
the
14
portion
thereof
for
which
the
employee
was
employed,
annualized
15
and
calculated
as
of
the
earlier
of
the
date
enforcement
of
the
16
noncompete
agreement
is
sought
by
the
employer
or
the
date
of
17
the
employee’s
separation
from
employment.
18
4.
“Employee”
means
a
natural
person
who
is
employed
in
this
19
state
for
wages
by
an
employer.
20
5.
“Employer”
means
a
person,
as
defined
in
chapter
4,
who
21
in
this
state
employs
for
wages
a
natural
person.
22
6.
“Franchisee”
and
“franchisor”
mean
the
same
as
defined
23
in
section
523H.1.
24
7.
“Noncompete
agreement”
includes
every
written
or
oral
25
covenant,
agreement,
or
contract
by
which
an
employee
is
26
prohibited
or
restrained
from
engaging
in
a
lawful
profession,
27
trade,
or
business
of
any
kind.
“Noncompete
agreement”
does
not
28
include
any
of
the
following:
29
a.
A
nonsolicitation
agreement.
30
b.
A
confidentiality
agreement.
31
c.
An
agreement
prohibiting
use
or
disclosure
of
trade
32
secrets
or
inventions.
33
8.
“Nonsolicitation
agreement”
means
an
agreement
between
34
an
employer
and
employee
that
prohibits
solicitation
by
35
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an
employee,
upon
termination
of
employment,
of
any
of
the
1
following:
2
a.
An
employee
of
the
employer
to
leave
employment
by
the
3
employer.
4
b.
A
customer
of
the
employer
to
cease
or
reduce
the
extent
5
to
which
the
customer
does
business
with
the
employer.
6
Sec.
2.
NEW
SECTION
.
94.2
Limitations
on
noncompete
7
agreements.
8
1.
A
noncompete
agreement
entered
into
between
an
employer
9
and
an
employee
on
or
after
the
effective
date
of
this
Act
10
is
void
and
unenforceable
against
an
employee
in
all
of
the
11
following
circumstances:
12
a.
When
receiving
an
offer
of
employment
from
an
employer
is
13
contingent
upon
entering
into
a
noncompete
agreement,
unless,
14
before
the
employer
offers
employment
to
the
employee,
the
15
employer
does
all
of
the
following:
16
(1)
Notifies
the
employee
in
writing
that
obtaining
17
employment
is
contingent
on
signing
a
noncompete
agreement.
18
(2)
Gives
the
employee
a
written
copy
of
the
noncompete
19
agreement
to
be
signed
by
both
employee
and
employer.
20
b.
When
receiving
an
offer
of
a
bona
fide
advancement
from
21
an
employer
is
contingent
upon
entering
into
a
noncompete
22
agreement,
unless,
before
the
employer
offers
the
bona
fide
23
advancement
to
the
employee,
the
employer
does
all
of
the
24
following:
25
(1)
Notifies
the
employee
in
writing
that
the
advancement
26
was
contingent
on
signing
a
noncompete
agreement.
27
(2)
Gives
the
employee
a
written
copy
of
the
noncompete
28
agreement
to
be
signed
by
both
employee
and
employer.
29
c.
When
entering
into
a
noncompete
agreement
is
required
30
in
order
to
continue
employment
by
the
employer
after
a
31
substantial
change
in
circumstances
of
the
employer
including
32
but
not
limited
to
the
sale
of
all
or
substantially
all
of
the
33
employer’s
assets,
the
employer’s
acceptance
of
significant
34
financing
from
a
third
party,
or
the
employer’s
entering
into
a
35
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partnership,
joint
venture,
or
other
such
business
arrangement
1
with
another
person,
unless,
before
the
substantial
change
2
in
circumstances
is
completed,
the
employer
does
all
of
the
3
following:
4
(1)
Notifies
the
employee
in
writing
that
continued
5
employment
is
contingent
on
signing
a
noncompete
agreement.
6
(2)
Gives
the
employee
a
written
copy
of
the
noncompete
7
agreement
to
be
signed
by
both
employee
and
employer.
8
d.
If
the
employee’s
earnings
from
the
employer,
when
9
annualized,
do
not
exceed
forty-one
thousand
six
hundred
10
dollars
per
year.
11
e.
If
the
employer
terminates
the
employment
of
the
12
employee,
but
the
termination
is
not
for
good
cause.
13
f.
If
the
agreement
exceeds
eighteen
months
in
duration.
14
g.
If
the
employee
is
participating
in
a
program
registered
15
with
the
United
States
department
of
labor,
office
of
16
apprenticeship.
17
h.
If
the
employee
is
an
undergraduate
or
graduate
student
18
working
as
an
intern
or
in
other
short-term
employment.
19
i.
If
the
employee
is
under
eighteen
years
of
age.
20
Sec.
3.
NEW
SECTION
.
94.3
Limitations
on
franchises.
21
1.
A
franchisor
shall
not
restrict,
restrain,
or
prohibit
in
22
any
way
a
franchisee
from
soliciting
or
hiring
any
employee
of
23
a
franchisee
of
the
same
franchisor.
24
2.
A
franchisor
shall
not
restrict,
restrain,
or
prohibit
25
in
any
way
a
franchisee
from
soliciting
or
hiring
any
employee
26
of
the
franchisor.
27
Sec.
4.
APPLICABILITY.
This
Act
applies
to
noncompete
28
agreements
entered
into
between
an
employer
and
an
employee
on
29
or
after
the
effective
date
of
this
Act.
30
EXPLANATION
31
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
32
the
explanation’s
substance
by
the
members
of
the
general
assembly.
33
This
bill
relates
to
the
circumstances
under
which
employers
34
can
enter
into
noncompete
agreements
with
employees.
35
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The
bill
defines
a
noncompete
agreement
to
include
every
1
written
or
oral
covenant,
agreement,
or
contract
by
which
an
2
employee
is
prohibited
or
restrained
from
engaging
in
a
lawful
3
profession,
trade,
or
business
of
any
kind.
The
bill
excludes
4
a
nonsolicitation
agreement,
confidentiality
agreement,
or
5
agreement
prohibiting
use
or
disclosure
of
trade
secrets
or
6
inventions
from
this
definition.
7
The
bill
provides
that
a
noncompete
agreement
entered
8
into
between
an
employer
and
an
employee
on
or
after
the
9
effective
date
of
the
bill
is
void
and
unenforceable
against
10
an
employee
in
certain
specified
circumstances
relating
to
11
contingent
offers
of
employment,
contingent
offers
of
bona
fide
12
advancement,
entering
into
a
noncompete
agreement
in
order
13
to
continue
employment
by
the
employer
after
a
substantial
14
change
in
circumstances
of
the
employer,
an
employee’s
earnings
15
not
exceeding
$41,600
per
year,
termination
of
employment
if
16
not
for
good
cause,
the
noncompete
agreement
exceeding
18
17
months
in
duration,
the
employee
participating
in
a
program
18
registered
with
the
United
States
department
of
labor,
office
19
of
apprenticeship,
the
employee
being
an
undergraduate
or
20
graduate
student
working
as
an
intern
or
in
other
short-term
21
employment,
or
the
employee
being
under
18
years
of
age.
22
The
bill
prohibits
a
franchisor
from
restricting,
23
restraining,
or
prohibiting
in
any
way
a
franchisee
from
24
soliciting
or
hiring
any
employee
of
a
franchisee
of
the
same
25
franchisor.
The
bill
prohibits
a
franchisor
from
restricting,
26
restraining,
or
prohibiting
in
any
way
a
franchisee
from
27
soliciting
or
hiring
any
employee
of
the
franchisor.
28
The
bill
applies
to
noncompete
agreements
entered
into
29
between
an
employer
and
an
employee
on
or
after
the
effective
30
date
of
the
bill.
31
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