On June 26, 2024, Rhode Island Governor Dan McKee vetoed a bill that would have banned nearly all noncompetes and customer non-solicits in the State of Rhode Island.
The Rhode Island legislature passed 2024-H8059 Substitute A, “An Act Relating to Labor and Labor Relations Rhode Island Noncompetition Agreement Act” (the “Bill”), that if enacted, would have banned all new and existing noncompetes except for those “made in connection with the sale of a business.” If the Bill had been passed, it also would have banned all customer non-solicits, although employee non-solicits would have remained enforceable.
Governor McKee’s most notable reason for his decision to veto the Bill was that it would make “Rhode Island an outlier as compared to other states.” This is true. If the Bill was signed into law, it would have aligned Rhode Island with California, which has banned all noncompetes with employees, as well as all non-solicits. In addition to California, only Minnesota, North Dakota, and Oklahoma prohibit noncompetes with employees. Governor McKee also reasoned that the Bill: (i) goes “beyond what is set forth in the [FTC’s] rule”; (ii) “does not address the valid concerns raised by the local businesses of the community”; and (iii) should the FTC repeal or amend its rule . . . the Act would continue to bind Rhode Island by its onerous restrictions on noncompetes.” Governor McKee’s veto follows Maine Governor Janet T. Mills’ decision to veto a bill that would have also banned all employee noncompetes in Maine.
The Bill may still become law if the Rhode Island legislature is able to override the Governor’s veto. If three-fifths of legislators in both Rhode Island houses vote to approve the Bill, it will become law notwithstanding the Governor’s veto. We expect Rhode Island legislators to vote on the Bill in the near future.
We will continue to monitor further developments in noncompete law in Rhode Island, including whether the legislature overrides the Governor’s veto.
*Gianna Dano, a Summer Associate in Epstein Becker Green’s Newark office (not admitted to practice) contributed to the preparation of this piece.
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