{"id":73,"date":"2015-11-10T14:12:41","date_gmt":"2015-11-10T14:12:41","guid":{"rendered":"https:\/\/www.apslaw.com\/its-your-business\/?p=73"},"modified":"2023-04-25T10:00:12","modified_gmt":"2023-04-25T14:00:12","slug":"distinguishing-between-types-of-non-compete-provisions-in-rhode-island","status":"publish","type":"post","link":"https:\/\/www.apslaw.com\/its-your-business\/2015\/11\/10\/distinguishing-between-types-of-non-compete-provisions-in-rhode-island\/","title":{"rendered":"Distinguishing Between Types Of Non-Compete Provisions In Rhode Island"},"content":{"rendered":"

Businesses often attempt to protect their valuable, non-public information \u2013 for example, confidential business and marketing plans developed through investment and research \u2013 from being used by their competitors by requiring employees to sign what is generally referred to as a non-compete agreement. As we addressed in a prior post<\/a>, whether a non-compete agreement provision will be enforceable in the eyes of a court is a crucial consideration when a business enters into this type of employment agreement.<\/p>\n

A court does not scrutinize all contracts to the same degree. When a business agrees to sell 10 widgets to a customer in exchange for payment of $10, a court will not scrutinize that agreement to determine whether it is fair or reasonable \u2013 it will simply enforce it in accordance with the plain meaning of its terms. Our free market economy relies on this freedom of contract. Non-compete provisions, however, are notably different. In most instances, the enforcement of a non-compete provision will restrain a person\u2019s ability to make a living in the field of his or her choosing, and courts have decided to take a closer look at such provisions to make sure a business has a good and valid reason to restrain its employee.<\/p>\n

The use of the term \u201cnon-compete\u201d actually encompasses a range of contractual provisions that restrict employees\u2019 and former employees\u2019 actions. In Rhode Island, the specific type of restraint on an employee\u2019s actions can directly impact the likelihood that a court would enforce the provision. The traditional type of non-compete provision wholly prohibits an employee from working for a competitor in a given geographic location and for a given period of time \u2013 for example, a one-year prohibition on working for a competitor located in the New England states. However, another type of restraint on an employee\u2019s actions is a non-solicitation provision, which prohibits an employee from soliciting the employer\u2019s existing and\/or prospective customers (and sometimes the employer\u2019s employees). Thus, a non-solicitation provision would prohibit the employee from soliciting business from the employer\u2019s (or former employer\u2019s) customers by, for example, contacting them and attempting to sell them products or services. This is a more narrow restraint on the employee than the traditional non-compete provision, as it does not necessarily prohibit the employee from working for a competitor.<\/p>\n

The distinctions between the two types of provisions are more than just the nature of the limitation. The Rhode Island Supreme Court has held that a non-solicitation provision is enforceable in only two, limited circumstances:
\n\u2022 if the customers being solicited are confidential in nature; or
\n\u2022 if a \u201cspecial relationship\u201d exists between the business and the customer being solicited.<\/p>\n

Durapin, Inc. v. American Prods., Inc.<\/em>, 559 A.2d 1051, 1057 (R.I. 1989). In the absence of one of these two specific circumstances, a non-solicitation provision would lack the requisite \u201cprotectable interest\u201d and, therefore, the provision would be an unenforceable restraint on the employee\u2019s right to earn a living. In contrast, no Rhode Island court has so narrowly defined the scope of a protectable interest in relation to a traditional non-compete provision. Thus, in Rhode Island, it is arguably harder for a business to demonstrate a protectable interest supporting a non-solicitation provision (and therefore to enforce such a provision), even though a non-solicitation provision arguably imposes less of a restraint on the employee\u2019s future employment activity.<\/p>\n

Valid and important reasons exist for businesses to utilize both types of provisions, either in isolation or in conjunction with one another. Navigating these issues successfully \u2013 long before an employee has left for a competitor and a court is scrutinizing the employment agreement \u2013 requires an in-depth understanding of both the business\u2019 confidential information and this intricate area of the law.<\/p>\n","protected":false},"excerpt":{"rendered":"

Businesses often attempt to protect their valuable, non-public information \u2013 for example, confidential business and marketing plans developed through investment and research \u2013 from being used by their competitors by requiring employees to sign what is generally referred to as a non-compete…<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2,3],"tags":[7,6,5],"class_list":["post-73","post","type-post","status-publish","format-standard","hentry","category-business-law","category-employment-law","tag-employees","tag-non-competes","tag-rhode-island-business-law"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/posts\/73","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/comments?post=73"}],"version-history":[{"count":0,"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/posts\/73\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/media?parent=73"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/categories?post=73"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.apslaw.com\/its-your-business\/wp-json\/wp\/v2\/tags?post=73"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}