Senate
File
2302
-
Introduced
SENATE
FILE
2302
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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S.F.
2302
Section
1.
NEW
SECTION
.
95.1
Definitions.
1
For
purposes
of
this
chapter:
2
1.
“Covenant
not
to
solicit”
means
an
agreement
that
is
3
entered
into
between
an
employer
and
an
employee
that
does
any
4
of
the
following:
5
a.
Restricts
the
employee
from
soliciting
for
employment
the
6
employer’s
employees.
7
b.
Restricts
the
employee
from
soliciting,
for
the
8
purpose
of
selling
products
or
services
of
any
kind
to,
or
9
from
interfering
with
the
employer’s
relationships
with,
the
10
employer’s
clients,
prospective
clients,
vendors,
prospective
11
vendors,
suppliers,
prospective
suppliers,
or
other
business
12
relationships.
13
2.
“Earnings”
means
the
compensation,
including
earned
14
salary,
earned
bonuses,
earned
commissions,
or
any
other
form
15
of
taxable
compensation,
reflected
or
that
is
expected
to
16
be
reflected
as
wages,
tips,
and
other
compensation
on
the
17
employee’s
internal
revenue
service
form
W-2
plus
any
elective
18
deferrals
not
reflected
as
wages,
tips,
and
other
compensation
19
on
the
employee’s
internal
revenue
service
form
W-2,
such
as,
20
without
limitation,
employee
contributions
to
a
401(k)
plan,
a
21
403(b)
plan,
a
flexible
spending
account,
or
a
health
savings
22
account,
or
commuter
benefit-related
deductions.
23
3.
a.
“Noncompete
covenant”
means
an
agreement
between
an
24
employer
and
an
employee
that
is
entered
into
that
restricts
25
the
employee
from
performing:
26
(1)
Any
work
for
another
employer
for
a
specific
period
of
27
time.
28
(2)
Any
work
in
a
specified
geographical
area.
29
(3)
Work
for
another
employer
that
is
similar
to
any
30
employee’s
work
for
the
employer
included
as
a
party
to
the
31
agreement.
32
b.
“Noncompete
covenant”
also
means
an
agreement
between
33
an
employer
and
an
employee
that
by
its
terms
imposes
adverse
34
financial
consequences
on
the
former
employee
if
the
employee
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2302
engages
in
competitive
activities
after
the
termination
of
the
1
employee’s
employment
with
the
employer.
2
c.
“Noncompete
covenant”
does
not
include
any
of
the
3
following:
4
(1)
A
covenant
not
to
solicit.
5
(2)
A
confidentiality
agreement
or
covenant.
6
(3)
A
covenant
or
agreement
prohibiting
use
or
disclosure
7
of
trade
secrets
or
inventions.
8
(4)
Invention
assignment
agreements
or
covenants.
9
(5)
A
covenant
or
agreement
entered
into
by
a
person
that
10
sells
the
goodwill
of
a
business
and
the
person’s
partners,
11
members,
or
shareholders
may
agree
with
the
buyer
to
refrain
12
from
carrying
on
a
similar
business
within
a
reasonable
13
geographic
area
and
for
a
reasonable
length
of
time,
if
the
14
buyer
or
any
person
deriving
title
to
the
goodwill
from
the
15
buyer
carries
on
a
like
business
in
that
area.
16
(6)
A
covenant
or
agreement
entered
into
by
partners,
17
members,
or
shareholders,
upon
or
in
anticipation
of
a
18
dissolution
of
a
partnership,
limited
liability
company,
or
19
corporation;
upon
or
in
anticipation
of
a
dissociation
of
a
20
partner
or
member;
or
as
part
of
an
agreement
addressing
the
21
dissociation
or
sale
of
a
partner,
member,
or
shareholder's
22
ownership
interest,
may
agree
that
all
or
any
number
of
them
23
will
not
carry
on
a
similar
business
within
a
reasonable
24
geographic
area
where
the
partnership,
limited
liability
25
company,
or
corporation
business
has
been
transacted,
or
within
26
a
specified
part
of
the
area.
27
Sec.
2.
NEW
SECTION
.
95.2
Impermissible
noncompete
28
covenants.
29
The
following
noncompete
covenants
are
void
and
violate
this
30
chapter:
31
1.
A
noncompete
covenant
within
an
employment
agreement
32
or
contract
in
which
an
employee’s
earnings
are
less
than
one
33
hundred
fifty
percent
of
the
state
or
federal
minimum
wage.
34
2.
A
noncompete
covenant
with
an
employee
unless
the
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employer
can
show
beyond
a
preponderance
of
the
evidence
that
1
there
is
a
clear
and
inherent
risk
of
unfair
competition
2
absent
the
noncompete
covenant
and
the
noncompete
covenant
3
was
narrowly
tailored
to
address
the
risk
in
restrictions
to
4
geographic
area
and
duration
of
the
noncompete
covenant.
5
Sec.
3.
NEW
SECTION
.
95.3
Remedies.
6
In
addition
to
any
remedies
available
under
any
agreement
7
between
the
employer
and
the
employee
or
under
any
other
8
statute,
in
a
civil
action,
if
an
employer
is
found
to
have
9
violated
this
chapter,
the
employee
shall
recover
from
the
10
employer
all
reasonable
attorney
fees
regarding
an
attempt
to
11
enforce
a
noncompete
covenant,
court
costs,
lost
wages,
and
12
at
the
discretion
of
the
court,
liquidated
damages
of
up
to
13
triple
the
amount
of
lost
wages
for
willful
violations
of
this
14
chapter.
An
employer
found
to
have
violated
this
chapter
may
15
be
fined
a
five
thousand
dollar
civil
penalty
per
violation
by
16
the
division
of
labor.
Penalties
shall
be
paid
to
the
division
17
of
labor
and
transferred
to
the
general
fund.
18
Sec.
4.
APPLICABILITY.
This
Act
applies
to
covenants
not
19
to
compete
entered
into
on
or
after
the
effective
date
of
this
20
Act.
21
EXPLANATION
22
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
23
the
explanation’s
substance
by
the
members
of
the
general
assembly.
24
This
bill
relates
to
noncompete
covenants
contained
within
25
employment
contracts
and
provisions
that
are
prohibited
and
26
void.
The
bill
provides
definitions
for
“covenant
not
to
27
solicit”,
“earnings”,
and
“noncompete
covenant”.
28
The
bill
provides
that
if
a
person
makes
less
than
150
29
percent
of
the
minimum
wage,
a
noncompete
covenant
is
30
unenforceable
and
violates
the
bill.
The
bill
provides
31
that
a
noncompete
covenant
with
a
non-low-wage
employee
is
32
unenforceable
and
violates
the
bill
unless
the
employer
can
33
show
that
the
noncompete
covenant
is
necessary
due
to
a
clear
34
and
inherent
risk
of
unfair
competition
and
the
noncompete
35
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2302
covenant
was
narrowly
tailored
to
mitigate
the
risk.
1
A
prevailing
employee
is
entitled
to
recover
reasonable
2
attorney
fees,
court
costs,
lost
wages,
and
at
the
discretion
3
of
the
court,
liquidated
damages
of
up
to
triple
the
amount
of
4
lost
wages
for
willful
violations
of
the
bill.
An
employer
5
found
to
be
in
violation
of
the
bill
is
subject
to
a
$5,000
6
penalty
per
violation
payable
to
the
division
of
labor
for
7
deposit
in
the
general
fund.
8
The
bill
applies
to
covenants
not
to
compete
entered
into
on
9
or
after
the
effective
date
of
the
bill.
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