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BILL AS INTRODUCED 2007-2008

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H.790

Introduced by Representative Martin of Wolcott

Referred to Committee on

Date:

Subject:  Commerce and trade; contracts

Statement of purpose:  This bill provides that contracts that constrain a person or business from engaging in a lawful profession, trade, or business are void.

AN ACT RELATING TO VOID CONTRACTS

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1.  12 V.S.A. chapter 200 is added to read:

Chapter 200.  Void Contracts

§ 5774.  FINDINGS; PURPOSE

The general assembly finds:

(1)  Employers and franchisers often demand that their employees and franchisees enter into noncompetition agreements, which prohibit the employee and franchisee from working in certain types of business and in certain geographic areas for a set amount of time.

(2)  Employees often feel forced to accept these noncompetition agreements in order to be hired or maintained by their employer.  Franchisees are told the language is standard to all their contracts.  There is no negotiation involved in the use of these restrictions, and the restrictions can have little relationship to the interests to be protected and the subject matter of the contract.

(3)  Many noncompetition agreements are extremely comprehensive in scope and prohibit an individual or business from working anywhere in the state of Vermont, New Hampshire, New York, and Massachusetts for up to five years.  For an individual who is trained in only one business or for a business that has spent time and capital building the business, this type of agreement can be devastating, unfair, and contrary to public policy.

(4)  In order to protect the livelihood of employees and the business of franchisees, Vermont courts must approach noncompetition agreements differently.  Rather than presume that a noncompetition agreement is valid, courts should begin with the presumption that an agreement is invalid, and the burden should be placed on the employer or franchise holder to demonstrate that a noncompetition agreement is necessary, reasonable, and in the public interest.

§ 5775.  VOID CONTRACTS

(a)  A contract that constrains a party from engaging in a lawful profession, trade, or business is void unless the party seeking to enforce the restrictions proves the contract is:

(1)  consistent with public policy;

(2)  necessary for the protection of the enforcing party;

(3)  not a contract of adhesion; and

(4)  reasonable, considering the subject matter and the conditions under which it is to be performed.

(b)  Nothing in this section limits the liability of any person under existing statutory or common law.

Sec. 2.  APPLICATION TO EXISTING CONTRACTS

This act shall apply both to contracts existing at the time of the effective date of this act and to contracts created thereafter.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us