An act relating to agreements not to compete
H.205 would broadly prohibit noncompete agreements in Vermont for two categories of relationships: franchisors and franchisees, and employers and employees. In the franchise context, the bill voids any agreement that restricts a former franchisee from operating its business after separation, including limits based on geography, time, or other restrictions that significantly impair competition. In the employment context, it voids agreements that prevent a former employee from working for a competitor, working in a geographic area, or working in a similar capacity after leaving employment.
The bill includes several carveouts. It does not affect nondisclosure obligations protecting trade secrets or confidential business information, and it preserves reasonable nonsolicitation agreements. It also allows noncompete agreements in connection with the sale of a business or ownership interest, partnership dissolution or dissociation, LLC dissolution or termination of an ownership interest, and certain severance agreements, so long as those severance restrictions are reasonable and tied to the consideration provided. For employees earning $100,000 or more annually, the bill does not apply, but it requires advance delivery of the agreement and a three-business-day waiting period before an offer can be rescinded if such an agreement is used.
The bill would amend Title 9 to add a new chapter governing franchise agreements and Title 21 to add a new section governing employment noncompetes. It would also require franchisors and employers to notify affected current and former franchisees or employees that existing noncompete provisions are void and unenforceable. The bill further applies existing anti-retaliation protections and enforcement provisions from Vermont employment law to violations of the new employee noncompete section. The act is set to take effect July 1, 2025.
Because there are no committee transcripts or recorded votes provided, the overall sentiment cannot be measured from debate or roll call history. Based on the bill’s text and stated purpose, it appears aimed at protecting worker mobility and franchisee independence while preserving trade secret protection and limited business-sale and severance exceptions. The main policy tension is between those seeking to eliminate restraints on competition and those who may view noncompetes as necessary to protect business goodwill, confidential information, and negotiated severance arrangements.
H.205 would significantly change Vermont law by making most noncompete agreements void and unenforceable in both franchise and employment settings, while preserving specific exceptions for trade secrets, confidential information, business sales, partnership and LLC transitions, nonsolicitation clauses, and certain severance agreements. It would add a new franchise-agreement chapter to Title 9 and a new employment noncompete section to Title 21, and it would impose notice obligations on franchisors and employers with existing prohibited agreements. The bill would also incorporate existing retaliation and enforcement remedies for employee noncompete violations, affecting franchisors, employers, franchisees, employees, and former employees statewide.
No committee discussion or votes are provided, so there is no recorded legislative sentiment to summarize from the available history. From the bill’s structure and purpose, the measure appears generally pro-worker and pro-franchisee, reflecting a policy preference for open competition and labor mobility over contractual restraints on post-employment or post-franchise competition. The inclusion of multiple exceptions suggests an effort to balance that goal with business-protection concerns.
The central point of contention is likely whether Vermont should broadly ban noncompete agreements or allow them as a tool to protect business interests. Supporters would likely emphasize employee mobility, entrepreneurship, and the ability of franchisees to continue operating after separation, while opponents may argue that noncompetes help protect investments, customer relationships, and proprietary know-how. A secondary issue is the scope of exceptions: the bill preserves trade secret protections and some business-sale and severance-related noncompetes, but it limits their use and, for severance agreements, ties enforceability to reasonableness and the amount of consideration provided. The $100,000 wage threshold may also be debated as a line between higher-paid workers and everyone else.