Hawaiʻi's Technology Community

Doug Hagan: Folks - Hawaii non compete  law - was signed into law this morning by Gov Ige.  Does anyone know how this applies to existing non-competes?

I hope an attorney with expertise weighs in on this, but it should be noted Hawaii is already one of the most restrictive states in terms of noncompete clauses (they must be "reasonable and necessary", etc.)

The best policy for business owners is to have an environment where people want to work rather than attempting to trap them. Real IP and trade secrets are of course still protectable, and businesses are wise to work with their attorneys to make sure they are protected while being fair to their team members.

Note: I'm not an attorney. This should not be viewed as legal advice.

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Quoting from the bill: 

Such agreement shall be void and of no force and effect.

Does this mean that existing agreements have no force and effect?

Going forward, an new hire/employee wouldn't need to push back, just go ahead and sign it knowing that it's void? 

My understanding was that it doesn't nullify existing noncompetes.

From Greg Kim, a well respected local attorney (MBA, engineering background) with solid tech startup experience:

I took a quick look at the new law in relation to the impact on existing noncompetes, and it contains this provision: “This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.”  Not entirely clear, but this language could be interpreted to mean existing non-competes are still enforceable as a “right” or “duty” that “matured.”  The term “matured” is vague, and it could be interpreted more narrowly to mean only noncompetes that have been reached have matured.  If these arguments don’t work, then looks like existing noncompetes are no longer valid because there is no exclusion for existing agreements.  If a noncompete is in a larger agreement, it’s also not clear if the rest of the agreement survives.  It partly depends on how the agreement is written, for example if there is a severability clause.  The law doesn’t do a very good job answering these transitionary issues.

Greg - Thank you for contributing this analysis.

Non-competes are particularly bad given Hawaii's location. For example, I had to move to the mainland 10 years ago due to a non-compete. All in all, it worked out over time as I went to SF, but non-competes regularly have a terrible impact on employees.

I know other guys who are afraid to leave their tech companies in Hawaii, despite so-so working conditions and mediocre pay. Why? Non-competes - afraid they will be sued (and this is not an abstract fear - management warns about this). Absurd. It helps incumbent employers but hurts employees and overall tech growth.

Hey John - Happy to see you back on TechHui. Thank you for sharing your situation 10 years ago. Reading about this here and on Civil Beat has been an education. I would think that in a tech community as small as ours, a company that makes a habit of threatening to sue its employees would have a hard time finding new ones.

You don't need to explicit threaten or send a cease and desist letter. Companies just remind you that you have a non-compete contract, etc.

It works better on younger people or those with less options. And in Hawaii that is an issue because if you are a technology specialist there are not a lot of companies to choose from that offer work in your speciality.

True. I haven't seen any examples of successful litigation (i.e. tech companies suing employees over noncompete), but that doesn't mean there aren't any, and the implied threat is usually enough.

Yes, the implied threat is usually enough. Most employees don't want or sometimes even have the thousands to spend on attorneys on a case they have no idea whether they can even win.

A couple relevant links from our newest member, local attorney Ryan Hew, who has also been involved in the tech community for years:

Hawai'i Litigation Blog: New Law Prohibits Noncompete Clauses in Te...

... The new law voids any “noncompete clause or a nonsolicit clause in any employment contract relating to an employee of a technology business.” The bill broadly defines “technology business” as one that “derives the majority of its gross income form sale or license of products or services resulting from its software development or information technology development, or both.” More...

Fortune: Hawaii ban on noncompetes leaves out a huge chunk of workers

The debate over noncompete agreements—the fine print in employment contracts that keeps employees from working for competitors in their next job—has largely focused on the tech industry. Opponents of the policies point to California’s Silicon Valley as an example of the kind of innovation-rich environment that can flourish when noncompetes are removed from the mix, allowing talent and ideas to flow freely. More...

As a recent transplant from California, it's great to see non-competes are now not enforceable here in Hawaii, at least for the tech sector. Having the freedom to move from one employer to another without restriction always felt like the right approach, since your employer would have to focus on providing the best environment for retaining workers, and not being dependent on legal constraints. Hopefully this helps the tech community prosper here.

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