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House backs limits on noncompete agreements, replacing fixed one-year rule with 'reasonable' standard
Summary
Second substitute HB251 passed the House after extended debate. Sponsor Representative Schultz said the bill replaces a strict one-year post-employment cap with a 'reasonable' test (time, scope, geographic market), exempts trade secrets and confidentiality protections, and allows mutually agreed severance arrangements. Advocates said the change would spur startups and mobility; critics warned of vagueness and litigation risk.
Representative Schultz presented second substitute HB251 on the House floor as a targeted reform of post-employment restrictive covenants. The substitute removes a hard one-year limit on post-employment covenants and instead requires that any restriction be reasonable in duration, geographic scope and market effect. Schultz emphasized the bill preserves protections for trade secrets, proprietary information, nondisclosure and non-solicitation agreements while expanding worker mobility.
Sponsors framed the change as pro-growth: Schultz and other supporters argued that limiting overbroad noncompetes facilitates new company formation (citing national examples such as California) and improves hiring mobility in fast-moving industries like software. Supporters noted that courts will continue to evaluate reasonableness and that other statutory protections (trade-secrets carve-outs) remain in place.
Opponents cautioned the language’s reliance on a court-determined 'reasonable' standard could produce litigation and uncertainty; Representative Arendt questioned the vagueness and whether the courts would determine reasonableness in many cases. Supporters responded that the bill narrows overreach and that the statute includes clarifications — including an explicit allowance for severance agreements freely and in good faith — to reduce inadvertent overreach.
The House voted on the second substitute; the transcript records a recorded vote result: second substitute HB251 passed the House (72 yes, 0 no) and will go to the Senate.
