Scarborough Democrat Rips Mills for Backing “Feudal” Non-Compete Agreements

On Tuesday, the Maine Legislature sustained Gov. Janet Mills’ veto of a bill that would have placed restrictions on the enforceability of non-compete clauses.

LD 1496 — sponsored by Rep. Sophia B. Warren (D-Scarborough) — was introduced in 2023 and carried over into the current legislative session for consideration.

Non-compete clauses are contractural agreements used by employers to limit the professional activities of current employees in the event they leave a company.

Warren’s bill aimed to prohibit the enforcement of non-compete clauses except under a few narrowly-defined circumstances.

Under the version of the bill adopted by the Legislature, such agreements would only be enforceable in certain circumstances, such as to protect trade secrets or if the employee had an ownership interest in their employer.

“A non-compete agreement may be presumed necessary if the employer’s trade secrets cannot be adequately protected through an alternative restrictive covenant, including by not limited to a nonsolicitation agreement or a nondisclosure or confidentiality agreement,” the bill stated.

Click Here to Read the Full Text of LD 1496 As Amended

Currently, non-compete agreements are permissible to protect trade secrets, confidential information, or the employer’s goodwill.

Non-compete clauses also cannot be imposed upon employees earning 400 percent or less of the federal poverty level.

Click Here to Read the Current State Statutes Governing Non-Compete Agreements

Members of the Labor and Housing Committee were split along partisan lines when they voted on their recommendations for this bill in February, with all Democrats in support and all Republicans in opposition.

Similar party-line divisions emerged in House and Senate, with just a few Republicans in the House joining the Democrats in support of this legislation. Partisan divisions remained firm in the Senate.

To overturn Gov. Mills’ veto, the House needed a super-majority of 98 votes, but came up short with just 74 lawmakers supporting the move. A number of Democrats joined the Republicans in voting down the motion to reconsider the veto, while a few Republicans — many of whom supported LD 1496 initially — voted with the Democrats.

In her veto letter to the Legislature, Mills noted that Maine recently placed limits on the use of non-compete agreements in 2019 with LD 733, such as prohibiting their usage against low-income workers.

“LD 1496 would go well beyond that by rendering most noncompete agreements unenforceable, even when they are designed to protect a former employer’s confidential information from disclosure to commercial competitors,” Mills wrote. “This ignores the fact that noncompete agreements can be critical tools to prevent employees from taking unfair advantage of their former employers.”

“It would be both unfair and contrary to public policy to prohibit employers from requiring a commitment from their employees not to take what they have learned and immediately put that sensitive information to work for a competitor,” said Mills.

The governor also noted in her veto letter that she approached Rep. Warren with an amendment to this bill “that would have garnered [her] support,” but “regrettably, that offer of comprise was rejected.”

In response to this, Warren told the Maine Wire that she did not support Mills’ proposal because her “compromise accepted no part of this bill.”

“The chief executive mentions she offered a compromise. In my understanding, a compromise is where two parties meet in the middle,” Warren said. “Her compromise accepted no part of this bill. I worked for two weeks in good faith, and I do regret that I could not come to any resolution that would materially benefit Maine people.”

“I challenge the chief executive to consider how she can better advocate for policies that prioritize the well-being and freedom of our workforce, the health of our businesses, and the prosperity of our state,” said Warren. “I ask she challenge herself to talk with Mainers who are trapped in these agreements. I ask the chief executive for her curiosity and empathy.”

Mills also explained in her veto letter that the Federal Trade Commission (FTC) is expected to adopt new regulations in May concerning the use of non-compete agreements, arguing that it would be “ill-advised” to proceed with new state-level restrictions in advance of the forthcoming federal guidance, particularly “with no demonstrated need and over the objections of Maine businesses.”

Warren also responded to this comment by Mills in her statement to the Maine Wire.

“At this point, I agree with the chief executive that we can look to the leadership of our federal government,” Warren said. “But both her and I were elected by Maine people to affect the laws of our state. We abdicate the responsibility that comes with the power we hold when we fail to act. And I regret we do that here.”

When LD 1496 was before the Labor and Housing Committee, the Maine Department of Labor (MDOL) offered opposition testimony, echoing many of the concerns raised by Mills in her veto letter.

“For several reasons, the Department is reluctant to support further amendment of the existing statute at this time,” they said. “First, the current statute seems to be working well, and we have had few inquiries about it or complaints of violations.”

“In addition, the [FTC] is currently promulgating rules regarding noncompete agreements, and we would like to learn the results of that process before venturing into the same territory again,” said the MDOL.

Click Here to Read the MDOL’s Full Testimony

As noted by Mills in her veto letter, business interests and healthcare providers also testified in opposition to this bill “out of concern for the for the effect it would have on the operations of their members.”

Mills also stated that she “heard directly from Maine-based businesses echoing those concerns” as well.

Click Here to Read Gov. Mills’ Full Veto Letter

“On Friday, a decision was made by our chief executive to veto a bill aimed at prohibiting non-compete agreements in our state with appropriate safeguards for legitimate business interests,” Warren told the Maine Wire Friday. “This action, I firmly believe, is a step backward for our economic freedom and innovation.”

“By vetoing the bill that sought to ban such agreements, the chief executive has inadvertently endorsed a practice that binds workers to their employers in an almost feudal manner, limiting their freedom to innovate, to grow, and to seek betterment elsewhere,” said Warren.

“The rationale behind supporting non-compete agreements is often to protect businesses and their intellectual property,” Warren explained. “While this concern is valid, it overlooks the fact that there are other, less restrictive means of protecting business interests, such as confidentiality and non-disclosure agreements.”

“The veto of this bill also fails to recognize the broader economic implications,” Warren argued. “States that have limited or banned non-compete agreements have seen an increase in entrepreneurship, a surge in innovation, and the attraction of high-skilled workers seeking environments where their careers are not restricted by overly broad legal constraints.”

“In conclusion, the decision to veto the bill prohibiting non-compete agreements is a missed opportunity for Maine to affirm its commitment to economic freedom, workforce mobility, and innovation,” Warren stated. “I speak for this bill and against this veto because I believe we ought not be bound by the past, but instead, look forward to a future of growth, innovation, and opportunity for all Mainers.”

Click Here to Read Rep. Warren’s Full Statement to the Maine Wire

Because the House voted down the motion to reconsider Mills’ veto of this bill, LD 1496 will not be signed into law and the existing statutes governing the enforceability of non-compete agreements will remain in effect.