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H 486

COVENANTS NOT TO COMPETE – Repeals and adds to existing law to provide that covenants not to compete shall be void and unenforceable except in certain situations.

68th Legislature, 1st Regular Session (2025) Introduced by Todd Achilles

Idaho generally voids non-competes, allowing only three narrow exceptions: sale of a business, dissolution, or high-earning employees, boosting worker mobility.

Reported Printed; Filed in the Office of the Chief Clerk
#businessandbusinessentities #contracts #employersandemployees
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Bill Summary · H 486

Idaho HB 486 — Covenants Not to Compete: Summary

Overview

House Bill 486, introduced by Rep. Achilles on April 3, 2025, would repeal existing Idaho covenants not to compete law and replace it with a new framework that generally voids non-compete agreements, with limited, targeted exceptions. The bill also establishes rules on choice of law and venue and provides for potential attorney’s fees in enforcement. It includes an emergency clause, making the act effective July 1, 2025.

Purpose and Intent

  • To increase worker mobility, competition, and entrepreneurship by restricting most non-compete agreements between workers and employers.
  • The accompanying fiscal note argues that greater mobility will raise wages, expand tax revenues, and reduce reliance on social safety nets (note: prepared by a bill proponent and not an official legislative determination).

Key Provisions

1) Repeal and New Chapter

  • Repeals Chapter 27, Title 44, Idaho Code (current non-compete framework).
  • Adds a new Chapter 27, Title 44, Idaho Code, defining terms and laying out enforceability rules, exceptions, and related procedures.

2) Definition Snapshot (44-2701)

  • “Covenant not to compete” includes written or oral agreements restricting:
    • A former employee/contractor from working for another employer for a period, in a geography, or in a similar capacity.
    • Restrictions on doing business with a customer.
    • Provisions that penalize or require repayment for engaging in a lawful profession.

  • Excludes:

    • Nondisclosure/trade secrets protections.
    • Non-solicitation provisions or restrictions on use of client lists.

  • “Employer,” “Employee,” and “Independent contractor” definitions are broad, with independent contractors defined to include entities formed for contracting purposes.

3) General Rule: Void and Unenforceable (44-2702)

  • Unless an exception applies, covenants not to compete are void and unenforceable.

4) Exceptions (44-2703)

Non-compete enforceability is permitted in three limited circumstances:
1) Sale of a business: Seller agrees to a temporary, geographically restricted noncompete with reasonable scope/time in connection with the sale.
2) Dissolution: In anticipation of dissolution, parties may agree not to carry on a similar business within a reasonable area where business has occurred.
3) High-earning employee: Covent not to compete applicable to an employee earning $250,000+ per year.

5) Choice of Law and Venue (44-2704)

  • Employers cannot require Idaho residents to adjudicate outside Idaho or waive Idaho substantive protections when disputes arise in Idaho.
  • voidable at the employee’s request; if voided, the dispute is adjudicated in Idaho, with Idaho law governing.

6) Enforceability and Attorney’s Fees (44-2705)

  • Other contract provisions remain valid even if a non-compete is voided.
  • Courts may award reasonable attorney’s fees to a prevailing employee or independent contractor.

7) Effective Date

  • Emergency clause declared; act takes full effect on July 1, 2025.

Who Is Affected

  • Employees and independent contractors in Idaho.
  • Employers and businesses that engage workers (including sellers/dissolution scenarios and executive-level hires).
  • Specifically, executive employees earning $250k+ may be subject to an enforceable noncompete under the limited exception.

Procedural and Timeline Aspects

  • Introduced and referred to Joint Rules App. for Printing on April 3, 2025.
  • Status: Reported Printed; Filed in the Office of the Chief Clerk.
  • Emergency provision and a July 1, 2025 effective date.

Potential Impacts

  • Broad reduction of noncompete usage across Idaho workplaces.
  • Greater labor market mobility, potential wage growth, and increased entrepreneurship.
  • Employers may rely on other contract terms (e.g., non-disclosure, non-solicitation) to protect business interests.
  • High earners (>$250k) remain subject to noncompete considerations, albeit within narrow and clearly defined conditions.

Compiled from official sources — confirm details with the bill’s official record.

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