Rhode Island Governor provides rationale for veto of noncompete ban

As you may remember, on June 17, Rhode Island Governor Dan McKee signed a law creating an exemption from Rhode Island’s noncompete law for advanced practice registered nurses. Then, three days later (June 20), the Legislature sent two bills to ban all noncompetes to the Governor, who did the only sane thing and vetoed them.

In vetoing the proposed complete noncompete ban, Governor McKee issued a statement to both the House and the Senate on June 26 explaining his rationale as follows:

In accordance with the provision of article IX, section 14 of the Constitution of the State of Rhode Island and section 43-1-4 of the Rhode Island General Laws, I transmit, with my disapproval, 2024-H8059 Substitute A, “An Act Relating to Labor and Labor Relations Rhode Island Noncompetition Agreement Act” (the “Act”).

The Act would prohibit nearly all noncompetition agreements (“non-competes”) except for those entered into as part of a sale of a business. Though the Federal Trade Commission (“FTC”) recently issued a ruling that prohibits the enforcement of certain non-competes, this Act’s prohibitions go beyond what is set forth in the federal rule. Significantly, the FTC’s rule does not prohibit existing non-competes with senior executives, whereas this Act would prohibit such agreements.

Though my Administration is supportive of setting reasonable limits on the use of non-competes, this Act does not address the valid concerns raised by the local business community. Members of the Rhode Island business community and major employers have expressed concern about the reach of this Act’s prohibitions and the unintended consequences that may follow. Further, the broad prohibition contained in the Act makes Rhode Island an outlier as compared to other states. Should the FTC ever repeal or amend its rule prohibiting non-competes, this Act would continue to bind Rhode Island by its onerous restrictions on non-competes, putting Rhode Island businesses at a national disadvantage.

For these reasons, I disapprove of this legislation and respectfully urge your support of this veto.

It is encouraging to see that Governor McKee saw through the hype and recognized that “unintended consequences . . . may follow” from a ban, including “putting Rhode Island businesses at a national disadvantage.”

As noted previously, New York Governor Kathy Hochul, Maine Governor Janet Mills, and now Governor McKee have all vetoed complete bans. Only Minnesota Governor Tim Waltz bought into the hype and signed a complete ban.

Stay tuned as the saga continues to unfold in states across the country, in Congress, and in the courts.

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