Make a Hawaii Non-Compete Agreement

Applicable State Laws - § 480-2  

Hawaii does impose restrictions on an employer’s use of non-compete agreements. According to Section 480-4(d) of Hawaii’s Revised Statutes, non-compete agreements may not be used in the information technology industry within the state. These agreements may only be used if they do not impose an undue hardship on an employee and only when necessary to protect the company’s trade secrets. This is because the state government believes that these documents are inherently unfair to the employees and negatively impact minimum wage and low-wage workers.

In lobbying for the new law before it was enacted, the State cited similar legislation passed in Illinois and Oregon to protect workers. The State also cited that non-compete agreements often limit the majority of its gross income and cause unemployment for workers in many industries and minimize innovation in information technology development.

Protect your Hawaii business by also using a Hawaii non-disclosure agreement form. Download a Hawaii non-disclosure agreement form now. 

How to Write a Hawaii Non-Compete Agreement

To write a Hawaii non-compete agreement, first review Hawaii Revised Statutes and the new law that passed that places limitations on which industries can use a non-compete agreement. Additionally, get assistance from a qualified law firm to improve the likelihood it is enforceable in court. To write a Hawaii non-compete agreement, include the following clauses:

• Purpose. This clause explains the purpose of the non-compete agreement: to protect the confidential information for industries in which the agreement can be used in the State of Hawaii. It also identifies the parties, includes the effective date, and explains that the term "confidential information" may also be referred to as "proprietary information." Proprietary information may include current customers' information, among other things, but, depending on the industry, it may not include software development.
• Non-compete. This clause includes the time period, geographical area restriction, restrictions on business practices (which are limited by Hawaii Revised Statutes), restrictions on the solicitation of clients and customers, restrictions on working for general competitors (which may or may not be allowed depending on your industry), restrictions on certain business activities (which may or may not be allowed depending on your industry and whether it would cause an undue hardship on your employee), restrictions on working for specific competitors (which may or may not be allowed depending on your industry and whether it would cause an undue hardship on your employee), restrictions on specific activities (which may or may not be allowed depending on your industry and whether it would cause an undue hardship on your employee), and restrictions on employee solicitation.
• Time period. This clause may restate the time restriction as well as explain when the time restriction begins. The time restriction begins either when the employee or independent contractor begins working for your business or when their employment relationship is terminated.
• Purchase option. This clause explains whether your business allows the party to buy their way out of their duties of the contract. If so, this clause lists the amount they must pay.
• Jurisdiction. This clause sets the laws used to govern the agreement: Hawaii Revised Statutes.
• Confidential information. This clause states that the term "confidential information" as used throughout the agreement means any and all technical and non-technical information provided by your business that includes, and is not limited to, any data or other proprietary information related to products, inventions, plans, methods, processes, developmental products, experimental products, intellectual property, software, databases, customer lists, vendor lists, supplier lists, marketing methods, reports, business plans, financial information, or other matter pertaining to your business or any of your clients, consultants, or licensees disclosed to the other party under the terms of the agreement. However, because of the new law, it's imperative to get clarification from an attorney on how this affects software development, the license of products, and other intellectual property or information technology development matters and whether attempting to protect those developments would be considered a violation of public policy under the law.
• Permitted disclosure. This clause explains when confidential information is no longer considered confidential. This generally occurs when information is made public at no fault of the receiving party, when information is discovered by the receiving party on their own without a breach of another party, or when information is released to the public after your business provides written consent.
• Confidentiality. This clause states that the receiving party acknowledges that the information they may access is confidential and that they agree they will not directly or indirectly disclose or communicate it to another without your business’s written consent. They also agree that the information will not be used for any reason except to further your business without first obtaining your business’s written consent.
• Consultants and employees bound. This clause states that the agreement binds both consultants and employees, that they are on a need-to-know basis, and must keep what they learn in the strictest of confidence.
• Return of materials. This clause states that when the agreement is terminated or when your business requests it, the receiving party must promptly return all documents and other tangible material representing the confidential information belonging to the business and all copies that exist. It also states that your business will notify the party upon discovering any loss or unauthorized disclosure of the confidential information.
• Remedies. This clause explains the remedies that your business is entitled to pursue under state law if the receiving party breaches the agreement. Examples may include the recovery of court costs and reasonable attorney fees, the award by the court of a temporary restraining order, a preliminary injunction against the unauthorized use of information, etc., as well as all other remedies available according to Hawaii Revised Statutes as well as according to equity.
• Choice of law. Hawaii Revised Statutes govern the non-compete agreement.
• Entire agreement. This final clause serves a couple of purposes. It explains that the parties may choose to amend the non-compete if it is done in writing and only if they sign the agreement. Then, directly after, it has the signatures and printed names of the parties. The signatures must be dated.

Each party should receive a copy of the executed agreement for their records.