The Vermont legislature introduced House Bill No. 790 on February 1, 2008. The Bill would render non-compete provisions of franchise agreements void unless the franchisor can prove to the Court’s satisfaction that the franchise agreement is: (1) consistent with public policy; (2) necessary to protect the franchisor; (3) not a contract of adhesion; and (4) reasonable considering the subject matter and conditions. Clearly the third requirement is problematic.
A “contract of adhesion” is legal-speak for “non-negotiable” and is “take-it-or-leave-it” in nature. Most franchise agreements are non-negotiable because it is important for the system to maintain uniform and consistent standards. However, various courts have deemed franchise agreements to be contracts of adhesion because of the superior bargaining power of the franchisor. Since most franchise agreements are contracts of adhesion, and if this Bill passes, it will be extraordinarily difficult for franchisors to enforce non-competition agreements among franchisees in Vermont.
One can only hope that this idea does not spread beyond the borders of the Green Mountain State. Vermont’s legislature appears intent of following this strange course of action, which is out of step with the other states. Watch this log for more updates.