Hawaii Non-Compete Agreement

Introduction

Key Things to Know

1. 1

   A non-compete agreement is a contract in which one party, usually an employee, agrees not to compete with a business for a set time and area after the relationship ends. In Hawaii an employee non-compete is enforceable within limits, and void entirely for a technology-business employee.

2. 2

   Hawaii enforces non-competes under HRS Section 480-4. Subsection (a) makes every contract in restraint of trade illegal, and subsection (c) makes it lawful to enter a restrictive covenant ancillary to a legitimate purpose, limited to a reasonable area and a reasonable period of time, unless the effect may be substantially to lessen competition or tend to create a monopoly.

3. 3

   Hawaii has no salary or income threshold that a worker must earn before a non-compete applies. Enforceability turns on reasonableness and a legitimate purpose, not on how much the employee is paid, and the technology-business ban applies regardless of income. Do not rely on any other state's wage figure.

4. 4

   The restraint must be limited to a reasonable geographic area and a reasonable period of time (HRS Section 480-4(c)). Hawaii sets no fixed maximum; its courts weigh reasonableness case by case, holding that a restraint is valid only if it is reasonable (Technicolor, Inc. v. Traeger, 57 Haw. 113).

5. 5

   Hawaii has no statute setting an advance-notice period or a fixed consideration formula for a non-compete. Under general Hawaii contract law the covenant needs consideration and must be ancillary to a legitimate purpose, so employers should tie it to genuine employment terms rather than assume any restraint will hold.

6. 6

   Since 2015, HRS Section 480-4(d) makes a noncompete or nonsolicit clause void and of no force and effect for an employee of a technology business, meaning a company that earns the majority of its income from software or information technology development cannot bind those employees to a non-compete. Because Hawaii ties the covenant to reasonableness, an overbroad clause risks being found unreasonable and unenforceable.

7. 7

   The one restraint that survives even the technology ban is an employee covenant not to use the employer's trade secrets (HRS Section 480-4(c)(4)). Hawaii employers protect confidential information through a confidentiality agreement and the Hawaii Uniform Trade Secrets Act (HRS chapter 482B) rather than through a broad non-compete.

Hawaii Requirements for Non-Compete Agreement

• Enforceable Within Limits

  In Hawaii an employee non-compete is enforceable within limits. HRS Section 480-4(a) makes every contract in restraint of trade illegal, and Section 480-4(c) makes it lawful to enter a restrictive covenant ancillary to a legitimate purpose, limited to a reasonable area and a reasonable period of time, unless the effect may be substantially to lessen competition or tend to create a monopoly. Hawaii courts add a common-law reasonableness test.

• No Income Threshold

  Hawaii has no salary or income threshold for a non-compete. Unlike states that only permit non-competes above a wage floor, Hawaii turns enforceability on reasonableness and a legitimate purpose regardless of pay, and the technology-business ban applies no matter what the employee earns. Do not rely on another state's salary figure when the worker is in Hawaii.

• Reasonable Area and Time

  A Hawaii non-compete must be ancillary to a legitimate purpose and limited to a reasonable geographic area and a reasonable period of time, and it must not substantially lessen competition or tend to create a monopoly (HRS Section 480-4(c)). Hawaii sets no fixed maximum duration; its courts weigh reasonableness case by case (Technicolor, Inc. v. Traeger, 57 Haw. 113), so draft the term and area narrowly.

• Technology-Business Employees Are Exempt

  Since 2015, HRS Section 480-4(d) makes a noncompete clause or a nonsolicit clause void and of no force and effect in any employment contract for an employee of a technology business, one that derives the majority of its gross income from the sale or license of products or services resulting from software or information technology development. A technology-business employer cannot bind those workers to a non-compete regardless of income.

• Permitted Restrictive Covenants

  HRS Section 480-4(c) makes several covenants lawful when reasonable: a covenant by the transferor of a business not to compete in connection with a sale of the business, a covenant between partners not to compete on a partner's withdrawal, a lessee-use covenant, and an employee covenant not to use the employer's trade secrets in competition. Each is valid only if ancillary to a legitimate purpose and reasonable in area and time.

• No Statutory Notice or Consideration Formula

  Hawaii has no statute setting an advance-notice period before signing or a fixed consideration formula for a non-compete. General Hawaii contract law applies, so the covenant needs consideration and must be ancillary to a legitimate purpose (HRS Section 480-4(c)). Tie the restraint to genuine employment terms rather than assume any clause will hold, because a court weighs reasonableness case by case.

• Protect Trade Secrets Instead

  The one restraint that survives even the technology-business ban is an employee covenant not to use the employer's trade secrets (HRS Section 480-4(c)(4)). Hawaii employers protect confidential information with a confidentiality or non-disclosure agreement and the Hawaii Uniform Trade Secrets Act (HRS chapter 482B), which protects trade secrets and customer data without an unlawful restraint on where a former employee may work.

• Federal FTC Rule Is Not in Force

  The 2024 Federal Trade Commission non-compete rule was set aside by a federal court before it took effect, so it is not currently binding, and its status remains unsettled. Hawaii does not depend on it: HRS Section 480-4 independently governs whether a non-compete is enforceable in Hawaii regardless of what happens with the federal rule.