Vermont non-compete law: case law and the 2026 health care act

Vermont has no general statute on employee non-competes, so most covenants are judged under Vermont Supreme Court case law: a covenant is enforced unless it is contrary to public policy, unnecessary for the employer's protection, or unnecessarily restrictive of the employee's rights, and it should be narrowly tailored in time, area and subject matter. The big exception, as of October 2026, is health care. 21 V.S.A. § 495q, added by Act 177 of 2026, voids post-employment practice restrictions and several related clauses in contracts with health care providers entered into on or after July 1, 2026.

So the recruiter's first two questions in Vermont are "Is this a health care role?" and "When was it signed?" The general screen is in non-compete questions for candidates, and the agency-side clauses are in non-solicitation clauses for recruiters.

What test do Vermont courts apply to non-competes?

The leading cases are summarized in a December 2025 non-compete working group report to the House Commerce Committee, posted on the Legislature's site. Drawing on the Vermont Bar Association's employment law section, it describes the rule this way:

• Caution. Courts "proceed with caution" because such restraints run counter to the policy favoring free commercial activity (Roy's Orthopedic, Inc. v. Lavigne, 1982, quoting Vermont Electric Supply Co. v. Andrus, 1974).
• Three ways to fail. A covenant is enforced unless it is (1) contrary to public policy, (2) unnecessary for the protection of the employer, or (3) unnecessarily restrictive of the employee's rights, with regard to the subject matter of the contract and how it is to be performed (Andrus; Roy's Orthopedic; Summits 7, Inc. v. Kelly, 2005 VT 97).
• Narrow tailoring. The covenant must be "narrowly tailored in terms of geographical, temporal, and subject matter restrictions to protect the employer's legitimate interests," and it may not protect against ordinary competition (Summits 7). Its duration must be no greater than necessary (Dyar Sales & Machinery Co. v. Bleiler, 1934).
• Consideration. "Under the common law, continued at-will employment is sufficient consideration to support a restrictive covenant" (Summits 7), so a covenant signed mid-job is not void for that reason alone.

What does the 2026 health care law do?

21 V.S.A. § 495q says any provision in a contract or agreement that creates or sets the terms of a partnership, employment or other professional relationship with a health care provider, regarding health care services in Vermont, "shall be void and unenforceable" if it:

1. restricts the provider's right to provide health care services "in any geographical area for any period of time" after the relationship ends;
2. limits a departing provider's ability to tell the people they treated about the change of employment;
3. restricts the provider from making disparaging statements about another party to the contract or a named third-party beneficiary;
4. is inconsistent with Vermont law; or
5. requires litigation arising from performance of the contract in Vermont to be conducted in another state.

A "health care provider" is anyone "licensed, certified, or authorized by law to provide professional health care service in this State." The section does not reach restrictions on a provider who contracts with a third-party company for nonclinical business support services from opening a business in a territory served by a different such company. Employers may not retaliate against an employee who uses these rights, and the penalty and enforcement provisions of Vermont's Fair Employment Practices Act apply. It covers contracts and agreements "entered into on or after July 1, 2026."

The section arrived by an unusual route. It was in S.230, a fair employment practices bill the Governor vetoed on June 18, 2026. The same text was added as Section 8e of S.313, a career technical education bill the Governor signed that day as Act 177, effective on passage.

What does § 495q mean for healthcare recruiters?

• The date decides it. A nurse practitioner who signed in May 2026 is under the case-law test; one who signed in August 2026 is under § 495q. The section speaks of contracts "entered into" on or after July 1, 2026 and does not mention renewals, so ask counsel how a renewed older contract is treated.
• It is broad. The definition is not limited to physicians, so licensed and certified roles across nursing, therapy and allied health are in scope.
• Agency contracts. It reaches agreements with the provider, which includes a staffing firm's employment contract with a clinician working in Vermont. Whether it reaches a facility-agency no-hire or conversion fee clause, which is not an agreement with the provider, is unclear. The Vermont staffing agency license guide covers those clauses.

Can a Vermont court narrow or extend a covenant?

No Vermont statute tells courts to rewrite an overbroad covenant, and Vermont courts have refused to remake terms. In Roy's Orthopedic, Inc. v. Lavigne (1985), the Vermont Supreme Court would not delay the start of a three-year restriction to make up for time lost in litigation, because that would "make a new contract for the parties." Whether a court would enforce a narrowed version of an overbroad covenant is a question for counsel.

Vermont non-compete rules at a glance

What should a recruiter ask a Vermont candidate?

Ask early in the phone screen, in the same words for every candidate, and write down facts only. Do not ask about current pay while you are on the subject; Vermont bars salary history questions, as the Vermont salary history ban guide explains.

VERMONT CANDIDATE — restrictive agreements

1. "Have you signed a non-compete, a customer or employee non-solicit,
    or a confidentiality agreement with your current or a past employer?"
2. "When did you sign it, and has it been renewed since?"
3. "How long does it last, and what area, customers or work does it
    cover?"
4. Health care roles: "Which license or certification do you hold?
    Does the contract limit where you can practice, what you can tell
    patients, or where disputes are heard?"
5. "Does it say which state's law applies?"
6. "Has your employer contacted you, or anyone else, about it?"
Always: "We don't want any confidential information, documents or
client lists from your current employer."

• Do not tell a clinician their clause is void because of § 495q. The date and the contract decide that.
• Do not tell anyone else that Vermont "doesn't enforce" non-competes. Its courts do, when the covenant is tailored.

What is the risk to the hiring company?

A Vermont trial court decision shows the pattern. In Simple Route, LLC v. Webb (Vermont Superior Court, Chittenden Unit, No. 23-CV-02035, December 19, 2024), two employees signed one-year non-competes, were let go, and joined a competitor. The former employer sent the competitor a letter about the agreements, then sued the two former employees and the new employer for injunctions. The court granted summary judgment to all of them: the one-year periods had run out, the employer admitted it had no evidence of lost customers or misused confidential information, and the court would not move the start date, citing Roy's Orthopedic. It is a trial-court ruling, not binding precedent, but it shows what to capture: dates, and what was actually taken.

The other side of that lesson: a letter is not a ruling, and a covenant still running can support an injunction that keeps a new hire out of the role. Tell the client before final interviews, let counsel read the agreement before the offer, and confirm at the offer call that the company wants no confidential information.

Is Vermont changing its non-compete law?

The 2025–2026 session took up the subject and enacted only the health care piece. The working group report above was prepared for the House Commerce Committee, and H.205, "An act relating to agreements not to compete," was recommitted to that committee on March 13, 2026 and did not become law. A general bill would have to start again in the 2027 session. Neighboring states went further; see New Hampshire non-compete law and Massachusetts non-compete law.

Where does the federal FTC rule stand?

It does not apply. The FTC's Noncompete Rule page notes the August 20, 2024 court order; the Commission voted 3-1 on September 5, 2025 to accede to the vacatur; and a February 12, 2026 notice removed it from the Code of Federal Regulations.

Staffing agencies and their own agreements

Your internal recruiters' covenants fall under the case-law test, and any clinician contract your firm enters into for Vermont work on or after July 1, 2026 falls under § 495q. For the other Vermont rules on a hire, see hiring employees in Vermont, Vermont background check laws and the Vermont recording consent guide.

A Vermont checklist

• Restrictive-agreement question asked of every candidate, in the same words.
• Health care roles: license and contract date captured against July 1, 2026.
• Length, area and subject matter recorded as written.
• No pay history questions.
• Any letter or contact from the former employer noted and passed to the client.
• No opinion on enforceability given; candidate pointed to their own lawyer.
• Client told before final interviews; counsel reviews before the offer.