AUGUSTA — Gov. Janet Mills used her first veto of the year to block a bill that would have limited the use of contract clauses that prohibit a former employee from competing with a previous employer.

Mills said she vetoed L.D. 1496 because the Labor and Housing Committee failed to prove that noncompete agreements are a problem and the sponsor, Rep. Sophia Warren, D-Scarborough, did not try to address the governor’s concerns.

“Regrettably, that offer of compromise was rejected,” Mills wrote. “As a result, I am left with no choice but to return L.D. 1496 unsigned and vetoed, and urge the Legislature to sustain the veto.”

It takes a two-thirds vote of the Legislature to overturn a gubernatorial veto. The House vote in support of an override was 74-72, well short of the number needed.

In an interview before the House vote, Warren pushed back on the governor’s assertion about offering a compromise. Instead, Warren said, the governor rewrote the entire bill, so rather than change it at the last minute, Warren thought it would be more appropriate for the governor to issue a veto.

“Ultimately, that compromise wasn’t a compromise,” Warren said. “It wasn’t us meeting somewhere in the middle, or even a slight pass forward. It was in fact a really different bill that I don’t think was responsible to green light that at the 11th hour without pubic comment.”

Warren’s bill would have allowed enforcement of noncompete agreements only when they are “reasonable and not broader than necessary” to protect an employer’s trade secrets or to protect an employer when the employee has an ownership interest in the company.

On the House floor, Warren said overturning the veto would “affirm the state’s support of economic freedom, workplace mobility and innovation.”

Mills said in her veto letter that lawmakers passed a bill in 2019 that prohibited noncompete clauses for low-income workers like hairdressers or fast-food workers, and the Department of Labor has not heard any complaints about that law being insufficient.

Current law prohibits non-compete agreements for people earning up to 400% of the federal poverty level, which is about $15,000 a year.

Mills said those contract clauses “can be critical tools to prevent employees from taking unfair advantage of their former employers” in industries such as technology start-ups and microbreweries.

Mills’ amendment would have allowed confidentiality agreements as long as they are reasonable and only last as long as necessary. In addition to protecting trade secrets, the amendment would have allowed noncompete agreements to protect the employers’ goodwill and confidential information in general.

Mills also noted that the Federal Trade Commission is expected to issue new rules on noncompete agreements, so it would be “ill-advised” for Maine to enact its own rules before then.

Warren hopes that Mills’ faith in federal action is well-placed. “I hope that’s right … that progress will come,” Warren said.