Vermont Legislature SmartTranscripts:

[Michael Marcotte (Chair)]: Good afternoon, everyone. This is House Commerce and Economic Development. It's 01:02 in the afternoon on Wednesday, February 4, here to talk about H639 and Act related genetic data privacy. And we have Richard Engelhardt with us from ancestry.com.

[Richard Engelhardt (Ancestry.com)]: Good afternoon, Vice Chair Graning, members of the committee. My name is Richard Engelhardt from ancestry.com. I head up our government affairs function over there. Here today in support of House Bill six thirty nine with one requested amendment to discuss with the committee. So Ancestry is proud of the work that we've done over the years to implement common sense privacy protections that ensure consumers are in control of their genetic data at all times. The work on this bill dates back to 2017 when the Future of Privacy Forum, a leading privacy nonprofit in DC, convened consumer and privacy advocates, medical ethicists, companies, and legislators on the hill. Together, we developed a privacy best practices document that includes what we believe are the appropriate guidelines for direct to consumer genetic testing services. When states look to regulate our industry a few years later, those best practices were translated into bill form. That bill before you today requires consumers to provide separate express consents, meaning we cannot bury our consents in our terms of service or privacy statements for any collection, processing, use, or sharing of their genetic data. H639 also empowers consumers to delete their data at any time and have any biological sample that they may have opted to store with us destroyed. They can end their relationship with our company and we retain no rights to their genetic data. This approach has had broad bipartisan and stakeholder support. Since 2021, 14 states have enacted similar laws and these are ruby red states like Texas and Utah and navy blue states like California and Minnesota. We would like to offer one amendment to the bill today, making it clear that the attorney general and the state's attorney have the sole authority to enforce H-six 39. Otherwise, the bill would have a private right of action, we do not believe that's the appropriate enforcement mechanism for several reasons. First, our consumers have complete control over their genetic data and they can download their raw genetic data files. Many of them opt to do this to share their genetic data with other companies in order to get further analysis or even participate in law enforcement investigations. Should a consumer notice activity that is unusual or suggests that their genetic data may have been used in a manner inconsistent with this bill, they're most likely to associate that with the misuse with the company that performed the test. We believe that agency enforcement allows for an investigation to discover if there may have been another entity involved in the complaint. This would allow the agency to focus on the source of the improper use rather than the courts using the courts for fact finding. Second, genetic data is more difficult to collect than just about any other form of consumer information. It requires both a sample and laboratory analysis. While consumers can download their raw genetic data files and share it with whomever they choose, unlike almost every other form of consumer data, it can't be collected incidentally to the consumer's use of an unrelated website or product. That means enforcement is focused on a very small number of companies. Ancestry, 23andMe, MyHeritage account for more than ninety percent of all DTC genetic tests performed in The US. Third, we believe that public policy should balance consumer privacy rights while also avoiding litigation without merit being brought against companies that are following the rules. None of the companies governed by this bill have had a successful action brought against them under Illinois GIPA, and that's the only state where their genetic privacy law has a broad PRA. Although several cases without merit have been brought and have not prevailed. That led to no additional protections for consumers and additional costs to the companies which ultimately gets passed on to the consumer. In the 14 states that have already passed this bill in its current form, none of them allow for a broad private right of action. Its enforcement aligns with the privacy rules in both HIPAA and the common rule and consumer reports in the ACLU have supported similar measures in other states without a PRA. This is not a situation where the companies are collecting data without the consumer's knowledge or consent, and the government has to step in and crack down on that. This law is codifying the rules that genetic testing services have already incorporated into their daily practices. We respectfully ask that Vermont's enforcement align with other states in recognition that the company has proactively worked with privacy advocates to craft this bill and have consistently complied with the requirements within it. I'll pivot for just a minute because I know in previous committee hearings on the bill, there's been substantial discussion about 23andMe, their data breach and bankruptcy in the past couple of years. In the first instance, most state data breach laws actually have a private right of action, and 23andMe was forced to settle several class action suits in the wake of their data breach. Those actions compounded the company's financial woes, which ultimately bankruptcy. But I would offer that the protections in this bill before you as drafted with AG enforcement actually worked as intended as it pertains to privacy during that bankruptcy. That's because the bill before you ensured that the privacy protections would be attached to the consumer's data and not limited to the company that collected the data. That's due to a provision that our legal team negotiated first in California, which later became part of the model that defines direct to consumer genetic testing company as both an entity that offers a test for sale to the consumer, but also any entity that receives data from the purveyor of such a test. So with that in the statute, any entity that would have acquired genetic data from 23andMe would have been bound to the same statutory requirements in those bills, passed in those 14 states that cover more than 60% of The US population. Ancestry and 23andMe both conform their terms of service and privacy statements to the strictest genetic privacy laws in The US for all consumers. So even if you're not in one of those 14 states, the agreements governing your relationship with 23andMe aligned with the laws in those states. At no time was it plausible that an entity would buy the company out of bankruptcy and be able to use the genetic data for whatever purpose they desire. At the end of the day, the 23andMe bankruptcy was ultimately a tale of a leadership team and a board at odds with each other more than it was about genetic data in peril. 23andMe was forced into bankruptcy after its CEO and board were unable to reach a take private agreement. 23andMe CEO, Wajiki, formed a nonprofit to bid for 23and its assets in the bankruptcy, and that bid was ultimately successful. In essence, Ann Wajiki bought the company from Ann Wajiki. The same leadership team, terms of service, privacy policies, and the uses of data existed before and after the bankruptcy closed. Operationally, consumers have the

[Michael Marcotte (Chair)]: same product experience and privacy protections both before and after the bankruptcy. But even if another entity such as Regeneron had prevailed in the bankruptcy bid instead of Ms. Wajiki, Regeneron would have been bound to

[Richard Engelhardt (Ancestry.com)]: the same statutory requirements to protect consumer genetic data and only use it for the purposes for which the consumer had provided consent. So we understand there was a lot of uncertainty and misunderstanding about what was going on during that bankruptcy. It was compounded by the fact that there were a couple of congressional hearings that company did not perform terribly well in, but we believe that the laws that were on the books actually provided the protections that consumers needed. Private right of action wouldn't have changed that response. Attorney general from more than half of the states, including Vermont, activated to engage the bankruptcy report to remind the presiding judge of the privacy promises that 23andMe had made to their consumers and the need for those protections to persist beyond the bankruptcy. The AGs also reminded consumers who are uncomfortable with the bankruptcy that they had a right to request the deletion of their data, and many consumers did delete their data. Ultimately, privacy promises that 23andMe made to consumers prior to entering the bankruptcy survived the discharge of the bankruptcy. All of that is to say I'm proud of the work that we've done at Ancestry over the years to codify these privacy protections for our consumers. 23andMe was an enthusiastic partner of ours for a long time. They exited the coalition that they had with us right before they went into bankruptcy proceedings, but until then they were fighting for these same protections for their consumers as well. Ancestry is still here encouraging you to pass this bill and provide, codify these protections for all Vermonters. We are just at the point where we believe that would provide the same protections to every direct to consumer genetic testing service and that they're all held to the same standards that we've had on the books since the work go. Designating the AG's office to enforce the bill will ensure that companies like ours that have been proactive partners to ensure privacy protections for consumers aren't saddled with frivolous lawsuits like we've seen in Illinois. At the end of the day, our customers trust is our top priority. We're an optional service. If they don't trust that we're going to hold their data safe and use it in the ways that we've promised we will use it, they simply won't use our services. We strongly support the policy provisions in this bill, and I'll stop there and answer any questions that the committee may have.

[Monique Priestley (Clerk)]: Thank you so much. I was just curious, so I think you mentioned Wyoming has a private right of action, and I'm just curious if there have been a lot of lawsuits as a result of that, or just relative to this space versus like comparing to Bennington with the difference.

[Richard Engelhardt (Ancestry.com)]: So Illinois is the state that has a broad private right of action. Wyoming has a narrow private right of action. So Wyoming put a PRA in, and it was kind of similar to the discussion I had with my friend from the AG's office earlier today. Wyoming's a smaller state as well. They have less resources than the AG's office. We're sympathetic to that. They put in a right to cure provision so that if you want to bring an action against a company like ours, you have to tell us why. Give us the opportunity to explain like, Hey, that consumer's data was actually downloaded before this incident. It might actually be Life DNA that they uploaded the information to or wherever they took it. And it gives us an opportunity to clear things up that might be unclear before we run into the courts. Then now we have to do filings and pleadings and because it takes a long time. Even when we prevailed in the cases in Illinois, it took upwards of a year and a half to two years to get those discharged, which costs the company a lot of resources, lots of staff time.

[Monique Priestley (Clerk)]: Just a follow-up on that. So if there was a narrow PRA with a care period, what length of care period makes sense?

[Richard Engelhardt (Ancestry.com)]: So Wyoming did sixty days. Honestly, any cure period, thirty, would work. It really is there to get the plaintiffs to approach us and say, Hey, here's what we think happened. And we can have a conversation ahead of time and be like, No, that's actually not what we think happened. Or we think there might be more people who had access to that data because the consumer downloaded on this day and time certain, which is before the alleged violation.

[Jonathan Cooper (Member)]: Thanks.

[Michael Marcotte (Chair)]: Actually,

[Herb Olson (Member)]: that's fine. So let's see. In a former past life, it was a regulator of various entities. So always acutely aware of the need for regulatory agency to have the resources necessary to do the job in terms of enforcement. And I'm wondering, and I understand what you're saying about, what might be the job action, private right of action, but how do you ensure for adequate enforcement? If for example, the enforcer asset dip into their appropriated funds or whatever to do that enforcement? How do you square that?

[Richard Engelhardt (Ancestry.com)]: Yeah, and I think it's an interesting question, right? Because if you have a private rate of action and there's frivolous cases, that is taxing resources on the courts. If the regulator's solely responsible for enforcing that taxes, the resources of the regulators, The former can raise costs for consumers. It's a complicated equation. What we think is the appropriate answer here is there's, like I said, there's three entities really that provide the vast majority of these tests in The U. S. If there is a privacy infraction or a bankruptcy or a data breach, it's a big story. And it's not the case where we've had large numbers of complaints. Like in Wyoming, Illinois, there haven't been a ton of consumer complaints that have prevailed. None of them have prevailed actually. We actually haven't had any cases brought against us in Wyoming with the right to cure in there. We haven't even been approached to say, Hey, we think you did this. We'd like to take this to court. So it's by and large a fairly well behaved sector and it goes back to if we aren't doing things with the data to keep it safe and to honor the privacy promises we make, we aren't providing cancer drugs. We're a completely optional service. People can delete their data and go home at any time. So if our consumers don't trust us, they won't use us.

[Herb Olson (Member)]: So yeah, I mean, I get it. Three entities, they say they're well behaved and stuff, and I have no reason to But when you're trying to think about putting together a statute, you wanna think about the terms. So general terms, so I'll specifically terms, and I don't get it. I'm just wondering, again, the concern that I have is about the if you're gonna assign to the government agency, the responsibility to force law, just trying to make sure that they have the resources to do the job. And I'm not sure that I understand what you're saying about the behavior of companies. You wanna do good by your customers, but setting up a regulatory regime, think you need to be focused on, well, what if the worst had happened and you actually do have to enforce, are you gonna have the resource?

[Richard Engelhardt (Ancestry.com)]: Yeah, well, and I think if we look back at, I mean, the '23 and the bankruptcy is a great example. It did not take the AGs long to organize and band together and say, we are going to the bankruptcy judge to remind them of what the state statute is in some of those states and why those privacy protections should persist. I don't think a PRA on the books would have changed that. Like the AGs would have engaged on that regardless and stridently. And part of that is if the AGs come to the bankruptcy court, they're going to be taken more seriously than just a law firm. Class actions take longer to get off the ground than AG enforcements do.

[Herb Olson (Member)]: Final question. They always say that. But the AG in doing what they did, around the bankruptcy or in a future events, would have to use, I would think, law, their own appropriate resources to do that. So then it comes a matter of allocation of their resources. Yeah, they did organize. Just trying to make sure that there's adequate resources in Yeah, that

[Richard Engelhardt (Ancestry.com)]: so in the 14 states where we've seen this passed already, we haven't had people approaching the AGs saying that, oh they're using my data in a way that they said they wouldn't, right? So there actually hasn't been a large compliance burden. It goes back to like by and large the companies have largely behaved. Even in the bankruptcy, like the privacy protections, I mean, was what people were most focused on, wanting to make sure that those survived the discharge of the bankruptcy. But nobody asserted that 23andMe had done anything improper or in violation of the statute that's before you. We just want to make sure that they continue to not do anything improper regardless of who was going to be controlling the company after it discharged the bankruptcy. And we understand like the resource questions. Like I said, in Wyoming, we were happy to work with them to basically say, let's have a right to cure so that people have to actually stop and pause before we march into the courts, but that option is still available for consumers. And in a smaller state like that where the AG's office didn't have the resources, I think they said they had two staff attorneys there total in their AG's office. They're like, Everything gets a PRA here. We don't do AG enforcement because we don't have any AG's staff to manage that. That solution's worked out well for everybody out there because if you want to sue, you can. You just have to contact us first and let us know why and let us explain that there might be another party that you're looking for other than us.

[Michael Marcotte (Chair)]: So that's the same reason that Vermont has a PRA because we have a small PHD. So my question is, it's kind of tangential, but you have direct relations with your consumers. Do you also get other data on those consumers that you add to that data?

[Richard Engelhardt (Ancestry.com)]: From third parties? No. So we like data that comes into Ancestry, that's actually a very interesting question because most people understand Ancestry as a DTC genetic testing product. We've been around since 1983, right? And we were doing a lot of other things before genetic testing. So we started out as a professional genealogy service for people who had more money than time, wanted to find out where their ancestors came from, and we started collecting historical records and documents birth, marriage, death records that were publicly available that helped people piece together those family trees. When CD ROM came around we put those records on CD ROM and started selling those. When the internet came around we moved all of to the internet and switched over to more of a subscription basis where you could pay one subscription fee and then you didn't have to run around all over the country wherever your answers may have lived. You'd be able to access those records in one central repository. Then when DNA came around, that was added as another layer because we're in the ten thousandth generation of homo sapiens. The paper trail runs off about 10 generations ago. DNA can actually help you understand a lot more about how your ancestors moved across the globe over time. So all of that is to say there's a lot of sources of data in there. There's a lot of publicly available information, vital records that we've digitized from state archives, whatnot. There's user generated content. So if you build your own family tree, you can actually put information in there and any living person data you put in there is not viewable to well actually none of your trees are viewable unless you make them publicly viewable. Even if you make your tree publicly viewable, any living person data on that tree is blanked out because we don't have the consent of your family member to share that publicly so we don't show it. Are we getting genetic data from other sources? No. That's all coming from the consumer but it does interact with the rest of their family tree. They could find genetic relatives through the DNA service and say, Oh, well that's my I figured out that's my third cousin and I'm gonna put them on my tree as my third cousin. So there's an iterative exchange of information there but it's all controlled by the consumer and it's basically our public records, their genetic results, and whatever they put into their own trees is where that combines.

[Abbey Duke (Member)]: I'm just wondering if you could The

[Monique Priestley (Clerk)]: PRA in this aspect is new. So could you explain possible nuances of how data if a bad actor say, you guys are a good actor, but there are bad actors in this space that are unlawfully transferring data, and then we're saying that we want to do a cure period, which I heard thirty days, sixty days, which sounds reasonable in a lot of cases, but say that there was an unlawful transfer and a person now has to wait and their data has been transferred to somebody else. Could you just explain your thoughts on that a little bit?

[Richard Engelhardt (Ancestry.com)]: The scenario that makes us most nervous as a company where we feel we're kind of exposed on the brand side, there are these secondary analysis services. My favorite example is Life DNA. I haven't looked at their terms in a minute, but when I first found this company, they had a PO box in Honolulu, Hawaii. They're asking you to send them your genetic information from 23andMe or Ancestry, and in their terms of service it says, We will use your genetic information for targeted advertising, except we're prohibited by state law. Oh my God. Because the last thing we want is for our consumers to start seeing ads for Croatian vacations five minutes after they see that they are 5% Croatian in their DNA results because they're most likely going to associate that with us. And LifeDNAs, the whole conceit of it was upload your ancestry data to us and we'll tell you what sports your kids will be good at and what things you should have in your diet to be most healthy. We don't know if there's any validity to their scientific claims but we do know they're hoovering up data so that they can use it for an advertising purpose, which the bill says you have to have separate express consent for using genetic data for advertising. We don't get those consents because we don't use the data for advertising. That is not why people put their information into Ancestry and it makes us different than most big tech companies. I was listening on the hearing a little bit earlier, our business model is not to collect personal information and monetize it. Our business model is to collect a subscription fee and provide a robust environment where you can map your genealogy and your family history and basically agglomerate your family history as it happens in real time. The DNA adds a layer to that. We're not selling that data to anybody as our business model. Our business model is subscriber gives us money, we give them service.

[Michael Marcotte (Chair)]: Other questions? Thank you.

[Richard Engelhardt (Ancestry.com)]: Excellent. Thank you so much.

[Todd Daylo (Assistant Attorney General, Vermont AG’s Office)]: Good afternoon.

[Kirk White (Ranking Member)]: Yeah.

[Todd Daylo (Assistant Attorney General, Vermont AG’s Office)]: For the record, Todd Daylo is assistant attorney general at the AG's office. I'll be quick. I, you know, wanna start appreciating the continued engagement with the bill and appreciating Richie's testimony and support from ancestry.com on the bulk of the bill. I think it is really valuable to have a sector that is comfortable with a degree of regulation and an understanding of the importance of the data. So the issue comes down as it has in other places to what is an import what is an available remedy and what is an appropriate enforcement action. I think it won't surprise the committee where we stand on that issue. We think consumers who are the ones who are most directly injured in these circumstances, especially especially in a circumstance where this is the most vital data you have. Right? I mean, we talked about it at the beginning when I was talking about the the impetus of the bill is this is not data about you. This is you. And I think it is important to recognize that when we have that kind of important data, it's really meaningful for individuals to be able to vindicate their rights in that space. The AG's office is a taxpayer funded entity that is pulled in multiple directions with limited resources. And if we have one consumer who suffers harm, we are not able to represent that one consumer. Right? We have to represent the state of Vermont. Now that's not to say there couldn't be circumstances where the harm was so great or the damage was so big or the deceit or the fraud or the unfair act act was so significant, we wouldn't act. But it is to say at the at the

[Richard Engelhardt (Ancestry.com)]: end of the

[Todd Daylo (Assistant Attorney General, Vermont AG’s Office)]: day, if an a disreputable company in this space broke this law as written, the AG's office doesn't necessarily have a role to step into that space. And so we think it's really important for individuals to say, you know, you unlawfully transferred my data. I'm getting advertisements based on x, y, and z. Doesn't sound like a practice that Ancestry undertakes. We understand completely the challenges of these kind of dunning letters, the the frivolous lawsuits that gin up costs. We haven't seen that in Vermont. It doesn't seem as though they've seen it in other places. And I, you know, I think when we talk about how we operate, we usually reach out to companies before we file litigation to do some of that investigative work to find out what the story is. That's all taxpayer funded, though. Right? And we make choices. The AG makes choices. The consumer division makes choices around where we're gonna focus our energies, where are the biggest harms. Right? A lot of that is in the data space right now, certainly. But again, we don't see that as being a proxy for an individual's ability to to carry their own rights forward. And I think that gets to the point that, Herb Olson was raising about adequate enforcement. You know, what is adequate enforcement in this space? I think there's a lot of, you know, caveat emptor, like, the buyer has to be aware. That's what a lot of the bill that I think we all agree on. It's that's clear and conspicuous notices. That's expressed consent on a lot of different areas. But again, if something were to happen and your data were to get transferred, I mean, I think this was rep Priestley's question. There's no cure. Right? Your genetic data is out there. It's it's replicable. It's easily transferable, and it's immutable. You can't change it. You can't get a new phenotypic profile. You can get a new Social Security number. It's not easy. You can move. You can change a lot of the other data that we're concerned about privacy on. But this kind of data is core to who we are. So that's I don't need to belabor it further than that. That's our main point.

[Michael Marcotte (Chair)]: John has a question.

[Jonathan Cooper (Member)]: Great. Thanks so much. Todd, you made a comment that I just wanted to hear a little bit more about, that the attorney general's office doesn't, isn't hearing a lot about frivolous lawsuits. And I was just curious by which, what is the mechanism by which you would learn of that were it to be taking place?

[Todd Daylo (Assistant Attorney General, Vermont AG’s Office)]: Well, I think that's a very good question. I think we haven't heard about it in the consumer space, and we do have a reasonable understanding of what's getting filed in Vermont. I would also say the definition of frivolous depends on who you are. I think a lot of people who file those lawsuits believe that they're meritorious. So I I would take the point that maybe there are certain entities that feel a lawsuit is frivolous. I I certainly used to defend the state in a prior iteration of my career, and there were lawsuits that I felt maybe didn't have the merit that the plaintiff felt they had. But I would say, Jonathan, there's not like a direct mechanism by which we get reports from Vermont courts around it. We generally try and pay attention to what's happening in the consumer law space in a lot of these Title IX Chapter 63 cases.

[Jonathan Cooper (Member)]: And as a follow-up to that, maybe the last little comment you made is really what this hinges on. Vermont companies also consumers based on the services that they procure?

[Todd Daylo (Assistant Attorney General, Vermont AG’s Office)]: They can be. But we generally are under Title IX, we generally look at the individual. There. I would say, for instance, our consumer assistance program does work with businesses when they operate as consumers. Thanks.

[Michael Marcotte (Chair)]: Any other questions? Thank you. It's always

[Richard Engelhardt (Ancestry.com)]: lovely to visit her. Committee,

[Michael Marcotte (Chair)]: we're going to change to to age two zero five and Sophie is here to take us through that update.

[Sophie (Legislative Counsel)]: Do I have permission to share?

[Michael Boutin (Member)]: Politically, yes. We do grant you that private right back.

[Sophie (Legislative Counsel)]: Alright. Yeah. So this is house bill number two zero five, which has had some interesting procedural history. But today, we're here on some amendments to the last version that you looked at. So, it should be draft number 2.3. It would be the one that you will have in front of you that is up on the screen. And there's a lot of highlights, so I'm my way through. Does anyone have any questions just generally about the Bill before we start? You're familiar enough with it that I can dive into what the changes are. Okay. So the first change, again, just a sort of grammatical one, just providing that discourage the use of agreements not to compete except in rare circumstances in which the agreement is the result of a bargain for exchange. I did want to remind everyone we have this language about agreements not to compete between an employer and a nonexempt employee are presumptively coercive and a restraint on trade. It generally is lower paid hourly workers the non exempt employees, but I didn't want to overlook the fact there are some groups of employees that tend to be in specialized areas that are hourly and are exempt. So I just didn't want to be too casual about that. But generally, that language, non exempt employee, you're really covering the lowest paid folks that are hourly employees. And again, for the others that may be hourly employees, unless they fall into one of exceptions that we're going to get into, agreements not to compete would also not be permitted for them. So we added in to the definition of agreements not to compete. There were a list of things that are not agreements not to compete. And this adds in contracts with teachers pursuant to 16 VSA seventeen fifty two. This is the language in the education title that deals with if a teacher in a public school leaves during the term, during the school year, they are foreclosed from working for another public school. So it was just to make clear that this is not intending to cover those kinds of agreements that currently exist. We had added the definition of healthcare provider before. I did speak with the attorney in our office who works with the healthcare committees about making sure, as we get into the language here, the prohibition on agreements not to compete in the healthcare field, to make sure that the language serves the purpose that the committee is interested in. And so, because we're going to refer to healthcare services further in the bill, we included a definition here. And again, it's a broad definition covering services for the diagnosis, prevention, treatment, cure or relief of a physical or mental condition, including counseling, procedures, products, devices and medications. By not referring to medical services, the goal there was also to include people like the chiropractor that the committee heard from previously.

[Michael Marcotte (Chair)]: Sophie, before you go on, I just want to note that the bill that we have on our page doesn't have the highlighted sections. Right. As long as you knew that, we can see it here.

[Sophie (Legislative Counsel)]: Oh, okay. Okay. I could have brought copies. I'm sorry. I I never quite know what people Okay. So then there's just some renumbering because we added in that additional definition. So this was to do with the non solicitation. So again, solicitation agreements are allowed. And this provides that they can't last for more than one year. And they cover solicitation or recruitment of an employer's employees or business with the customers or clients of the employer that the employee was previously employed by. And then last time we had looked at adding some language around a notice requirement for certain professions, allowing individuals so we had talked about lawyers, medical field and then fiduciaries being able to at least notify the clients with whom they've had a direct working relationship that they've moved to a different place. And there was a suggestion or a request that some more guidance be given around the notice. So this revised language, it takes out lawyers. There was a concern from the Bar and from Michael Kennedy noting that non solicitation agreements are already prohibited for lawyers, so that it was sort of unnecessary to include them in here. So, the language on lines six through eight is who can give notice. So, it's separating employees who provide direct medical service. And again, just a flag for myself as I went through this, that should be changed to healthcare services. So, I didn't catch that. But again, just to have that more expansive definition that's consistent with the one we just looked at. Or direct fiduciary relationship. And then this is what the notice would include: that the employee is continuing to practice the employee's profession, the employee's new professional contact information, and the client's or patient's right to choose a provider. So that gives some guardrails, so it's not the goal being to avoid disputes down the road. Like, if someone keeps it to those categories of information, then they wouldn't be falling afoul any non solicitation agreement they might otherwise have. We then move on to a definition of senior executives. So this was a concern. There's a carve out further in the bill relating to agreements not to compete. And the goal of the carve out is specifically to address sort of highly compensated employees who are at senior levels of management, and then somehow also to address employees with startups. So they may not be highly compensated, but they may have really critical information to that enterprise that's starting up. So this is the revised definition of a senior executive. So it's an employee with policymaking authority and access to proprietary information critical to the employer's business interests who earns at least 150% of the salary threshold for highly compensated employees under the Fair Labor Standards Act in total compensation. So there is a definition of in total compensation coming. The 150% of the salary threshold for highly compensated employees. The last time there was a concern around putting in a fixed dollar amount, because if there's a fixed dollar amount, it's going to get stale and out of date. The the language here around senior executive is largely coming from the definition that had been in the Federal Trade Commission's rule that then was enjoined and it has not moved forward. But what they had proposed in that particular rule was tying the salary threshold to this highly compensated employees standard. But at that time, under the previous administration, that standard was going to be it was around 151,000. Right now, the current threshold is that didn't pass. The current threshold and I've got the numbers here, so I will give you accurate numbers The current threshold right now is $107,432. So to reflect what had been proposed by the Federal Trade Commission, by putting it at 150% of the salary threshold for highly compensated employees. That then brings it up currently to $161,148 The benefit of having that measurement in is that that will likely get updated. I would say the federal minimum wage and these salary thresholds are very rarely updated at the federal level, so that 161,000 may not get updated for some time. So, for example, the federal minimum wage is $7.25 and it's been that since 2009. So, I'm just putting that out there, just to let you know. So, right now, that would be $161,000 So it may be static for some time, but it has the potential to go up if, in a future administration, that threshold gets moved up. In severance agreements in the definition, there was a concern around non qualified deferred compensation plans. So, this just adds specifically in that the definition of a severance agreement does include non qualified deferred compensation plans. I'm going fast, if anyone has any questions, please stop me. Go ahead.

[Michael Boutin (Member)]: Just going back to the definition of a senior employee here, senior executive. So if I have policy making authority and I access to proprietary information and I'm a startup, I'm not anywhere near 150% of the threshold, then I would not qualify as a senior executive.

[Sophie (Legislative Counsel)]: Right. So alphabetically, we're going to get to startup employee in just a moment. Okay. I think we're right there. Okay. So the other exception that's further in the bill, because again, there's a general prohibition on agreements not to compete, There are a couple of carve outs from that. So one is for the senior executive, and the other is for a start up employee. So this is the proposed definition of a start up employee, and that's an employee of a newly established business familiar with the employing entity's operations, processes and business plans, who earns at least 250% of the state minimum wage in total annual compensation. So again, that 250% of the state minimum wage, that will likely go up every year because, I mean, there's a formula that's in state statute regarding our minimum wage. Right now, it's $14.42 If you annualize that, it's right under 30,000. So if you have it at 250%, that's currently literally right under $75,000 So, that would be the salary threshold for a startup employee. The concern with setting that mean, obviously it's up to the committee you could set it lower than that. There was a concern about setting it too low, where you could have somebody that is part of a startup, but they're not making a livable wage. And that, I think, was kind of reflected in the testimony from the chiropractor, where she testified that she made about $25,000 So, one of the reasons she left the practice was because she didn't have a livable wage. So, I think it's finding that balance between a startup and having access to that really critical information for a startup company, but not offering them such a low salary that they're unable to live on it while non compete is in effect. So again, that may not be the right number, but that's the number that's in there right now, and it's around $75,000

[Michael Marcotte (Chair)]: Do we have a time period or a definition for a startup? No. I

[Sophie (Legislative Counsel)]: did look to see if there was a good definition. I'm gonna look at representative Olson who came up with this one, but I didn't find one that was sort of perfect. Think I don't want to speak for representative Olson.

[Herb Olson (Member)]: I didn't do a whole lot of work on trying to I mean, if we can find a better definition, I think it would be helpful. Just wasn't able to find. I goal- Only the time that I was willing to.

[Sophie (Legislative Counsel)]: Think the goal was to capture not just sort of having access to the secret source of a startup where you could cover that with a trade secret or a non disclosure agreement, but the fact that somebody knows all the intimate information around the startup, like what the business plan is, what they've done that's succeeded, what hasn't succeeded. It's sort of more the intangible information that a startup has. So, I think that was the intent behind trying to craft a definition. But again, this could certainly be something that gets changed.

[Herb Olson (Member)]: If I can add just one thing, didn't put in there, but you could think about duration, mean, what is newly established means. And you could think about some sort of duration from the time when the biggest entity is formed, I guess. That'd be one way to approach that.

[Michael Marcotte (Chair)]: So it could be revenue. Revenue, what could they start to revenue, or June?

[Kirk White (Ranking Member)]: I didn't imagine. But that

[Herb Olson (Member)]: could fluctuate. I'm not sure if that would come to mind in terms of a big startup. To me, that means something kind of new, but then the question is how long.

[Sophie (Legislative Counsel)]: And then both those definitions, the senior executive and the startup employee reference total annual compensation. So this includes a definition of what that would incorporate. So it's salary, commissions, non discretionary bonuses, other non discretionary compensation earned during a calendar year. And then what it would not include so board lodging, payments for medical insurance, payments for life insurance, contributions to retirement plans, or the cost of other similar benefits.

[Michael Marcotte (Chair)]: That's all policy. Can talk about that further.

[Sophie (Legislative Counsel)]: So moving on, this is where now Addison Let me go back up a bit. So we have the prohibition in an agreement not to compete is void non enforceable. And then in we have the exception. So no change to most of these. So the sale of a of a ownership in a business, dissolution of a partnership, dissolution of a limited liability company and a severance agreement. And then this is added language. So this now adds in the carve out for agreements not to compete with, again, with a senior executive or a start up employee, provided that the limitations set forth in the agreement are reasonable in time, geographical area and scope, and then it just references back up here to the reasonable requirements for a severance agreement. Again, that would have a time component to it. It doesn't have a fixed time component, but it would still need to be a reasonable amount of time. New subsection E. So there was testimony from the Vermont Medical Society around having just a blanket prohibition on agreements not to compete in health care. So again, the agreements not to compete that are permitted are those ones above, right, in D5 the senior executive or the startup employee. So, what subdivision E does is it says, notwithstanding those exceptions, and then it has any contract or agreement that creates or establishes the terms of a partnership, employment, or any other form of professional relationship with a health care provider. And, again, it's that broad term for a health care provider in Vermont which includes any restriction of the right of health care provider to provide health care services in any geographic area for any period of time after the termination of such partnership, employment or professional relationship shall be void and unenforceable with respect to restriction. So this, again, the goal here is just to provide a blanket prohibition in the healthcare field. And then the second section here is that if there is an agreement to provide healthcare services, it's going to be void and unaffordable if it makes the agreement subject to the laws of another state or requires any litigation arising out of agreements to be conducted in another state. And this was language that comes out of a New Mexico law, and this was specifically aimed at travelling nurses. An issue was raised that there are travelling nurses that have an agreement by which they're hired and come to work in Vermont that's out of state, but they may then choose to want to stay in Vermont. And so the goal of this language was to essentially have them covered by the laws of Vermont and any prohibitions that are in Vermont law. Again, this may need more work on it. This is what was requested.

[Anthony “Tony” Micklus (Member)]: Little concerned about this. If there's contracts getting done outside of the state for nurses that we desperately need in our our state. I know that if I was a business working out and I have these contracts, I would send them to Vermont. And that's a huge problem for our healthcare. I mean, everybody knows what I was like uncomfortable with this bill in general, but to me, that's really concerning. I get the reasoning, but it's, I think we're, you know, biting off our nose to spite our face on that, Cutting off her nose, sorry.

[Michael Marcotte (Chair)]: We can confirm with the hospitals that they're comfortable with this. They're the ones who are making those contracts and if they think that it is going to impede their ability to build their positions. Specifically get testimony from that.

[Anthony “Tony” Micklus (Member)]: I don't know if the hospital is in the right place to do it. I think providing companies that are doing it would be better because they would say, yeah, we're just not going to send people here. And if that's the vote we as a committee want to take, that's something that we're going to have to do. I hear

[Michael Marcotte (Chair)]: your concern. We should take testimony on it to make sure it's more than just a concern, but it's something valid in the industry. Because I don't work in that industry, you don't work in that industry. So our thoughts on it might not be what the issues are today. So let's get some testimony.

[Sophie (Legislative Counsel)]: The other concern I have with it just is in the very first line there provision and an agreement to provide health care services. So that could encompass all kinds of things beyond this. So again, I think it would be helpful to have more information to flesh this out. So the notice and opportunity to review is not new, it's just that it's been reorganised a little bit. So that's just a new heading there. And again, there was a request. So this language is if you are going to enter into a prospective agreement not to compete again with those two categories that are permitted, that you provide notice and you give people at least three business days to review it. And a concern was raised around, well, what happens if you're promoting somebody internally where you would want them to sign an agreement not to compete? And so this adds a subsection two that just provides that if an employer is a current employee to sign an agreement not to compete, again, that's in compliance with subdivision D5, that the employee would be provided with at least three business days to consider it before signing. This just adds a provision around collective bargaining, just to reflect that nothing in the section would be construed to limit alter or modify terms, conditions or provisions of a collective bargaining agreement. So if a union has negotiated something with the employer, there's at least been an equal playing field and negotiation there versus an individual with an employer. Collective bargaining language is pretty standard in a lot of bills to make sure there aren't unintended consequences on existing collective bargaining agreements. Age again, just renumbering. There was an issue last time around what does retaliation mean, and I would just note that this references another portion of the Fair Employment Practices Act that defines what retaliation is, so it doesn't need to be included directly in here. And then there was a request to add posting so that employees are aware of the provisions of this statute if it were to go into effect. And so this provides that an employer would post notices. Typically, happens is the Commissioner of Labor comes up with a form that employers then post in the poppy machine in the kitchen, wherever employees are likely to see it. And then this provides the effective date. This is to clarify. So normally we have the effective date just at the end of a bill. There was a concern around whether or not we took it out. Original bill had language in there that would have made the agreements not to compete prohibition apply to existing agreements, and that language came out. But it left open the question, as it was silent, what happens to existing agreements to compete? So this now adds specifically into the statute that it would go into effect only for agreements not to compete entered into on or after 07/01/2026.

[Anthony “Tony” Micklus (Member)]: So, if you go back up to the union part, so we're creating a carve out, even I get the union collective bargaining, but there might be non exempt employees in that collective bargaining. So we're carving out so that the union has the ability to not being subject to this law?

[Sophie (Legislative Counsel)]: So this essentially the goal is just to make sure that it doesn't interfere with with bargaining agreements that have already been agreed to. I don't know all bargaining agreements in the state. I think it's probably highly unlikely that there would be things that deal specifically with agreements not to compete. But if there were something in there, then this would protect that language that had been negotiated between the employer and the union. And you're right, some of the people in a union, certainly often in unions, are hourly or exempt or non exempt employees. I think this we haven't gone to the second section of the bill. I think it's probably more relevant to the second section. But again, it may be helpful to have some testimony from some of the union folks, like if this is necessary or if this is not needed on this. And then this is into the next section. This is the stay or pay provisions. There aren't as many amendments to this. It's just ones that are consistent with what we've already talked about. The one it does add is that if you do have a stay or pay provision, it won't be an unlawful employment practice. Again, there's a general prohibition here in section B. But in C, you can have one if and then you have a list of requirements to have a valid stable pay provision. And these are all cumulative, like you have to meet all of them. And the fifth one is just making it clear. I think before it was I don't remember exactly before, but this is to make it clear that it only is if the employee voluntarily separates from employment. So if the employee chooses to leave, then they would be required to make the repayment again, assuming the repayment terms are consistent with the rest of this language here. But if the employee is laid off or they're fired for some reason, then they would not be required to make the repayment. So, if I'm a

[Kirk White (Ranking Member)]: business and I have reduction in force and I lay people off, then that's on me, which it should be. Okay? And then if they be the employer, if the employee decides they're going work for somebody else, then they

[Sophie (Legislative Counsel)]: It's You don't seem to capture it with the goal here. What about

[Kirk White (Ranking Member)]: the colleagues? So if you fire an employee to a colleague?

[Sophie (Legislative Counsel)]: That's something that could be yeah. It could be that if they voluntarily leave or are fired from you could add that in.

[Kirk White (Ranking Member)]: Well, I think that as from the business perspective, if you fire an employee for cause, so if they're stealing from you, if they're whatever, then I think if you're invested in that employee and then they do that, I think you'd want the ability to be able to recapture those funds. Right?

[Sophie (Legislative Counsel)]: Yeah, I

[Kirk White (Ranking Member)]: mean we need to add language or is that plainly here?

[Sophie (Legislative Counsel)]: You would need to add that if you wanted to have the cause. Yes, you would have to add that language in. And again, there have been situations, not that I'm aware of in Vermont, but nationally, where people have been sort of lured in, like, we're going to give you free, you know, we're going to train you, we're going to do all this stuff for you. And then they're let go. It's basically a scam to extort money from people that don't have a lot of money. But yes, if there's a full cause termination, that language can certainly be added in.

[Herb Olson (Member)]: So, I'm probably just missing something. I've probably read it too many times. But I know we're thinking of because lawyers have their own set of rules around non traffics and stuff, that we can carve those out. Very sad. The idea that we would exempt from legal because they have a much broader scheme around. Basically, the client can follow you. You Where is that exclusion in here?

[Sophie (Legislative Counsel)]: They want to get taken out entirely, so it's just removed. It just doesn't reference attorney client because they're governed by the rules of professional conduct.

[Herb Olson (Member)]: Okay. I'll talk to you.

[Sophie (Legislative Counsel)]: Okay. And then, again, it has the the collective bargaining agreement and then the posting requirement, and then the this applies to all stay or pay agreements entered into after 07/01/2026 to make clear that it's prospective. So those were the proposed changes.

[Michael Marcotte (Chair)]: More questions for Sofji?

[Sophie (Legislative Counsel)]: On the

[Michael Marcotte (Chair)]: this is a question, this isn't an add in, anything like that. Can the posting be part of another posting?

[Sophie (Legislative Counsel)]: Yeah, so usually, I I don't know where they are in the State House, but there are these big, huge posters with tiny print on it, it's got all the Vermont laws, and then there'll be another one that has all the federal laws. And so, yeah, they may have to do that. So it ends a few

[Michael Marcotte (Chair)]: more lines on Unless we identify that it has to be its own oath, then it can be part of

[Sophie (Legislative Counsel)]: the Right. Right. Yeah, I use the same language that's used elsewhere in the statute regarding when the commissioner's been directed to do postings.

[Abbey Duke (Member)]: Thanks, Sophie. So what is the definition of a fiduciary? That's something that I've sort of been struggling with as we've been working on this, is when we say it applies to fiduciaries, what does that mean? Is it somebody who's licensed in a certain Anyway, do you know what that definition would be?

[Sophie (Legislative Counsel)]: So the request, I think, was anticipating sort of financial advisers that are fiduciaries. But again, we don't have a definition in the bill, and certainly one could be added in. And again, would, I guess, I don't know if Representative Olson wants to add something to that.

[Herb Olson (Member)]: Yeah. So when we were talking about this, are some professions where embodied in the agreement between client and whoever the professional is, is the notion that that professional is gonna act on behalf of the client. And it's usually baked into the agreement between the client and that professional. Some of those same professionals might not have that in their agreement. So then they would not be in a fiduciary relationship because they're not empowered to happen. So you could crack a definition sort of around that, but it wouldn't be, I think, by profession or occupation. I think it would be about defining it in terms of the relationship between the professional or whatever and and the client such that the client is a trusting fiduciary and trusting the affairs over that particular subject to the individual. So, like,

[Michael Boutin (Member)]: I have two listing contracts right now. Yeah. They're my fiduciaries. Right. So I said for selling real estate, we have a contract. I'm authorized to I'm just trying to help better help you all understand what fiduciary is. Well, would my clients, I sell real estate for are my fiduciaries because I am solely responsible. I can act on their behalf. I am sworn in my contract to be loyal to them even to my own detriment.

[Herb Olson (Member)]: Right. And it comes into this draft where because of that relationship, just seems to be that client should be able to follow you. Because the existing relationship is probably more important than the relationship between the client and the firm.

[Michael Boutin (Member)]: Right. Because I could one of my clients could be in foreclosure and late on their payments. And for someone else to find that information out would be could be very detrimental to that client.

[Herb Olson (Member)]: So you owed that relationship. You you owed those duties. And because that you have those, you know, real deep duties, the client probably wants to know and receive some notice from you when you move somewhere else. That's the concept.

[Abbey Duke (Member)]: Yeah, so it sounds like we do need a definition of it, I

[Kirk White (Ranking Member)]: think. Jonathan?

[Jonathan Cooper (Member)]: Hello, I think it was in one portion, we were discussing the health care services had included devices. And I was wondering if that is that medical device manufacturers? And and for what reason are they included? Or perhaps I'm misunderstanding.

[Sophie (Legislative Counsel)]: Primarily it's taken from some other statutory language and it's really just to be as broad as possible. So it might be, I don't know the whole world on the healthcare side, but maybe if you're an orthopedist, you're working with someone or a physical therapist, someone with a device to make sure that that's covered too. Again, the goal was more to cast the net broadly for healthcare providers, and that language came from a statutory definition of healthcare services that included devices. So I think the goal would be people in the healthcare field that might be running tests, diagnostics, and maybe devices as part of that.

[Kirk White (Ranking Member)]: So, again,

[Jonathan Cooper (Member)]: know Madam Bosch, you mentioned not working in the field would be good for us to take testimony on that. I certainly would glad to have that opportunity in the future. Thanks.

[Michael Marcotte (Chair)]: Any other questions? All right, well thanks. We have a break now until 02:30. So committee, you can now have a break. We'll be back here. Let's be on time. Start right at 02:30. That would be great. And then, yeah, we have the floor after that, so we can go off block.