After years of debate, Massachusetts enacted a new law that governs non-competition agreements (frequently referred to as ‘non-competes’) between employers and employees. The law went into effect October 1, 2018. It includes many changes to the way non-competes will be drafted and enforced moving forward. Below is a run through of key provisions. Check to see how your agreement matches up.
- The law applies to non-compete agreements entered into on or after October 1, 2018. The law is NOT retroactive, meaning if you signed a non-compete or had your employees sign a non-compete prior to October 1, 2018 this law does not apply.
- The law applies to post-employment non-compete agreements. Restrictions during employment are permissible.
- Employers are prohibited from requiring certain categories of employees (e.g. non-exempt, overtime eligible employees) to enter into non-compete agreements.
- The law applies to employees and independent contractors.
- The non-compete period generally cannot extend beyond one year (there are exceptions).
- Continued employment is not sufficient consideration for the non-compete agreement to be enforced.
- The non-compete must provide ‘garden leave’ or ‘other mutually agreed upon consideration’ to be enforceable. ‘Garden leave’ means payment of 50% of the employee’s highest salary during the restricted period. What ‘other mutually agreed upon consideration’ means remains unclear.
- Non-compete agreements are not enforceable against an employee who is laid off or terminated without cause.
- The law does not apply to other restrictive agreements, such as non-solicitation, non-disclosure, or confidentiality agreements.
- The law does not apply to separation or severance agreements containing a non-compete.
For more detailed information about this law, visit the mass.gov website.
As the new Massachusetts non-compete law is not yet even a year old, it remains to be seen how dramatic of a shift it will be for employees and employers in practice. Still, there are many potential implications as you can see from above. If you are an employee being asked to sign a new compete you should have it reviewed by an attorney to see if it complies with the new law’s dictates. If you are an employer and have not already revised your non-compete agreements, it is time to do so. In either scenario, Swartz Law can help. Call us at 617-871-1500 or email us today to set up a consultation to review your Massachusetts non-competition agreement.