New Non-Compete Law in Massachusetts
It’s taken nearly a decade, but Massachusetts has finally passed a new law regulating the use of non-compete agreements in the private sector.
On August 10, Governor Charlie Baker signed into law “An Act relative to the judicial enforcement of noncompetition agreements.” It’s important to note that the act does not apply to: non-disclosure agreements; non-solicitation agreements; and certain agreements applying to the sale of a business and invention assignment agreements.
1. Who is covered? Massachusetts residents and Massachusetts employees, including independent contractors.
2. Who is excluded?
Employees who are classified as non-exempt under the Fair Labor Standards Act
Undergraduates or graduate students who are engaged in short0term employment
Employees who are 18 years of age or younger
Employees who have been terminated without cause or laid off
3. What are the minimum requirements for the agreement?
Must be in writing.
Must be signed by the employer and employe.
Must include provisions which expressly state that the employee has a right to counsel prior to signing.
Must not exceed 12 months in duration, unless the employee has breached a fiduciary duty or has unlawfully taken the employer’s physical or electronic property, which could extend the duration to a maximum of 24 months.
Must be provided to the employee at least ten days prior the date of hire (or at least ten days prior to the effective date of the agreement, if entered into after the date of hire.)
Must include a “garden leave” provision, which would require the employer to pay the employee at least 50% of the employee’s highest annualized base salary in the past two years, or “other mutually agreed upon consideration” (which is not defined by law).
If signed after employment has commenced, the employer must provide “fair and reasonable consideration,” which must be more than an offer of continued employment alone.”
Geographical – reasonable
Prohibited activities – reasonable
4. When does it take effect? October 1, 2018 (but not retroactively).