On October 1, 2018, a new law went into effect that impacts an employer’s use of non-competition agreements with Massachusetts employees. This new law does not apply to certain non-competition agreements entered into as part of: (1) the sale of a business; (2) severance/separation agreements (so long as the employee has seven days to revoke the acceptance of such agreement); (3) non-solicitation agreements; and (4) confidentiality agreements.
Here is a brief list of some of the activities this law provides that employers must follow in order to enter into such agreements with employees who work in Massachusetts:
- Provide the non-competition agreement in writing to new employees at the time of the offer, or 10 days before start of employment, whichever is earlier
- Signed by both employer and employee
- Contain reasonable terms (restriction period cannot exceed one year (up to two years, but only if an employee breached a fiduciary duty or has taken property of the employer); no broader than necessary to protect legitimate business interest; reasonable in geographic scope)
- “Garden Leave” requirement – employers must pay employees during the restricted period either 50% of their highest annualized base salary employee received within two years of termination, or “other” mutually agreed upon consideration
- Restrictions on where you can bring a law suit to enforce non-competition agreements
The law further provides that any non-competition agreement signed by an employee after the start of employment must be supported by “fair and reasonable consideration independent from the continuation of employment.”
Additionally, the law provides that non-competition agreements cannot be enforced against certain types of employees, including those non-exempt under the Fair Labor Standards Act; undergraduate or graduate students engaged in an internship or other short term employment; employees terminated without cause or laid off; or employees 18 years of age or younger.
This post has not covered all of the requirements of this new law. While this law does not apply to those non-competition agreements entered into before October 1, 2018, employers who currently use non-competition agreements for Massachusetts employees should contact an employment attorney to determine how this law impacts their current and future non-competition agreements.