Alert: New MA Law Limits Scope of Non-competes
Following passage of the Massachusetts Noncompetition Agreement Act in August, employers in the state must now comply with a new set of rules for any non-compete agreements executed on or after October 1, 2018.
The law specifies that, to be valid and enforceable, a non-compete must meet certain minimum requirements:
- If entered into in connection with the commencement of employment, the agreement must be in writing and signed by both the employer and employee and expressly state the employee has the right to consult counsel before signing. It must be provided at the time of the offer of employment or 10 business days before an employee’s first day, whichever is earlier.
- If the agreement’s entered into after commencement of employment and not in connection with separation from employment, it must be supported by fair and reasonable consideration independent of the continuation of employment and be provided at least 10 days before it takes effect. It also must be in writing and signed by both parties and expressly state the employee has the right to counsel before signing.
- The agreement must not be broader than necessary to protect the employer’s trade secrets, confidential information or goodwill.
- The stated restriction period cannot exceed 12 months from the date of cessation of employment unless the employee has breached their fiduciary duty to the employer or unlawfully taken property of the employer; in those cases, the duration may not exceed two years from the date of cessation of employment.
- The agreement must be reasonable in geographic reach to the interests protected, meaning, it must be limited to areas where the employee provided services or had a material presence or influence within the last two years.
- The agreement must be reasonable in the scope of proscribed activities in relation to the interests protected.
- The agreement must be supported by a garden leave clause or other mutually-agreed upon consideration between the employer and employee. A garden leave clause requires the employer to provide payment of wages on a pro-rata basis during the restricted period of at least 50 percent of the employee’s highest base salary in the two years prior to termination.
- The agreement must be consistent with public policy.
In addition, non-competes are not enforceable against workers who are nonexempt under the FLSA, enrolled undergrad or graduate students working in an internship or short-term employment relationship, have been terminated without cause or laid off, or are 18 or younger.
With these significant changes to non-compete law in the state, contact Complete Payroll Solutions at 888-865-4470 with any questions about how you may need to adapt your practices to comply.