On October 1, 2018, the Non- Competition Agreement Act went into effect in Massachusetts. This law applies to all noncompetition agreements (“agreements”) entered into by employers and employees or independent contractors in Massachusetts on or after October 1, 2018. This new law does not apply to non-solicitation agreements, nondisclosure or confidentiality agreements, or invention assignment agreements. This law also does not apply to noncompetition agreements made in connection with the sale of a business entity, where the party restricted by the agreement is a significant owner (member/partner) who will receive significant consideration from the sale.
While this law is set out in its entirety at M.G.L. c. 149, § 24L, the following are a few provisions of note for employees:
- If the agreement is entered into prior to the start of employment, it must be in writing, signed by both parties, and provided to the employee at the formal offer of employment or 10 business days prior to the start of employment;
- If the agreement is entered into during employment, it must be supported by fair and reasonable consideration other than continued employment;
- The agreement must not be broader than necessary to protect the employer’s trade secrets, confidential information or goodwill;
- The restricted period must not exceed 12 months from the end of employment in most cases;
- The agreement must be reasonable in geographic reach, or limited to the geographical area where the employee provided services in the last 2 years of employment;
- The agreement must be reasonable in scope, or limited to the types of services provided by the employee in the last 2 years of employment;
- The agreement must be supported by a garden leave clause in most cases, where the employee receives payment of at least 50% of his/her highest annualized base salary paid withing the last 2 years of employment;
- There can be no agreements with non-exempt employees, under-graduate/graduate students in internships, employees that were terminated without cause or laid off, and employees under the age of 18.
- The agreement can not contain a choice of law provision that would avoid the requirements set forth by the new law.
Before signing any agreement, it is important to understand the effects that agreement may have on your future ability to obtain employment. Contact us if you have any questions.