massachusetts non-compete update - massachusetts non-compete update.pdf · enforceable because the...

Massachusetts Non-compete Update

Presented by: Denise Chicoine

Clear Law Institute | 4601 N. Fairfax Dr., Ste 1200 | Arlington | VA | 22203

www.clearlawinstitute.com

Questions? Please call us at 703-372-0550 or email us at

[email protected]

All-Access Membership Program

● Earn continuing education credit (CLE, CPE, SHRM, HRCI, etc.) in all states at no additional cost

● Access courses on a computer, tablet, or smartphone

● Access more than 75 live webinars each month

● Access more than 750 on-demand courses

Register within 7 days after the webinar using promo code “7member” to receive a $200 discount off the $799 base price.

Learn more and register here: http://clearlawinstitute.com/member

Clear Law Institute, © 2018

www.ClearLawInstitute.com (703) 372-0550

44 School Street ▪ Suite 800

Boston, MA 02108

T (617)723-7440

F (617)723-8849

[email protected]

www.ec-attorneys.com

255 State Street ▪ 5th Floor

Boston, MA 02109

T (617)897-5655

F (617)439-9363

[email protected]

www.sheehan.com

MASSACHUSETTS NONCOMPETE UPDATE

HISTORY OF NONCOMPETE

AGREEMENTS

In the 1400s noncompetes were unenforceable

under English common law as a restraint on trade.

In Massachusetts the 1837 case of Alger v. Thacher

followed English precedent to establish a framework, to

analyze the enforceability of non-compete agreements

reasonableness is the crux highly fact-dependent.

mailto:[email protected]



http://www.ec-attorneys.com/




mailto:[email protected] http://www.sheehan.com



EXAMPLES OF NONCOMPETE

ENFORCEABILITY

• California, North Dakota, and Oklahoma ban

noncompete agreements for employees.

• Noncompete agreements are disfavored and

analyzed critically in Virginia and Illinois.

• Florida and Texas routinely enforce no competes.

2018 NONCOMPETE LEGISLATION IN MASSACHUSETTS

New legislation in MA effective October 5, 2018

M.G.L. Chapter 149 § 24L

• Bill was 9 years in the making.

• Significant changes to Massachusetts law for trade

secrets and noncompetes



EMPLOYEE CONCERNS

• Inequitable employees who pose no real threat e.g.

fast food franchises.

• Overly broad companies imposed maximum

restrictions because courts can modify.

• No bargaining power employees required to sign

noncompete on first day or to keep their jobs.

NONCOMPETES IN

MASSACHUSETTS

Massachusetts courts have held for decades:

“A covenant not to compete is enforceable only

if it is necessary to protect a legitimate business

interest, reasonably limited in time and space,

and consonant with the public interest.”

See, e.g. All Stainless, Inc. v. Colby, 364 Mass. 773, 778

(1974).



2018 NONCOMPETE LEGISLATION

IN MASSACHUSETTS

3 main points

• What the employer pays

• Length of restriction

• Circumstances when it is banned


IN MASSACHUSETTS

Consideration:

What the employer must pay the employee to

make the non-compete enforceable cannot be

continued employment

Must include “garden leave” one-half of

employee’s salary for length of non-compete

or

other “fair and reasonable” compensation

(not defined)




IN MASSACHUSETTS

Length Of Restriction In Any Noncompete Agreement

Limited to 12 months

unless the employee is a bad actor

(stealing information or breaching fiduciary

duties)


IN MASSACHUSETTS

Circumstances when noncompetes are banned

• employees terminated without cause

• hourly workers

• undergraduate or graduate interns who

have short-term employment

• employees under 18




IN MASSACHUSETTS


IN MASSACHUSETTS

other requirements for valid noncompete

geographic reach

limited to areas where employee provided

services within last two years




IN MASSACHUSETTS

other requirements for valid

noncompete

scope

limited to types of services employee

provided during last two years


IN MASSACHUSETTS

Other considerations

right to counsel: agreement must

expressly state

choice of law: MA for any employee

living or working in MA

venue: where the employee

lives or Suffolk




IN MASSACHUSETTS

Other considerations:

parties can negotiate a noncompete at

departure, with seven-day revocation

not retroactive = does not apply to

noncompetes signed before

October 5, 2018


IN MASSACHUSETTS

Other considerations:

Legislation does not affect nonsolicitation

agreements, no raid agreements, and

nondisclosure agreements

different presumptions for sale of business

= contractual obligation



EMPLOYER CONCERNS

Enforceability of existing noncompete

agreements

noncompete signed before October 5, 2018 is

enforceable because the law is not retroactive

But legislation provides a public policy

statement that may be used by employees who

want to escape a non-compete they signed

before October 5, 2018

EMPLOYER CONCERNS

Enforceability of existing noncompete

agreements public policy challenges based on

new legislation

New agreements may now only last 1 year—

someone with a 2 year agreement may argue

that is unfair to hold them to 2 years



EMPLOYER CONCERNS

EMPLOYER CONCERNS



EMPLOYER CONCERNS

Undefined terms in the new law

scenarios that aren’t directly addressed

by the statutory language will lead to

uncertainty…. and that can lead to

litigation

EMPLOYER CONCERNS


Under the new law, an agreement signed

before or during employment must offer

“garden leave” = payment of an amount

during the entire non-competition period

equal to 50% of employee’s highest earnings

in last 2 years OR the employer can give

“other mutually-agreed upon

consideration.”



EMPLOYER CONCERNS

EMPLOYER CONCERNS



EMPLOYER CONCERNS


Could employers develop very broad

definitions of cause, so that if the company

lets someone go for simple performance

reasons it can still enforce the non-

compete?

EMPLOYER CONCERNS


what happens if an employer states the

employee was terminated for cause, but the

Division of Unemployment says that it was

not for “cause”

-- is the agreement enforceable or not?



EMPLOYER CONCERNS

undefined terms in the new law

Under the new law, a non-compete agreement is

not enforceable against an hourly worker. BUT

employers can enter an agreement when

someone leaves employment and include a

noncompetition provision, as long as there is

right to rescind within 7 days.

>Can hourly workers agree to this to get some

additional money?

WHAT SHOULD EMPLOYERS BE

DOING?

Review and update agreements that will be used

going forward:

Consideration

Length of time

Scope of restrictions




DOING?


DOING?




DOING?


DOING?

When an employer is letting someone go, decide:

Whether the termination is for cause or without

cause?

Whether you want to offer a separation

agreement with a noncompete provision (giving

7 days to revoke)




DOING?

Bolster your other agreements that you still can

give to all employees

• non-solicitation

• non-disclosure and confidentiality

• invention agreements

KEY TAKE AWAY

massachusetts non-compete update - massachusetts non-compete update.pdf · enforceable because the...

Documents