Non-Compete Agreements in Massachusetts

In August 2018, the Massachusetts legislature enacted a wide ranging law covering non-competition agreements. We give you a summary of the new requirements for an enforceable agreement below:Non-Solicitation Agreements Not IncludedThe new law covers noncompetes only. It explicitly does not include (and the requirements below will not apply to):

• 1. Covenants not to solicit or transact business with customers, clients, or vendors of the employer
• 2. Noncompetes in the context of the sale of a business or substantial assets thereof, when the individual is a "significant" equity holder and will receive "significant" consideration for the transaction
• 3. Noncompetes in connection with a separation agreement, if the employee is given seven days to rescind the agreement
• 4. Covenants not to solicit or hire employees of the employer

Noncompetes Must Comply With All of the Following to Be Enforceable

• 1. Noncompetition period may not be longer than 12 months unless the employee breaches a fiduciary duty or unlawfully takes company property, in which case the noncompetition period can be up to 24 month

• 2. Agreement must provide for either:
• "Garden leave," which means at least 50% of the highest annualized base salary paid to the employee within the two years prior to termination; or
• "[O]ther mutually agreed-upon consideration between the employer and the employee" specified in the agreement

• 3. If Agreement is made in connection with the commencement of employment:
• Agreement must state that the employee has the right to consult with an attorney prior to signing
• Agreement must be provided to the employee by the earlier of:
• The tender of a formal offer of employment
• 10 days before commencement of employment

• 4. If Agreement is made after commencement of employment:
• Agreement must be supported by "fair and reasonable consideration, independent from the continuation of employment"
• Notice of the agreement must be provided 10 business days before the agreement is to be effective
• Agreement must state that the employee has the right to consult with an attorney prior to signing

Noncompetes Not Allowed For

• 1. Employees who are terminated not for cause or laid off
• 2. Nonexempt employees (i.e., hourly wage earners who are entitled to overtime pay)
• 3. Students partaking in internships or "short-term" employment
• 4. Employees age 18 or under

Additionally, the new law cannot be circumvented by making the agreement subject to the law of another jurisdiction if the employee was a resident of or employed in Massachusetts for at least 30 days immediately prior to his/her termination.