On August 10, 2018, Massachusetts Governor Baker signed new legislation limiting the enforcement of non-competition agreements against employees and independent contractors who reside in Massachusetts. Under the new law, which will take effect on October 1, 2018, employers will only be able to enforce a non-compete by paying a former employee.
Payment may be agreed upon by the parties, but the default requirement is payment of at least fifty percent of the employee’s highest base salary during the prior two years for the term of the non-compete. In addition to this expense, employers will also face hurdles in drafting non-compete provisions. For example, on the procedural side, if a non-compete is signed at the commencement of employment, the provision must be presented to the employee at the time of the employment offer or ten days prior to beginning work. If the agreement is signed after employment, consideration of outside continued employment must be provided.
Moreover, the legislation codifies substantive reasonableness limits, including limited scope of activity and geography and typically a maximum duration of only one year. For certain employees — including minors, undergraduate and graduate student employees, and non-exempt employees under the Fair Labor Standards Act — non-competes are entirely unenforceable.
All employers of Massachusetts residents should review their existing contractual arrangements to ensure compliance with the new law. For more information about Massachusetts’ new non-competition law, please contact your Ally Law lawyer.