The New Massachusetts Noncompetition Agreement Act Implications For Employers
The new Massachusetts Noncompetition Agreement Act goes into effect on October 1, 2018. All employers using noncompetition agreements (“NAs”) with their employees (including independent contractors) will need to evaluate how this new legislation will impact their operations. This update outlines some key provisions in the new law.
NAs signed before October 1 are not covered by the new law. For NAs signed after October 1, the new law imposes many new restrictions and requirements for NAs with employees to be enforceable.
One key provision in the new law is that NAs with certain groups of workers signed after October 1 will no longer be enforceable:
- Hourly workers who are non-exempt employees (those eligible for overtime under federal law);
- Undergraduate or graduate students in a short-term employment relationship; and
- Employees under age 19.
After October 1 NAs with employees outside of these categories will generally be allowed, but with new restrictions. Some key provisions of the law require that NAs entered after October 1 st with new employees must:
- Be provided to a prospective employee at the earlier of 10 business days before commencement of employment, or at the time of a formal offer; and
- Expressly state that the employee has the right to consult with an attorney before signing.
For NAs signed after October 1 with existing employees the NA must, in addition to the requirements for new employees, also be supported by fair and reasonable consideration to the employee in exchange for agreement to the restriction on noncompetition. The offer of continued employment will no longer be adequate to support enforcement of the NA.
In addition to the requirements listed above, the new law also requires that all NAs with employees:
- Restrict competition for no more than 12 months;
- Be reasonable in geographic area;
- Be reasonable in the scope of prohibited activities;
- Be in writing and signed by both employee and employer; and
- Include a “garden leave” clause (payments to the employee during the restricted period) or other mutually agreed upon consideration.
Even if a NA meets the above requirements, if the employee is laid off or terminated without cause, the NA becomes unenforceable.
Other employee restrictive covenants, such as non-solicitation, nondisclosure and confidentiality agreements, are still available to employers. Employers should consider using these types of agreements in situations where they will no longer be able to enforce NAs with certain categories of employees. Please reach out to us if you would like to discuss this new legislation and how it impacts your existing employee agreements and your business, and to discuss what changes you will need to make under the new law.
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