Russell Beck and Erika Hahn‘s article analyzing how the “new” Massachusetts Noncompetition Agreement Act deals with the issue of consideration was published by Massachusetts Lawyers Weekly under the title, “The New Noncompete Law: Compromise Happens.”
The analysis focuses on how the Commonwealth’s noncompete reform law, which went into effect on October 1, 2018, handles the issue of compensating employees for a noncompete that arises after the employee has already started their employment. The law specifies that such agreements “must be supported by fair and reasonable consideration independent from the continuation of employment,” G.L.c. 149, §24L(b)(ii). This is a requirement that does not exist for a noncompete signed at the start of employment.
For a noncompete entered into at the start of employment, “mutually-agreed upon consideration” is required (or, in the alternative, a garden leave clause). According to the article,
Reading the two consideration provisions together, the question becomes, if “fair and reasonable consideration” is the standard for consideration for mid-employment noncompetes (when there is a heightened concern for an employee’s leverage), doesn’t that mean that something less than “fair and reasonable consideration” suffices for a noncompete entered at the commencement of employment (when the concern is less pronounced)?
The relative concern giving rise to the requirement of “fair and reasonable consideration” seems to support such a conclusion.
Although the conclusion that something less than “fair and reasonable consideration” is all that is required for a noncompete signed at the start of a new job might seem unfair, that is precisely what the law has always been. Courts do not review the adequacy of consideration, just the fact of it.
But, if that is what the Legislature intended, why include the option of garden leave? The unsatisfactory answer is that inclusion of the garden leave option was a necessary compromise to avoid losing all of the progress that had already been made, including notice requirements, a ban on noncompetes for nonexempt employees, a 12-month durational limit, and, of course, the “fair and reasonable consideration” requirement for employees asked to sign a noncompete mid-employment.
The analysis concludes that the new noncompete law may not change the consideration analysis for noncompetes arising out of the start of a new job:
Thus, a new job and associated compensation and rights may be — as it always has been — sufficient consideration under the new noncompete law.
Time will tell if courts will read greater implications into the inclusion of the garden leave option. Until then, as with many other new laws, we will continue to grapple with some uncertainty, while our clients benefit from the many positive aspects of the new law.
For up-to-the-minute analysis of legal issues concerning noncompete agreements in Massachusetts and across the United States, read Russell Beck’s blog, Fair Competition Law.
eck Reed Riden LLP is among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment law and business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience.
The Wall Street Journal featured Beck Reed Riden LLP’s noncompete agreement experience. In 2016, the White House issued a report entitled, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses,” relying in part on Beck Reed Riden LLP’s research and analysis, including its 50 State Noncompete Survey.
Russell Beck’s work in this area is well recognized; it includes:
- Over twenty two years of working on trade secret, noncompete, and unfair competition matters
- Assisting the Obama White House as part of a small working group to develop President Obama’s Noncompete Call to Action
- Authoring the book Negotiating, Drafting, and Enforcing Noncompetition Agreements and Related Restrictive Covenants (5th ed., MCLE, Inc. 2015), used by other lawyers to help them with their noncompete cases
- Authoring the book Trade Secrets Law for the Massachusetts Practitioner (1st ed. MCLE 2019), covering trade secrets nationally, with a focus on Massachusetts law
- Drafting and advising on legislation for the Massachusetts Legislature to define, codify, and improve noncompetition law
- Teaching Trade Secrets and Restrictive Covenants at Boston University School of Law
- Founding and administrating the award-winning blog, Fair Competition Law
- Establishing and administrating the Noncompete Lawyers and Trade Secret Protection groups on LinkedIn, with over 1,600 members around the world
- Founded and chaired the Trade Secret / Noncompete Practice for an AmLaw 100 firm
In addition, Russell was honored for his work in this area of law in the 2019 Chambers USA Guide, which stated that Russell Beck is a “terrific” attorney, who “is an excellent choice of counsel regarding noncompete agreements and the resolution of restrictive covenant disputes.” Chambers noted that Russell “basically wrote the new Massachusetts statute on noncompetes” and that “he’s an expert in employee mobility and nonrestrictive covenants.”
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