New Bill to Modernize Noncompete Agreements Filed

Today Representative Lori Ehrlich (D-Marblehead) and Representative William Brownsberger (D-Belmont) filed a bill to codify, clarify, and modernize Massachusetts law relative to employee noncompetition agreements. In-depth analysis of the bill can be found here.

Noncompete agreements are frequently used by employers to prevent employees from working for competitors for a period of time following the employee’s departure from the company.  In Massachusetts, there is a long line of court decisions interpreting and enforcing such agreements, but there is not a state statute that codifies their use and limitations.

The noncompete bill — originally drafted by Russell Beck — would codify current law, which permits noncompete agreements to be enforced if, among other things, they are reasonable in duration, geographic reach, and scope of proscribed activities and necessary to protect the employer’s trade secrets, other confidential information, or goodwill.  In doing so, the noncompete bill filed today would provide more certainty to employers and employees by setting limits to the scope of permissible noncompete agreements.  The bill also details the types of restrictions that are presumptively reasonable.

Key provisions of the noncompete bill include the following:

  • The noncompete bill restricts noncompete agreements to one year.
  • There would be a two-year restriction on garden leave agreements (under which the employer compensates the employee while the employee is restricted from competitive activities).
  • The bill requires that noncompetes be in writing, signed by both parties, and, in most circumstances (i.e., if reasonably feasible), provided to the employee seven business days in advance of employment.
  • In the event of a claimed breach of a noncompete agreement, the noncompete bill requires payment of the employee’s legal fees under certain circumstances, primarily where the agreement is not enforced in most respects by the court or where the employer acted in bad faith.

The noncompete bill would not apply retroactively – it would only affect noncompete agreements that are entered into after the law becomes effective

The noncompete bill filed today contains many of the same provisions that appeared in a version that was filed in the prior legislative session.  A notable change includes the elimination of a salary threshold for the use of noncompete agreements.  While the version introduced in the prior session limited the use of noncompete agreements to employees earning at least $75,000, the new bill directs courts to factor in the economic circumstances of, and economic impact on, the employee.

For a complete analysis of the new bill, along with a discussion of the differences between the new and prior versions, please visit Fair Competition Law.

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