NEW LAW — Massachusetts Restricts Non-Compete Agreements

On August 3, 2018, Massachusetts governor Charlie Baker signed the Massachusetts Noncompetition Agreement Act (see Section 24L)  into law.  This new law, which goes into effect on October 1, 2018, places new limitations on non-compete agreements between employers and employees.

First, under the new law employers are prohibited from entering into post-termination non-compete agreements with the following types of employees:

  • Non-exempt employees,
  • Employees who are terminated without cause (including as a result of a layoff),
  • Interns and
  • Minors.

For all other employees , the scope of any non-compete agreement is limited as follows:

  • Non-competes are limited to a term of one year (except in the event of an employee breach of fiduciary duty to the company or theft of company property) and employers must compensate employees during this period of non-competition.
  • The  geographic scope of non-competition agreement must be “reasonable” in geographic reach in relation to the interests protected.
    • A geographic reach that is limited to only the geographic areas in which the employee, during any time within the last 2 years of employment, provided services or had a material presence or influence is presumed to be reasonable.
  • The agreement must be reasonable with respect to the types of activities that are prohibited under the agreement.
    • A restriction on activities that protects a legitimate business interest and is limited to only the specific types of services provided by the employee at any time during the last 2 years of employment is presumed to be reasonable.

Finally, the law imposes the following notice requirements upon employers:

  • New employees must receive notice that a non-compete agreement will be required as a condition of their job offer either (1) before the job offer is communicated, or (2) 10 days prior to their first day of work, whichever is earlier.
  • Existing employees subject to a new non-compete agreement must have at least 10 days to review the agreement.

It is recommended that all Massachusetts employers who use non-compete agreements review their existing agreements to determine if they comply with the new law.