Culminating a tumultuous, years-long effort, the Massachusetts legislature has passed legislation that regulates and limits the ability of employers to impose most types of non-compete agreements. The legislation is expected to be signed by the Massachusetts Governor and go into effect on October 1, 2018. It would affects noncompetes entered into by private sector employees in Massachusetts on or after that date. (For those of you with time on your hands, the text of the legislation is here.)
The legislation defines “noncompetition agreement” as follows:
an agreement between an employer and an employee, or otherwise arising out of an existing or anticipated employment relationship, under which the employee or expected employee agrees that the employee will not engage in certain specified activities competitive with the employee’s employer after the employment relationship has ended.
The legislation requires that a noncompete, to be enforceable, must satisfy four elements that resemble those used in courts’ (common law) analysis regarding enforceability, i.e. the noncompete must: (1) be as narrow as necessary to protect either the employer’s trade secrets, other confidential information, or goodwill; (2) be limited to one year in duration; (3) be reasonable in geographic area/scope; and (4) affect only those activities or services provided by the employee at any time during the last two years of employment.
Significantly, the legislation permits courts to “blue pencil” (reform and fix) and thereby salvage an otherwise problematic non-compete. That is, a noncompete that is invalid under the legislation is not per se void, although a court may elect not to blue pencil the noncompete.
The Act also carves out, and does not impact, certain categories of non-competes (e.g., those entered into in connection with the sale of a business) and certain categories of employees (e.g., short-term employees or employees terminated without cause).
The Act, if signed by the Governor as anticipated, will apply to noncompetes that are entered into on or after October 1, 2018. This means that employers with Massachusetts employees should start reviewing their noncompete language now, and employees should consider the impact of this legislation on any new employment situation they are contemplating.
The opinions expressed are solely those of the author(s). This content is provided as background and does not constitute legal advice.
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