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Executive Order on Non-Compete Agreements

Jul 28, 2021
Executive Order on Non-Compete Agreements

On July 9, 2021, President Biden signed an Executive Order aimed at promoting a more competitive marketplace for America workers, businesses, and consumers. In order to promote workers’ ability to switch jobs and negotiate higher wages, the Order encourages the Federal Trade Commission (“FTC”) to restrict the use of non-compete agreements in employment contracts. If the FTC does propose a ban on non-competes, there certainly would be much debate about whether the FTC has the authority to implement such a ban and whether the ban would in fact “promote competition in the American economy.


Currently non-compete agreements are regulated by states, which diverge on whether and to what extent they enforce non-compete agreements. In 2018, the Massachusetts legislature passed the Noncompetition Agreement Act limiting the use of non-compete agreements by providing strict criteria that the agreement must meet in order to be enforceable. The law applies to contracts between employers and independent contractors entered into after October 1, 2018.


The law provides that to be enforceable, a non-compete agreement:


  • must be no broader than necessary to protect employers’ legitimate business interests, which include employers’ trade secrets, employers’ confidential information, or employers’ goodwill with customers;
  • cannot last for more than one year after the end of employment; and
  • must be reasonable with respect to geographic area and activities restricted.


The law also includes a provision requiring non-compete agreements to contain a garden leave clause or some other form of mutually agreed to consideration specified in the agreement. A garden leave clause would require employers to pay employees 50% of their highest salary during the last 2 years, while the non-compete agreement was in effect.


Under the law, non-compete agreements cannot be enforced against (1) non-exempt employees; 2) employees who are terminated without cause or laid off; (3) undergraduate or graduate students engaged in an internship or other short-term employment; and (4) employees aged 18 or younger. Other Massachusetts laws also ban non-compete agreements for physicians, nurses, psychologists, social workers, broadcasters, and lawyers.


For questions about non-competes or any other employment law matter, please contact the attorneys at The Royal Law Firm at (413) 586-2288.

06 Mar, 2024
Walking a Fine Line  By Trevor Brice, Esq.
14 Feb, 2024
Effective January 1, 2024, all businesses conducting and engaging in business within the United States, have one more requirement to add to their list. The Corporate Transparency Act (“CTA”), was passed by Congress in 2021, and recently took effect January 1, 2024. What is it? The Act requires businesses to report their “beneficial owners” to the government through a Beneficial Ownership Information (BOI) report. A “beneficial owner” is someone who owns 25% or more of the business or exercises substantial control over it. The reports are made to the United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN), which has been tasked with maintaining a national registry of beneficial owners of the reporting companies. Why was this passed? The Act is Congress’ attempt to prevent money laundering, terrorism financing, tax fraud, and other illicit activities including human and drug trafficking and securities fraud (aka prevent shell corporations and hiding money). While shell corporations are not illegal, they can be used to engage in activities that shield entities from legal liability, which is disfavored by the government and courts. Certain circumstances actually benefit from the use of a shell corporation, i.e. where companies seek to take advantage of doing business “offshore.” However, the “bad actors” who abuse this business structure have used such strategies for personal gain and, according to the government, hide from legal liability. Who does it effect? The new reporting requirement affects all businesses, corporations, and LLCs, no matter how big or small. It also affects non-US entities that are registered to conduct business with any state or territory within the United States. How do you comply? To remain in compliance with the reporting requirement, business must file the report by year end of 2024. If you create a business this year, 2024, but before January 1, 2025, you will have 90 calendar days after receiving notice of the company’s creation or registration to file the initial BOI report. Notice is actual notice received or public notice by the secretary of state, whichever is earlier. Failure to comply could lead to financial penalties or jail time. Such penalties include felony convictions, $500 daily (for every day of non-compliance) penalty up to $10,000, up to two years in prison. If your business has any questions on this topic or any other matters, please do not hesitate to contact the attorneys at The Royal Law Firm at 413-586-2288.
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