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Massachusetts Non-Compete Reform Legislation

Published:  February 13, 2017

For many years, the Massachusetts legislature has proposed various bills to reform and limit non-compete agreements.  The Massachusetts House and Senate have again proposed legislation related to non-compete agreements that, if enacted into law, would have a significant impact on employers.   

The bill imposes specific obligations on employers that apply at commencement of employment, over the course of employment, and upon termination of employment.  If the non-compete agreement is entered into at commencement of employment, employers must provide advance notice, the agreement must be in writing, and it must expressly state that the employee has the right to consult with counsel before signing the agreement.  In addition to these obligations, if the non-compete agreement is entered into after commencement of employment, there must be consideration independent of continued employment.  Also, employers must review non-compete agreements with employees at least every three years.  And, upon termination of employment, employers must provide written notice within ten business days of their intent to enforce the agreement or they waive such right.   

In addition, the bill would require that non-compete agreements be narrowly tailored and limited in scope.  Agreements must be narrowly tailored to protect an employer’s legitimate business interests, such as an employer’s trade secrets, confidential information, or the employer’s goodwill.  Agreements must be reasonable in scope.  Under this bill, a restriction on activities that protects a legitimate business interest and that is limited to only the specific types of services provided by the employee during the last two years of employment is considered reasonable.

The bill also imposes time and geographic limitations.  Agreements must be limited to one year from the date of termination, or two years if an employee breaches a fiduciary duty or unlawfully takes company property.  Agreements must be reasonable in geographic reach.  Under this bill, a geographic reach that is limited to only the geographic areas in which the employee provided services or had a material presence or influence during the last two years of employment is considered reasonable.

Further, the bill prohibits enforcing non-compete agreements against certain employees including non-exempt employees, students, and employees that are terminated without cause or laid off.

These requirements would obligate many employers to make changes in their current practices.  

If you have any questions regarding non-compete agreements, please contact any of the attorneys at Royal, P.C.