Massachusetts Enacts Comprehensive Noncompete Agreements Law

Author: Robert S. Teachout, XpertHR Legal Editor

August 15, 2018

A new Massachusetts law establishes minimum requirements for employment-related noncompete agreements to be enforceable and bans agreements that do not meet the law's requirements. Massachusetts joins several other states that have recently established new regulations for noncompete agreements. The new law applies only to agreements entered into on or after October 1, 2018.

To be enforceable under the Massachusetts law, an agreement must be in writing; signed by both the employer and employee; expressly state an employee's right to seek legal counsel before signing; and either:

  • Be provided at the time a job offer is made or 10 days before an employee starts work, whichever is earlier; or
  • Become effective at least 10 days after a current employee is provided with the agreement.

Under the law, a noncompete also may not be "broader than necessary" to protect an employer's legitimate business interests. This includes limitations on these agreements both in their duration and geographic scope.

In addition, the Massachusetts measure states that a noncompete cannot be enforced more than 12 months after the date of termination of employment unless the employee breaches a fiduciary duty to an employer or has unlawfully taken the employer's property; then an agreement may be enforced for up to two years.

Meanwhile, geographic restrictions must be limited only to areas where an employee provided services or had a material presence or influence during the last two years of his or her employment. And limitations on an employee's activities must focus on those activities reasonably related to protecting the employer's legitimate business interests.

The Massachusetts law also includes independent contractors in its definition of "employee." However, it makes noncompetes unenforceable for certain classes of employees, including:

  • Nonexempt employees under the Fair Labor Standards Act;
  • Undergraduate or graduate students enrolled in school and employed in short-term employment or internships;
  • Employees terminated without cause or laid off; and
  • Employees age 18 or younger.

The law requires that a noncompete entered into during the course of employment be supported by consideration other than continued employment. An agreement must provide "garden leave" pay to an employee for the entirety of the restriction period or specify some "other mutually agreed-upon consideration."

Garden leave is a type of leave in which an employer continues to compensate a departing employee while the employee stays at home and "tends to the garden." The garden leave pay must equal at least 50 percent of the employee's highest salary within the last two years of employment.

However, the law does not cover certain agreements, including:

  • Noncompete agreements made in connection with the sale of a business;
  • Noncompete agreements made in connection with the separation of employment (provided the employee is given seven business days to rescind acceptance);
  • Employee non-solicitation covenants;
  • Customer/client/vendor non-solicitation covenants; and
  • Non-disclosure of confidential information agreements.