On October 1, 2018 a new law was enacted that will have extensive legal as well as every-day consequences for all companies with employees and contractors in Massachusetts. This new law governing non-competition agreements puts employers in a complex place, forcing them to examine the way their non-compete agreements are now executed, and potentially needing to revamp their older ones to make sure they are compliant.

Simply put, a non-competition agreement is an agreement between two parties under which one of the parties agrees that he or it will not engage in certain specified activities competitive with the other party.  Non-competition arrangements may typically be found when two parties enter into a supply agreement, an acquisition, or in the employer-employee context, which is the focus of the new law.  With this new Act, employers are much more limited in what and when they can impose on their Massachusetts workers and independent contractors, and the cost to them.

For a non-competition agreement to be effective, the non-compete must now protect a legitimate business interest, not exceed one year, and be reasonable in geographic scope and prohibited activities.  Some exceptions still exist, such as non-compete agreements stemming from the sale of a business; non-compete agreements stemming from

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.

 

The new law also differentiates between non-compete agreements entered into prior to the start of employment versus those that are drawn up during the course of employment.  Prior to the commencement of employment, the agreement terms must:

• be in writing;
• be signed by both the employer and employee;
• expressly affirm the employee’s right to consult with counsel prior to signing; and
• be provided to the employee before a formal offer is made

Alternatively, if a non-compete agreement is produced during the course of employment, though not related to the employee’s separation from the company, the agreement must

• be supported by fair and reasonable consideration;
• be provided at least 10 days prior to the effective date;
• be in writing;
• be signed by both the employer and employee; and
• state that employee has the right to consult with counsel before signing.

If a non-compete is found to be in violation of this new law, courts will either reform an overly broad agreement or otherwise void the provision altogether.

As a result of the enactment of the new non-competition law, all employers who maintain non-competes for Massachusetts employees should consult with qualified employment counsel to determine if their current contracts are still operable, and also to draft comprehensive boilerplates for new agreements.  Contact us to find out more on this important subject as this is just a sampling of the requirements of the new laws.