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Massachusetts Legislators Refile Modified Non-Compete Legislation

Last year, I reported on the status of a new non-compete bill that, for the first time in Massachusetts, attempted to codify its non-competition law. After summarizing the details of the bill in April, I reported in October that the bill had died in Committee. However, as stated at that time, Senator Brownsberger, one of its sponsors, promised to present a new bill on the same subject in a future session. Well, the future is now.

The new bill clarifies and modifies the old bill, mostly in an attempt to satisfy businesses that found portions of the bill unacceptable. As modified, the new bill appears to have a good chance of passing this coming spring. Rather than summarize each provision of the modified bill, this article highlights some of its unique provisions.

Highlights of the Modified Bill

1. The new non-compete bill is limited to employment agreements. The bill specifically does not include: agreements not to solicit or hire employees from the employer; agreements not to solicit customers of the employer; non-competition agreements made in connection with the sale of a business; or agreements by employees not to reapply for employment after termination.

2. The new bill limits the length of a valid non-compete agreement to one year, however, it re-introduces the concept of garden leave, which is the only method in which one can extend the covenant not to compete to two years.

3. Unlike the old bill, the modified bill excludes any salary that one must exceed for the agreement to be enforceable. Instead, the new bill simply states that the employee’s compensation be “reasonably adequate,” thus allowing the court to take into consideration the economic impact on the employee.

4. In addition to non-competition agreements entered into at or in anticipation of hire, the new bill also deals specifically with agreements that are entered into during the term of employment. No longer is “continued employment” adequate consideration alone, a concept that some Massachusetts courts have already questioned. If the bill becomes law, the employee must also receive “fair and reasonable” consideration if the agreement is signed during the term of employment.

5. The new bill provides that the non-compete agreement must be in writing and signed by both parties, along with prescribed minimum notice requirements to the employee, before it becomes effective.

6. The new bill rejects the inevitable disclosure doctrine.

7. The new bill creates presumptions of what constitutes reasonable duration and scope of the non-compete agreement, thus providing some guidance to the parties.

There are other important provisions in the attached bill and I am sure that amendments will be proposed before the final bill is presented for a vote. As always, I will keep you posted.