Non-compete agreements are a common feature of employment contracts in Massachusetts, designed to protect businesses from unfair competition by former employees. However, these agreements are subject to specific legal requirements under Massachusetts law to ensure fairness and enforceability. We review what non-compete agreements are, the legal framework governing them in Massachusetts, and key considerations for both employers and employees.
What Are Non-Compete Agreements?
A non-compete agreement is a clause in an employment contract that restricts an employee from working for competitors or starting a competing business for a specified period after leaving their current employer. These agreements aim to:
- Protect trade secrets and confidential information.
- Preserve customer relationships.
- Prevent unfair competition.
Legal Framework for Non-Compete Agreements in Massachusetts
The enforceability of non-compete agreements in Massachusetts is governed by the Massachusetts Noncompetition Agreement Act (MNAA), which took effect on October 1, 2018. Key provisions of the law include:
- Written Agreement: The agreement must be in writing and signed by both the employer and the employee.
- Notice Requirements: Employees must receive the agreement either at the time of their job offer or at least 10 business days before starting employment.
- Fair Consideration: If the agreement is entered into after employment begins, the employee must receive fair consideration, such as a raise, bonus, or other tangible benefits.
- Reasonable Restrictions: The agreement must be limited in scope, geography, and duration. Typically, the duration cannot exceed 12 months unless the employee has engaged in misconduct.
- Garden Leave Clause: Employers must pay the employee at least 50% of their salary during the restricted period or provide other mutually agreed-upon compensation.
- Exclusions: Certain employees, such as non-exempt workers under the Fair Labor Standards Act, are not subject to non-compete agreements.
Key Considerations for Employers
Employers must carefully draft non-compete agreements to comply with Massachusetts law. Key considerations include:
- Defining Legitimate Business Interests: Clearly identify the specific interests the agreement seeks to protect, such as trade secrets or customer goodwill.
- Reasonable Limitations: Avoid overly broad restrictions that could render the agreement unenforceable. Ensure the geographic and temporal limitations are appropriate to the role.
- Proper Compensation: Include a garden leave clause or equivalent compensation to comply with statutory requirements.
- Regular Review: Periodically review and update non-compete agreements to align with changes in the law or business operations.
Key Considerations for Employees
Employees should understand their rights and obligations under a non-compete agreement. Important considerations include:
- Review Before Signing: Carefully review the terms of the agreement and consult with an attorney if necessary to understand potential restrictions.
- Negotiation Opportunities: Negotiate terms that may be overly restrictive or request clarification on vague language.
- Impact on Future Employment: Consider how the agreement may affect future job opportunities and career mobility.
- Challenging Enforceability: If the agreement is overly broad or does not comply with Massachusetts law, it may be challenged in court.
Examples of Non-Compete Enforcement in Massachusetts
- Reasonable and Enforceable: An employee in a sales role agrees not to work for competitors within a 10-mile radius for six months after termination. The court upholds the agreement due to its reasonable limitations.
- Overly Broad Restrictions: A software engineer is prohibited from working in the tech industry anywhere in the U.S. for two years. The court finds the agreement unenforceable due to excessive geographic and temporal restrictions.
- Failure to Provide Garden Leave: An employer enforces a non-compete agreement without offering garden leave pay or equivalent compensation. The court invalidates the agreement for non-compliance with MNAA requirements.
Massachusetts Non-Complete Agreement Lawyer
Non-compete agreements in Massachusetts must balance the interests of employers with the rights of employees. Employers must ensure their agreements comply with state law, while employees should understand their rights before signing. If you need assistance drafting, reviewing, or enforcing a non-compete agreement, consult an experienced Massachusetts employment law attorney to navigate this complex area of law.
