Restrictive covenants are still enforceable in Massachusetts
Many employees have heard that Massachusetts has changed the law over noncompete agreements and are under the (mis) impression that restrictive covenants no longer are enforceable in Massachusetts. While some states, like California, do not permit non-compete agreements, Massachusetts has not banned them entirely. The law changed in 2018, and as of October 2018, noncompetes are only enforceable if they meet the following requirements.
(i) The agreement, must be in writing, signed by both the employer and employee, and presented to a new employee at the earlier of the formal offer or 10 business days before her employment commences. The employee must be notified of his right to consult with a lawyer.
(ii) If the agreement is entered into after the employee starts work (but not in connection with the separation from employment), it must be supported by fair and reasonable consideration. “Continued employment” used to be enough to support a mid-term noncompete agreement but isn’t any more. The employer must give the employee 10 business days to review and state that he has the right to consult an attorney.
(iii) The agreement must be no broader than necessary to protect one or more of the following legitimate business interests of the employer: (A) the employer’s trade secrets; (B) the employer’s confidential information that otherwise would not qualify as a trade secret; or (C) the employer’s goodwill.
(iv) The restricted period (after employment ends) cannot be longer than a year, except in limited circumstances (such as employee theft).
(v) The agreement must be reasonable in geographic reach in relation to the interests protected.
(vi) The restrictions must be reasonable. A restriction on activities that protects a legitimate business interest and is limited to only the specific types of services provided by the employee at any time during the last 2 years of employment is presumptively reasonable.
(vii) The noncompetition agreement shall be supported by a garden leave clause or other mutually-agreed upon consideration between the employer and the employee, provided that such consideration is specified in the noncompetition agreement. “Garden leave” means the employee has to pay at least 50 percent of the employee’s highest annualized base salary paid by the employer within the 2 years preceding the employee’s termination; and (ii) cannot unilaterally fail or refuse to make payments (except in limited circumstances).
It is important that employees consult a lawyer immediately upon receipt of a noncompete agreement to make sure it complies with these protections and to understand what they can or cannot do once they leave or are fired. It makes a difference whether an employee is fired for cause or not for cause. It also makes a difference whether the noncompete is inserted into a separation agreement. Restrictions on soliciting clients or customers still may be valid notwithstanding the new law.