Beware of Free Non Compete Templates
Why Free is Not Always Free
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If you are thinking about using non competition agreements in your business, you may have done a google search to learn more about them. If you did, you probably saw half a dozen or so ads for "free" non compete agreements.
The format is similar across most of these offerings. You input the information you want, including how long the restricted period is, the name of the employee, and other details. This will generate a form agreement that you may or may not be able to download and use without setting up an account and/or paying something for the document. But that is not the biggest problem with these "free" templates. The real problem will cost you a lot more than the nominal charge you may have to pay to get a usable download of the agreement. The real problem is that not a single one of the seven services we tested produced an agreement that was enforceable under Massachusetts law. This means any employer who relied on these templates to protect their trade secrets and goodwill will find themselves unprotected after their key employees leave. What Was Missing From the "Free" Non Compete TemplatesGarden Leave ProvisionsFor any non compete agreement signed on or after October 1, 2018, Massachusetts law requires that it contain a "garden leave" provision. This is a provision that entitles the employee to be paid at 50% of their highest earnings during the restricted period, unless the employer waives the non compete. This a specific condition to the validity of the agreement. Without it, a court may either "write in" an agreement to pay the employee or refuse to enforce the agreement altogether.
12 Month Limit on RestrictionsMassachusetts law also limits the length of a restricted non compete period to 12 months. If you have an agreement with a longer period, a court may either amend it downward to one year, but it is also possible that it will not be enforced at all.
Time for Employee to ReviewIn Massachusetts, you can no longer present a new employee with a non compete on their first day and expect them to sign it. The law requires that they be given ten days to review and consider the agreement before signing. This right to review must be specifically set forth in the agreement.
Unlike the length of the restricted period or the garden leave provision, this is not something a court can "cure" after the fact. This means it is highly likely if you do not have this in your agreement that it will not be enforced. Right to Consult an AttorneyIn addition to providing time to review, your agreement must advise the employee that they can consult with an attorney before signing the agreement. Like the time to review, this is difficult for a court to cure after the fact. If you do not have this provision in your agreement, it is highly likely that it will not be enforced.
Acnowledgment of Massachusetts Law |
An agreement that will cost thousands of dollars in legal fees down the road and leave your business unprotected is never free.
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Another error we found with the free templates is that they allowed us to specify a state other than Massachusetts whose law would govern the agreement. This may seem like a simple way to get out of the many requirements of the Massachusetts statute, but it is not valid. The statute specifically states that Massachusetts law governs a non competition agreement with any employee or contractor who lives or works in Massachusetts, regardless of what the agreement says.
Other Issues
There were many other shortcomings in the "free" templates. These are areas of concern even if they do not invalidate the agreement entirely. For example, most of the agreements did not address the ownership of intellectual property created during employment at all. This leaves the employer at risk that a former employee might claim copyright in the works they were paid to create.
These agreements also provided no guidance on what might be considered reasonable in terms of time limits and geographical scope. They simply asked the user to fill in what they wanted. This can be an expensive mistake, because what a court will judge to be reasonable is very fact-specific. Experienced advice ahead of time can prevent costly litigation over the reasonableness of the terms.
These agreements also provided no guidance on what might be considered reasonable in terms of time limits and geographical scope. They simply asked the user to fill in what they wanted. This can be an expensive mistake, because what a court will judge to be reasonable is very fact-specific. Experienced advice ahead of time can prevent costly litigation over the reasonableness of the terms.
How Can We Help?
We have years of experience helping business owners protect their legitimate interests through valid non compete and non solicitation agreements, and we would be happy to help. You can use the button below to schedule a call back from a member of our team, give us a call at 781-784-2322, or fill out our web form to let us know a little more about your situation.
