Non Compete Agreements in Massachusetts
Non compete agreements in Massachusetts have always been subject to scrutiny by the courts. This is because of the serious impact they have on the ability of employees to move freely in the marketplace and to earn a living in their chosen field or profession.
In 2018, the Massachusetts legislature passed a new law creating specific requirements for enforcing non-competes. The old rules are still relevant, however. Not all agreements are subject to the new law, either because they were signed before it took effect or because they are in categories that the statute has excluded (for example, noncompetes in a severance agreement or signed in connection with the sale of a business).
The landscape is still complex, in short. If you are considering a non compete, thinking about leaving a job, or deciding whether to implement these agreements in your business, it is a good idea to confer with an employment lawyer before taking the next step. In the meantime, we hope the information below is helpful to you.
In 2018, the Massachusetts legislature passed a new law creating specific requirements for enforcing non-competes. The old rules are still relevant, however. Not all agreements are subject to the new law, either because they were signed before it took effect or because they are in categories that the statute has excluded (for example, noncompetes in a severance agreement or signed in connection with the sale of a business).
The landscape is still complex, in short. If you are considering a non compete, thinking about leaving a job, or deciding whether to implement these agreements in your business, it is a good idea to confer with an employment lawyer before taking the next step. In the meantime, we hope the information below is helpful to you.
What is a Non Compete?A noncompete is a written agreement between an employee and the employer. They are usually signed at the beginning of employment, as a condition of getting the job. The agreement usually states that for a period of time after leaving the job, you will not work for a competitor of the company.
Often a non compete is part of a larger documents that includes other provisions such as non-solicitation and nondisclosure clauses. People sometimes refer to the entire agreement as a "non-compete," and sometimes the title to the agreement even includes those words, when in reality the only restrictions are non-solicitation and nondisclosure. A true non-compete limits you from working in competition with your employer whether or not that competition involves solicitation of their customers or clients. Understanding Your Non CompeteThough there are many grounds to challenge enforcement of a non compete, it is important for you to understand the terms of your agreement, because there is also always a chance it will be enforced as written. Whether you are considering signing a new agreement or weighing your options about looking for a new job, here are some things you want to consider:
How does the agreement define competition? Some agreements state that you can't provide services or products in competition with services or products you were involved with while employed. Others define competition more broadly, seeking to include everything that the company offers even if you had nothing to do with it. Imagine, for example, a non-compete with a company like Amazon that restricted competition with any product or service the company offered. If you work for a large, diversified company you will want to be sure you are only restricted in your sphere of influence. What is the restricted time? Typically, non competes seek to restrict your activities for anywhere from 6 months to two years, though we have seen even longer time periods. Though you can (probably successfully in most cases) argue that a longer time period is unreasonable, if you are making a decision about leaving or taking a job you will need to understand the worst case scenario. What are the enforcement provisions? Sometimes the agreement will state that if there is litigation over its terms, the losing party will have to pay the other side's legal fees. If the provision is mutual, then it is both a risk to you but also a risk to the employer for making an unsuccessful attempt to enforce the agreement (because they could end up paying for your attorney if they lose). We have often seen these provisions only go one way- in favor of the employer. You should make sure you understand whether the provision protects you as well as the employer. |
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Consideration for Signing a Non Compete
If you are asked to sign a non compete, you should receive some kind of benefit, or consideration, for your agreement. Historically the offer of a new job was sufficient consideration to support the agreement, as it is under the new statute. There was debate, and there were conflicting court decisions, about whether continued employment was enough. What is different post 2018 is that the law now explicitly requires you to receive "fair and reasonable consideration independent from the continuation of employment."
The statute does not define what is "fair and reasonable," but it is fair to say it needs to be more than a token and must be something of actual value. This could be a raise, a bonus, equity, or other tangible benefit.
The statute does not define what is "fair and reasonable," but it is fair to say it needs to be more than a token and must be something of actual value. This could be a raise, a bonus, equity, or other tangible benefit.
Will a Court Enforce My Non Compete?
Whether your non compete is enforceable will depend on many factors, including whether you signed it before or after October, 2018, the nature of your job, your history with your employer, and what the terms of the actual agreement are. Though the new law was intended to provide greater clarity, and in many ways does so, the reality is that, for most people, this the answer to this question will require analysis by an experienced employment lawyer.
Here are some resources you can access to get a better understanding of enforcement of non-competes in Massachusetts:
Here are some resources you can access to get a better understanding of enforcement of non-competes in Massachusetts:
- Agreements Signed After October 1, 2018: Requirements of the Massachusetts Non-Compete Act
- Agreements Not Subject to the Act: Common Law Rules About Enforcement
How We Can Help
Our employment lawyers can help you navigate these issues and get clarity on your rights and obligations as an employer or an employee. We can also help you respond if you have been served with a lawsuit or a cease and desist letter. 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.
