Non Compete Agreements in Massachusetts

Are Non Compete Agreements Enforceable in Massachusetts?

Whether your non compete clause is legally binding may depend on when you signed your agreement. That is because a new Massachusetts law took effect in 2018 creating stricter requirements for enforcement of non compete agreements. Agreements entered before October 1, 2018, will be governed by the old rules. 

If you signed it on or after October 1, 2018, you may have some new and clearer defenses. In either event, there are some common defenses available to most people facing a non compete challenge. The basic rules are outlined below.

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The New Massachusetts Non Compete Law and What It Means to You

In 2018, the Massachusetts Legislature passed a statute limiting the enforcement of non-compete agreements. 

The new law applies to all non compete agreements signed on or after October 1, 2018. The law requires employers in Massachusetts to give you ten business days to review and consider the agreement before signing. Your employer also must tell you to get legal advice before signing. 
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The new state law also sets certain clear and specific requirements for an agreement to be valid and enforceable. These include:
  • The employer must agree to pay you at least 50% of your salary or other mutually agreed upon consideration during the non compete period. This is called a "garden leave" clause. If it is not part of your agreement the agreement is likely unenforceable.
  • Certain employees cannot be held to a non compete agreement. These include employees who are not exempt from overtime, employees under the age of 18, and a few other categories.
  • If you are terminated without cause or laid off, you cannot be held to your non compete.
  • If an employee resides and works in Massachusetts, the new state laws of Massachusetts will apply, even if your agreement has a choice of law provision that says otherwise.
  • These provisions only apply to a restrictive covenant signed in connection with employment, not to a non compete related to the sale of a business. The new law also does not apply to non-solicitation agreements or nondisclosure agreements.
These changes, though meant to clarify Massachusetts non compete law, create their own uncertainties. For example:
  • What does it mean to be terminated without cause or laid off under the statute? 
  • Are you exempt from overtime?
  • What are the things that you might do that could put the "garden leave" payments in jeopardy? 
  • What does it mean to breach a fiduciary duty to your employer that would relieve them of the obligation to make garden leave payments? 
  • Can mutually agreed upon compensation as a garden leave provision be less than 50% of your salary? 
You can see the answers to frequently asked questions about the new law. We can also help you answer these questions with our same day non compete review service.

Enforcing a Non Compete Under the Old Rules

Even if you signed your agreement before October1, 2018, Massachusetts law still limits enforcement under certain circumstances.

Massachusetts courts will only enforce a non compete agreement if it is reasonable in time and geographic scope, and if it protects a legitimate business interest of the employer. 

The definition of "reasonable" depends on the circumstances. Under the common law, there was no bright line test for period of time or geographical area. 

Courts will look at whether the period of time and geographic scope are reasonable and necessary to protect the employer. Specifically, are they reasonable in light of the sensitive information and/or good will that the employer claims. 

For example, we have seen nationwide non competes enforced where the employee had a nationwide sales territory. In contrast, a 25 mile non compete may be unenforceable for a hair stylist whose customers come from a 10 mile radius. We have also seen longer non competes enforced where the legitimate business interest was a valuable trade secret.

A non compete cannot prevent an employee from working for a competitor just because your former employer does not want you to. The non compete has to protect either the employer's confidential information or its goodwill.  "Good will" generally means the reputation and relationships you have built with customers or clients under the employer's name. 

There are other common defenses to a non compete. These include:
  • If you signed your non compete after starting employment, you may be able to resist enforcement if you were not paid something to sign it. The new law makes this explicit, but even before October 2018 there were some cases that rejected such non competes for lack of consideration.
  • If your job and/or compensation changed materially after you signed the agreement, you may have an argument that the original agreement was voided.
  • If your employer did not pay you as agreed, you may have an argument that the employer has lost the right to enforce the agreement.
  • If you are paid as an independent contractor you may have additional grounds to challenge the non compete under the Massachusetts Independent Contractor Law.
The bottom line is that even if you have a non compete that does not fall under the new law, there are available defenses.  You should consult with an employment lawyer experienced in non compete law to assess those defenses.  You can also read some case studies about people we have helped with their non compete agreements.

How We Can Help

Our non compete 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.