How Does a Furlough Affect a Non Compete Agreement?
Navigating Non Compete Agreements and Furloughs: What You Need to KnowIf you have a non-compete agreement and have been through a furlough due to the pandemic, you might be wondering how this affects your non-compete restrictions. The lines between employment termination and furlough can be blurry, and it's essential to understand how this impacts your non-compete agreement. In a recent Massachusetts trial court decision, Harrell v. Backstage Salon & Day Spa, the court shed some light on this issue.
The Harrell v. Backstage Salon & Day Spa CaseIn March 2022, the court ruled that a furlough, even if temporary, should be considered a termination of employment. The plaintiff had been furloughed when the salon had to close at the beginning of the pandemic but returned to work in June 2020. She continued to work until May 2021 and then accepted a job with a direct competitor, potentially violating her non-compete agreement.
The court's decision was significant because it found that the furlough counted as a termination. Here's a key excerpt from the ruling: "Being placed on an indefinite furlough without pay, and with no guarantee of being rehired, constitutes a termination of employment." The court further concluded that the one-year non-compete period continued to run after her return to work. This decision implies that once the non-compete period starts, it doesn't "reset" if you return to work for the same employer. The plaintiff hadn't been asked to sign a new agreement upon her rehire, which allowed her to join a competitor one year or more after her initial furlough. Implications for Employees with Pre-Pandemic Non Compete AgreementsThis decision could have significant implications for individuals who had non-compete agreements in place before the pandemic and experienced a furlough. Whether or not a court considers your employment terminated during a furlough may depend on various factors, such as whether you received payment during that period or if you worked at all. The specifics of your health benefits during the furlough may also play a role.
As these questions continue to be addressed in courtrooms, it's essential to consult with an employment attorney if you're navigating a non-compete agreement affected by a furlough. |
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Impact on Employers Who Furloughed Employees with Non Compete Agreements
Employers who furloughed employees and later see them join competitors may face challenges in enforcing old non-compete agreements. If you want to avoid this issue in the future, consider having employees sign new non-compete agreements.
However, you need to be aware that pre-October 1, 2018, non-compete agreements were not subject to the Massachusetts Non-Compete Act, which imposed specific requirements on agreements signed after that date. If you do decide to enter new non competes now, you will have to comply with the 2018 statute, which means:
However, you need to be aware that pre-October 1, 2018, non-compete agreements were not subject to the Massachusetts Non-Compete Act, which imposed specific requirements on agreements signed after that date. If you do decide to enter new non competes now, you will have to comply with the 2018 statute, which means:
- The non compete agreement must include a "garden leave" clause providing for payment to the employee at 50% of their base pay for the restricted period.
- The agreement must also be supported by fair and reasonable consideration, provide employees with ten days to consider the non-compete, and be signed by both parties.
- Furthermore, post-October 1, 2018, agreements cannot be enforced against employees not exempt from overtime or those terminated without cause. Employers will need to carefully weigh their options when it comes to non-compete agreements in light of these legal changes.
How Our Non Compete Lawyers Can Help
At slnlaw, we can provide expert legal guidance on navigating the complexities of non-compete agreements in Massachusetts. Whether you're an employer seeking to draft enforceable agreements or an employee facing potential restrictions, our experienced attorneys are here to help you understand your rights, strategize your approach, and ensure your interests are protected in compliance with the evolving legal landscape. You can use the button below to schedule a call back from a member of our team, or give us a call at 781-784-2322.
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