Non Compete Agreements and the Garden Leave Requirement in Massachusetts
Navigating Non-Compete Agreements and Garden Leave in MassachusettsThe legal landscape for non-compete agreements in Massachusetts has undergone significant changes with the introduction of the garden leave requirement. This requirement has reshaped the balance of power between employers and employees when it comes to enforcing non-competes.
Understanding the Impact of Garden LeaveIn the past, employers could easily deter employees from pursuing competing positions by threatening to enforce non-compete agreements. For employees, the cost of challenging these agreements often outweighed the benefits. Moreover, new employers were reluctant to hire individuals facing potential litigation.
Now, under the new law, employers must pay at least 50 percent of an employee's base salary during the restrictive covenant period unless they choose to waive the non-compete entirely. This means that if you are bound by a non-compete for six months, you are entitled to receive garden leave payments for the entire duration. This shift forces Massachusetts employers to carefully weigh the value of enforcing non-compete agreements against the added expense of providing garden leave payments. For many, the mere desire to retain talent may not justify the increased cost. Deciphering the Garden Leave Price TagThe law contains language that suggests garden leave can be negotiated as "other mutually agreed consideration." However, it also mandates that garden leave payments must equal or exceed 50 percent of the employee's highest annualized base salary. As the law is relatively new, courts have not had many opportunities to clarify this ambiguity. Therefore, it's essential to consult with legal counsel before signing any agreement to fully understand the implications of the garden leave provision.
Can Employers Opt-Out of Garden Leave?The statute provides two exceptions to the garden leave requirement. Firstly, if an employee breaches a fiduciary duty or unlawfully takes property belonging to the employer, they may forfeit their entitlement to garden leave.
Secondly, an employer can choose to waive the non-compete provision and avoid garden leave payments. However, the law doesn't specify when or how this waiver must occur. Therefore, it's crucial to consult with an attorney when considering job changes or facing termination to understand your rights regarding garden leave payments. Garden Leave and Severance PaymentsIn some cases, employers offer severance packages to terminated employees, which include certain payments in exchange for the release of legal claims. While substantial severance payments may qualify as "other mutually agreed consideration," they may still fall short of the 50 percent requirement. This raises questions about whether these payments provide adequate consideration for the release of claims.
It's important to note that the statute explicitly excludes non-compete provisions in separation agreements from its requirements. Therefore, if you are asked to agree to non-compete terms as part of a severance package, these provisions may still be enforceable, even if they do not meet all statutory requirements. |
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Garden Leave and Out of State Employers
The new law applies to individuals who live or work in Massachusetts, irrespective of their employer's location. A recent federal court decision suggested that out-of-state non-compete agreements without garden leave provisions may still be consistent with Massachusetts law. However, the interpretation of this decision may vary, and some out-of-state employers may argue against providing garden leave payments.
Garden Leave and the Massachusetts Wage Act
The garden leave payments must align with the statutory requirements governing the timely payment of wages. This designation means that failure to make these payments could subject the employer to triple damages under the Massachusetts Wage Act.
Unanswered Questions About Garden Leave
Several scenarios pose unanswered questions regarding garden leave:
- If an employee resigns without discussing the waiver of the non-compete, and the employer fails to make garden leave payments, can the employer later waive the non-compete?
- If an employee is terminated for cause and offered a severance payment equal to half a year's salary, does this qualify as garden leave under the statute? If so, is the release of claims in the severance agreement valid?
- If an employee is terminated and offered a non-compete agreement as part of a severance package, along with payment of less than 50 percent of their base salary, does the new non-compete cure any deficiencies in the original agreement?
Meet Our Employment and Non Compete Lawyers
Emily Smith-Lee is the owner and founder of slnlaw. She is a 1996 graduate of Boston College Law School. She was previously a partner at the Boston office of a large international firm, where she worked for thirteen years before starting the firm that became slnlaw in 2009. She has been recognized as Massachusetts Superlawyer each year since 2013, and in 2018 earned recognition as one of Massachusetts Lawyers Weekly's Lawyers of the Year. She has written a book on employment law: Rules of the Road, What You Need to Know About Employment Laws in Massachusetts, been interviewed by the Massachusetts Superlawyers magazine about non compete agreements, and written an op-ed in the New York Times about the dangers of non competes. Along with the rest of the slnlaw team, she has helped hundreds of clients navigate, negotiate, or defend against their non compete agreements.
Rebecca Rogers: Rebecca is a 2006 graduate of Boston College Law School, and has worked with slnlaw since 2013. She previously worked as an intellectual property litigation attorney for Fish & Richardson in Boston, Massachusetts, and clerked for the Massachusetts Supreme Judicial Court. Rebecca has helped many clients understand and evaluate their non compete agreements and develop strategies for defending against non compete enforcement and negotiating resolution.
Jenna Ordway: Jenna is a 2013 graduate of Quinnipiac Law School, and also earned an LLM in Taxation from Boston University in 2015. She has been affiliated with slnlaw since 2011, first as a law clerk and then as an attorney. Jenna has been recognized since 2019 as a "Rising Star" by Massachusetts Superlawyers. Jenna works with employers to develop reasonable and enforceable employee agreements, including non competes. She has also helped employees understand and evaluate their non compete agreements and develop strategies for defending against non compete enforcement and negotiating resolution.
Elijah Bresley: Eli is a 2014 graduate of Seton Hall Law school, and has worked with slnlaw since 2020. He previously worked for a boutique employment law firm outside of Boston, and then for the Labor and Employment department of a large Boston firm. He also spent a year clerking for the judges of the Superior Court in Hartford, Connecticut. Eli has helped clients both evaluate and negotiate their non compete agreements, and defended non compete claims in state and federal courts.
How We Can Help
Our experienced legal team can provide expert guidance and representation to navigate the complexities of non-compete agreements, garden leave requirements, and other employment-related matters in Massachusetts, ensuring your rights and interests are protected. 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.