Non Compete Agreements and Severance in Massachusetts
The new Massachusetts non compete law that went into effect in 2018 imposes strict requirements for non compete agreements. These requirements provide greater protection for employees burdened by unfair or excessive post-employment restrictions. The law, however, does not apply to non competition agreements in certain situations, including agreements made in exchange for severance pay. In addition, some severance agreements contain language about pre-existing non-competes that you need to read carefully. Below are some things you should know before signing a severance agreement if you have any intention of competing with your former employer.
Reaffirming Non Compete in Severance Agreement
Sometimes buried in the pages of a severance agreement is a representation or agreement concerning a non compete you may have signed years ago. This may not cause you much concern- after all, if you had an agreement before it shouldn't change much to acknowledge it in a severance document.
However, there are some defenses you could be waiving by agreeing to that language. For example, there have been cases where courts refused to enforce a non compete because the employee's job or compensation had changed over the years since signing the agreement. By reconfirming the agreement in your severance document, you could lose the ability to raise that defense to enforcement.
Also, especially if you have been in the same job for a long time, you may not even remember whether you had a non-compete in the first place. You want to be sure that the wording of your severance agreement is not creating new obligations that you may never have had before.
New Non Compete in Severance Agreement
The Massachusetts non compete statute specifically states that it does not apply to "noncompetition agreements made in connection with the cessation of or separation from employment if the employee is expressly given seven business days to rescind acceptance."
If you are simply re-affirming a prior agreement, it is unlikely that the severance would be considered "made in connection with the cessation of or separation from employment." Remember, though, this is a relatively new law and there have not been many court decisions interpreting it. It is entirely possible that someone will make this argument in the future, and what a court will do with it is uncertain.
If you are agreeing to a new non compete in exchange for severance pay, understanding how this affects you is critical. You must be given seven business days to change your mind, or rescind. Presumably this means if that is missing, the agreement is not enforceable (again, note that the law is new and there is not much case law interpreting it).
The common law rules that predate the statute will still apply to a non compete that is part of a severance package. In short, that means the agreement must be reasonable in time and geographic reach, and must be necessary to protect either the employer's confidential information or its goodwill.
Need Help With a Severance Package?
How We Can Help
We can help you get clarity on your severance agreement and how it might impact what you can and cannot do after your employment ends, so that you can make an informed decision. 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.