The Massachusetts Noncompetition Agreement Act, applies to all non-competition agreements entered into on or after October 1, 2018,  and applies to all employees and independent contractors working in Massachusetts regardless of whether the agreement contains a choice-of-law provision. Here are the important points that you need to know.
Expressly Precluded Enforcement
In addition to the current statutory framework, the Act expressly precludes enforcement of non-competition agreements against the following classes of employees:
- Nonexempt employees under the Fair Labor Standards Act (i.e., hourly employees who are overtime eligible);
- Undergraduate or graduate students who are in an internship program or other short-term employment relationship with an employer (whether paid or unpaid) while enrolled in a full-time or part-time undergraduate or graduate educational institution;
- Employees terminated “without cause” or who are laid off; and
- Employees age eighteen or younger.
8 Minimum Requirements Under the Act
The Act applies to traditional non-compete agreements, but does not apply to other varieties of restrictive covenants, such as non-disclosure agreements, non-solicitation agreements, certain agreements applying to the sale of a business, and “non-compete agreements entered in connection with an employee’s separation, provided the employee has 7 days to rescind acceptance.” To be enforceable under the Act, a non-competition agreement must meet eight minimum requirements:
- If entered into at hire, the agreement must be signed by both the employer and the employee, expressly state that the employee has the right to consult with counsel prior to signing, and must be provided to the employee by the earlier of a formal offer of employment or ten business days before the hire date.
- If entered into during employment (after hire, but not in connection with separation from employment), there must be additional consideration independent from the continuation of employment supporting the agreement, and the requirements above (signed by both parties, employee given ten days’ notice, employee given notice of right to counsel) must be met. The Legislature did not provide much guidance on what consideration will satisfy this requirement. The Act simply states that the consideration must be “fair and reasonable.”
- The duration of the restriction cannot exceed twelve months, except that the duration can be as long as two years where the employee breached his or her fiduciary duty or unlawfully took the employer’s property.
- Incorporating long-standing common law requirements, the agreement must be no broader than necessary to protect an employer’s trade secrets, confidential information and/or good will. A non-compete agreement is presumed to be necessary where these interests cannot be adequately protected through other restrictions.
- Also incorporating existing law, the restriction must be reasonable in geographic scope. If the scope is defined as the areas in which the employee “provided services or had a material presence or influence” during the past two years, it will be considered presumptively reasonable.
- The agreement also must be reasonable in the scope of the prohibited activities in relation to the interests protected. The scope will be presumptively reasonable if it is limited to only the specific types of services provided by the employee during the last two years of employment.
- The agreement must provide some income protection for the employee during the restricted period. This must be in the form of either (i) a “garden leave” clause, where the employee is paid no less than 50% of the employee’s highest annualized base salary within the preceding two years, or (ii) “other mutually agreed upon consideration” set forth in the agreement. The latter concept is not defined in the statute, but would seem to contemplate that the employer and employee can agree to a figure that is lower than the garden leave requirement described above, provided that the precise amount or consideration is set forth in the agreement. The employer’s obligation to pay is relieved only if the employee breaches the agreement.
- The agreement must be consistent with public policy (as is the case under existing common law).
Additionally, the Act requires all civil actions to enforce employee non-competition agreements be brought in Massachusetts in the employee’s county or Suffolk County’s Business Litigation Session. The Act also allows courts to rewrite non-competes to make them valid and enforceable, to the extent necessary to protect the employer’s legitimate business interest. Furthermore, while the Act precludes enforcement of non-competition agreements against employees terminated without cause or who are laid off, it exempts separation agreements (i.e., a separation agreement that contains a non-competition clause), provided that the employee is given seven business days to rescind acceptance.
The following language should be added to all noncompete agreements entered into after October 1, 2018:
- Language that expressly states the employee’s right to consult with counsel prior to signing.
- Either (i) a “garden leave clause,” which provides pay on a pro rata basis during the entire restricted period of at least 50% of the employee’s highest base salary over the prior two years, or (ii) other mutually-agreed upon consideration.
- Language specifying that all actions in connection with the agreement must be filed in either (i) the employee’s county in Massachusetts, or (ii) Suffolk County’s Business Litigation Session.
If you have further questions about this law, contact Mike Paris at email@example.com.
 The new law does not govern or invalidate agreements that were signed before the effective date.
 The following laws prohibit noncompetition agreements for certain professions:
M.G.L. c. 112, § 12X (Physicians); M.G.L. c. 112, § 74D (Nurses); M.G.L. c. 112, § 129B (Psychologists); M.G.L. c. 112, § 135C (Social Workers); M.G.L. c. 149, § 186 (Broadcasting Industry); Mass. Rules of Professional Conduct 5.6 (Lawyers).