You’ve spent years building relationships, know-how and a reputation, and you’re worried a key employee will take them to a competitor. Or you’re the employee, and you’ve been handed a non-compete and want to know whether it can actually hold you back. In Massachusetts, the answer for most agreements signed on or after October 1, 2018 comes from the Massachusetts Noncompetition Agreement Act, G.L. c. 149, § 24L. Its requirements are strict, and an agreement that misses one of them may not be enforceable.
What counts as a non-compete?
The Act covers agreements in which an employee or prospective employee promises not to do work competitive with the employer after the job ends. It also covers independent contractors. It does not cover several related agreements, including:
- Agreements not to solicit or hire the employer’s employees
- Agreements not to solicit or do business with customers, clients or vendors
- Nondisclosure and confidentiality agreements, and invention assignment agreements
- Non-competes signed as part of selling a business by a significant owner who receives significant value from the sale
- Non-competes in a separation agreement, if the employee is expressly given seven business days to rescind
Those agreements are judged under older common law rules instead. That’s why many employers rely on non-solicitation and confidentiality agreements, which are often easier to enforce.
What makes a Massachusetts non-compete enforceable?
Under § 24L(b), a non-compete must meet every one of these minimum requirements:
- In writing, signed by both sides, and expressly stating that the employee has the right to consult a lawyer before signing.
- Timely notice. For a new hire, the agreement must be given by the earlier of the formal offer of employment or 10 business days before the job starts. For a current employee, notice must be given at least 10 business days before it takes effect.
- New consideration for current employees. If signed after employment starts, it must be supported by fair and reasonable consideration beyond simply keeping the job.
- A legitimate business interest. It can be no broader than necessary to protect trade secrets, other confidential information, or goodwill.
- No more than 12 months. The restricted period can’t exceed 12 months after employment ends, or 2 years if the employee breached a fiduciary duty or unlawfully took the employer’s property.
- Reasonable geographic reach. Limiting it to the areas where the employee provided services or had a material presence during the last 2 years is presumed reasonable.
- Reasonable scope. Limiting it to the types of services the employee provided during the last 2 years is presumed reasonable.
- Garden leave or other agreed consideration. The agreement must include a garden leave clause or other mutually agreed consideration that is spelled out in the agreement.
- Consistent with public policy.
What is garden leave?
A garden leave clause requires the employer to keep paying the former employee during the restricted period. To qualify, it must pay at least 50 percent of the employee’s highest annualized base salary in the 2 years before termination, on a pro-rata basis, and the employer can’t stop paying on its own except if the employee breaches. Employers who don’t want to pay garden leave can instead specify another form of consideration both sides agree to, such as a signing payment. The consideration must be stated in the agreement.
Who can’t be bound by a non-compete?
Under § 24L(c), a non-compete can’t be enforced against:
- Employees classified as nonexempt under the federal Fair Labor Standards Act, generally hourly workers eligible for overtime
- Undergraduate or graduate students in an internship or short-term job while enrolled
- Employees who were terminated without cause or laid off
- Employees age 18 or younger
Separate statutes go further for certain professions. A restriction on the right to practice in any geographic area for any period after the relationship ends is void for:
- Physicians, under G.L. c. 112, § 12X
- Registered nurses and licensed practical nurses, under § 74D
- Psychologists, under § 129B
- Social workers, under § 135C
Broadcasting industry employees have similar protection under G.L. c. 149, § 186. In each case, the rest of the contract generally stays in force, so a confidentiality or non-solicitation clause in the same agreement may still apply.
Other rules worth knowing
- A court can rewrite it. A judge may reform an overbroad non-compete to the extent needed to protect the employer’s legitimate interests, rather than strike it entirely.
- Out-of-state law usually won’t work. A choice-of-law clause that avoids the Act isn’t enforceable against an employee who lived or worked in Massachusetts for at least 30 days before leaving.
- Where to sue. Lawsuits must be brought in the county where the employee lives or, if both sides agree, in Suffolk County Superior Court or its Business Litigation Session.
For employers: drafting tips
Decide first whether you need a non-compete at all, or whether a non-solicitation and confidentiality agreement would protect you. If you do use one, present it with the offer letter rather than on the first day, keep it to 12 months or less, tie the territory and activities to what the employee actually did, and choose garden leave or another clearly stated form of consideration. Review older agreements signed before October 2018 too, since they’re judged under different rules.
For employees: before you sign
Read the agreement for its length, territory and restricted activities, check whether you fall into one of the excluded groups, and look for the required statement about your right to consult a lawyer. If you’re being asked to sign after you’ve started, ask what new consideration you’re receiving. A short review before signing is far less expensive than a dispute after you leave.
Attorney Gaudet can draft or review a non-compete for your business, or help an employee understand an agreement before or after signing. Call 978-273-8337 or contact our office.
About the Author
Richard Alan Gaudet, Esq. is a Massachusetts attorney at the Law Offices of Richard Alan Gaudet, LLC in Middleton, Massachusetts, who advises employers and employees on non-compete, non-solicitation and confidentiality agreements. His practice focuses on professional license defense, business law and litigation, family law, and landlord representation, serving clients across Northern, Eastern, and Central Massachusetts. Reach him at 978-273-8337 or rgaudet@gaudetlawoffice.com. Office: 35 Village Rd., Ste 100, Middleton, MA 01949.
ABOUT THIS ARTICLE
This article was prepared by a Massachusetts attorney and is provided solely for general informational and educational purposes directed to members of the general public. It does not constitute legal advice and does not create an attorney-client relationship. The law applicable to any particular situation depends on the specific facts and circumstances of that matter. Readers are encouraged to seek the advice of a licensed Massachusetts attorney before taking any action.
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