MA Law to Tightly Regulate Post-Employment Covenants Not to Compete; Uniform Trade Secret Act is AdoptedOn August 17, 2018 by Schnader
Effective October 1, 2018, employers seeking to bind employees to post-termination non-compete agreements will face significant new requirements and limitations.
Important elements of the new law include:
- Limitation of otherwise lawful non-competition period to one year;
- Restriction of non-competition agreements to overtime exempt employees only;
- Prohibition of enforcement of non-competition agreements against any employee whose employment terminated without cause or due to layoff;
- Non-compete for newly hired employees: requirement that non-compete agreement be provided on the earlier of the date of the offer of employment or ten days before the commencement of employment;
- New non-compete for existing employees: requirement that newly-required non-compete be supported by “fair and reasonable” consideration that is independent from continued employment;
- Elimination of continued employment as sufficient consideration for post-employment non-competition agreements;
- Requirement that former employee be placed on “garden leave” during non-competition period and paid during that time a minimum of 50% of his/her highest annualized base salary paid by the employer within the 2 years preceding employee’s termination, or provided “other mutually agreed-upon consideration”;
- Declaration that choice-of-law clauses naming states other than Massachusetts are unenforceable as against residents of Massachusetts or workers employed in Massachusetts for more than thirty days;
- Inclusion of independent contractors as parties protected by the new law.