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MA Law to Tightly Regulate Post-Employment Covenants Not to Compete; Uniform Trade Secret Act is Adopted

On 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.