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Friday, October 20, 2017

The Future of Massachusetts Non-Competition Agreements

Most people have experience with non-competition agreements, whether they love them (generally employers) or hate them (generally employees). 

In 2016, both the Massachusetts House of Representatives and the Massachusetts Senate passed different versions of non-compete reform bills.  Unfortunately, by the end of the legislative session, they were unable to come to reach an agreement on non-compete reform.

In early 2017, a new non-compete bill was filed which grew out of earlier versions of legislation introduced in Massachusetts.  This bill, if passed, would make significant changes to non-competition law in Massachusetts.  Some of the key changes would include: (a) limiting non-competition agreements in duration to twelve months in most cases; (b) prohibiting the enforcement of non-competition agreements against employees who were laid off or terminated without cause; (c) requiring additional consideration (i.e. not just continued employment) for non-competition agreements that are entered into after the employee has already begun working for the employer; (d) informing the employee in writing that he or she has the right to counsel prior to signing the non-competition agreement; and (e) prohibiting the Court from reforming over-broad non-competition agreements.

If these proposed changes sound familiar, it is because people having pushing for them to become law in Massachusetts for years.  Understandably, most employers are less than enthusiastic for these changes to take place, as they seem to almost universally benefit the employee.  Essentially, this bill (or any bill with similar provisions) would drastically reduce the reach of non-competition agreements in Massachusetts.

So, for now, the old way still stands.  Valid non-competition agreements must be "necessary to protect a legitimate business interest, reasonably limited in time and space, and consonant with the public interest."  A court will review the non-competition agreement to make sure it is "no more restrictive than necessary." Massachusetts Courts have found that limited business interests including protection of proprietary information, trade secrets, confidential information, and client lists.

In terms of what "reasonably limited in time and space" means, this is an area that scares both employees and employers.  Non-competition agreements can range from six months to five years (or more) and anything in between.  Distances also have a large geographically range.  That is why obtaining proper counsel is important for both employers and employees as it is at the Judge's discretion what qualifies as "reasonably limited in time and space."

Of importance, in Massachusetts, if a Judge finds that the duration of a non-competition agreement is unreasonably long, that does not mean the entire non-competition agreement is null and void.  The Judge can simply reform the parts of the non-competition agreement that are unreasonable and allow the rest of the agreement to stand as legally valid.   

Non-Competition Agreements will continue to be an important legal issue that effects millions of people a year.  If you or someone you know have a question about a non-competition agreement, or the policy behind non-competition agreements, you should not hesitate to contact an experienced civil litigation attorney.

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