Non-Competition Agreements

On January 5, 2023, the Federal Trade Commission (FTC) announced a proposed regulation that would completely prohibit non-competition agreements in the workplace.  A non-compete clause is a contractual term between an employer and worker that prevents the worker from seeking or accepting certain employment, or operating certain businesses, after the worker’s employment ends.  Previously, the FTC issued a statement in November 2022 in which it declared its intention to exercise authority under Section 5 of the FTC Act which would be in line with President Biden’s Executive Order from July 2021 urging the FTC to promulgate new rules governing non-competes.  If this were to happen, the consequences for both employers and employees would be significant.

With certain exceptions, the proposed rule would make it illegal to (1) enter into or attempt to enter into a noncompete with a worker, (2) maintain a noncompete with a worker, and (3) represent to a worker that the worker is subject to a noncompete agreement.
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          Recent changes in Massachusetts' laws regarding non-competition agreements have started leading to interesting court rulings in Superior Court.  In the matter of Genzyme Corporation and Bioverativ, Inc. v. Keith Hanglin and BioMarin Pharmaceutical, Inc., the Court has recently ruled that Genzyme cannot block a former employee from joining BioMarin Pharmaceutical Inc, where he would help launch a gene therapy treatment for hemophilia that would compete with a drug his ex-employer markets.
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One of the most debatable employment law issues in Massachusetts over the past decade or so has been changes to Massachusetts' laws regarding non-competition agreements.  Historically, employers loved them and employees (at best) tolerated them.  On August 10, 2018, Massachusetts Governor Charlie Baker signed new legislation in the form of Massachusetts General Laws chapter 149, § 24K into law.

Prior to the changes in the law, to be enforceable a non-competition agreement only needed to be supported by consideration, as non-competition agreements were believed to be necessary to protect an employer's legitimate business interests (such as confidential information or trade secrets).  Non-competition agreements needed to be reasonable in scope, in both duration and geographic area.

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.