The Massachusetts Noncompetition Agreement Act (M.G.L. c. 149 § 24L) applies to employee noncompetition agreements entered into on or after October 1, 2018. Under the new law, any noncompetition agreement entered into on or after October 1, 2018 must meet the following minimum requirements to be enforceable. First, if entered into in connection with the commencement of employment the agreement must be in writing, signed by both the employer and the employee and must expressly state that the employee has the right to consult with counsel prior to signing. Additionally, the agreement must be provided to the employee by the earlier of (i) a formal offer of employment or (ii) 10 business days before the employee begins working for the employer.
Second, if entered into after the commencement of employment but not in connection with separation from employment: the agreement must be supported by fair and reasonable consideration independent from the continuation of employment, and notice of the agreement must be provided at least 10 business days before the agreement is to be effective. The agreement must be in writing, signed by both the employer and the employee, and such writing must expressly state that the employee has the right to consult with counsel prior to signing.
Additionally, the agreement must be no broader than necessary to protect one or more of the following legitimate business interests of the employer: (1) The employer's trade secrets, as that term is defined in M.G.L. c. 93L § 1; (2) The employer's confidential information (to the extent such information is not included in the definition of trade secrets); or (3) The employer's goodwill. An agreement is necessary where the legitimate business interest cannot be adequately protected through an alternative restrictive covenant, such as a non-solicitation, non-disclosure, or confidentiality agreement.
Under the new law, restrictive periods may not exceed 12 months from the date of cessation of employment, unless the employee has breached his or her fiduciary duty to the employer or has misappropriated the employer's property. If such a breach or misappropriation exists, then the restrictive period may not exceed two years from the date of cessation of employment. The geographic reach must be reasonable in relation to the interests protected, and the scope of proscribed activities must be reasonable in relation to the interests protected.
Finally, under M.G.L. c. 149 § 24L, the noncompetition agreement must be supported by a garden leave pay clause or other mutually agreed-upon consideration between the employer and the employee. Other consideration must be specified in the noncompetition agreement. The garden leave clause must provide for the payment on a pro-rata basis, during the entirety of the restricted period, of at least 50 percent of the employee's highest annual base salary paid by the employer within the two years preceding the employee's termination unless there has been a breach by the employee.
Employers in Massachusetts who utilize noncompetition agreements will need to evaluate whether their current policies and practices are in line with this new legislation. Your Lewis Brisbois employment law attorney is available to assist with this process.
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