After years of bouncing around non-compete reform legislation, Massachusetts has finally passed it. The new law will take effect on October 1, 2018 and includes sweeping restrictions on the use of non-compete agreements in Massachusetts.
A non-competition or non-compete agreement is a contract between an employer and an employee in which the employee agrees that she will not go work for a competing business during her employment or for some period of time after her employment ends (for whatever reason – whether she is fired, laid off, or resigns). Non-competes have become rampant across a variety of industries. While we typically think that non-competes are confined to highly compensated employees in high tech industries, this is not the case. It seems everyone is made to sign non-competes these days, including dog walkers, massage therapists, hair stylists, and yoga teachers.
A non-compete agreement greatly restricts the ability of employees to get a new job. And that’s not really what a non-compete is supposed to do. A non-compete is meant to protect a legitimate business interest, such as the investment an employer makes in training, or the employer’s trade secrets or other confidential information, or the like. But many employers are using non-competes where none of these issues is implicated, meaning the agreements do nothing other than restrict competition.
Under the new law, the use of non-competes is greatly restricted. Some of the highlights:
- Non-competes cannot be in force for longer than one year following the end of employment.
- There are new restrictions on signing a non-compete mid-employment (as opposed to when an employee starts a new job).
- Generally, during the period in which a former employee is restricted by the non-compete, the employer will have to pay the him at least 50% of his highest salary within the last 2 years.
- A non-compete can only apply to the geographic area the employee actually worked and the specific types of services the employee actually performed.
- Employers cannot use non-competes with workers who are non-exempt under labor laws – i.e., no non-competes for anyone paid by the hour as opposed to salary, like those dog walkers, massage therapists, hair stylists, and yoga teachers mentioned earlier. This is huge.
- Non-competes are not enforceable against employees who are terminated without cause or laid off.
The new law does have some complexities that will need to be worked out, but the implications of this law cannot be understated. Most employers will need to rewrite their non-competes in light of this new law, and employees who are job seeking at this time should bear in mind that as of October 1, the non-compete landscape is changing.
If you are an employer or employee and need your non-compete reviewed in light of the new law, please call the employment lawyers at Levine-Piro Law at (978) 637-2048 to schedule a consultation.