On August 10, 2018, Massachusetts signed the Massachusetts Non-competition Agreement (the “Act”) into law. Non-compete agreements are still permitted, but the Act severely limits their use and employers will have to re-consider how and when to use them.
Here are 4 key components of the Act.
- Limits the duration of post-employment non-competition agreements to twelve months, although that period may be extended for up to 24 months in certain situations;
- Requires companies to provide “garden leave” payments during the post-employment non-competition period equivalent to 50 percent of the former employee’s base salary unless the parties mutually agree on other consideration;
- Prohibits non-competition agreements for employees who are terminated without cause or laid off, and for certain categories of employees; and
- Imposes these requirements on non-compete agreements with independent contractors.
The Act only applies to non-competition agreements executed on or after October 1, 2018. Following the laws of most jurisdictions, the Act does not affect (a) non-competes entered into in connection with the sale of a business, or (b) non-compete agreements entered into as part of a separation/release agreement, as long as the employee receives 7 business days to revoke acceptance of the agreement.
These are major changes that will affect how employers do business in MA, and how employees should approach and manage their own non-compete obligations. For questions regarding the new law, or any other matters related to business or estate planning, contact Fournier Legal Services at firstname.lastname@example.org or 860.670.3535 for a free consultation or planning session.
Joseph E. Fournier is an Attorney and a CPA who has more than twenty years of experience in a variety of business legal matters, including start-ups and company formations, drafting shareholder and operating agreements, contracts, employment law, commercial litigation, tax planning and audit defense, and mergers and acquisitions (M&A). He also handles estate planning matters, such as business succession planning, wills, trusts, and probate.