Massachusetts Noncomp Law Explained

My recent post flagged adoption of the new Mass law regulating noncomps by statute for the first time in the State, basically limiting noncomps to one year and requiring some payment during the restricted period.  Some important details to note:

*You cannot restrict non-exempt employees or interns at all.  This is for senior people only.

*If someone breaches a noncomp, the period can be extended to two years.

*There are mechanical steps and timing to get a valid noncomp from a new hire, including 10 day advance notice and flagging the right for the employee to have counsel.

*If an employer approaches a current employee for a noncomp, there must be a benefit to the employee, typically a raise or other “fair and reasonable consideration”; unlike some other states, notably NY, mere continued employment is not enough.  There is no definition of what kinds of benefit must be offered, and I smell litigation on the horizon.

*In a sale of a business where an employee gets a big payday, due to equity ownership or otherwise, a broader noncomp can be enforced provided the employee receives “significant consideration or benefit”– I smell further litigation on the horizon defining what is “significant.”

*Restrictions must be reasonable geographically and cover the specific services provided during the last two years (unless you can make a compelling argument for other services).

*If you fire an employee without cause or lay him/her off, your noncomp will not be enforced.

*The law covers people employed here and Mass residents employed elsewhere.

*Caveat: at the same time, Mass is enacting the Uniform Trade Secrets Act, which in some States has been interpreted as allowing the enjoining of competition, even without an agreement (!), if new employment would result in “inevitable disclosure” of trade secrets to a competitor, reports the Boston Business Journal (quoting an attorney in my firm, btw). Mass has never in the past entertained the “inevitable disclosure”doctrine under prior law, but then again they never had this new law on the books.  So stay tuned.

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