Effective October 1, 2018, Massachusetts employers will be subject to the following new requirements governing non-compete agreements with employees:
- Non-compete agreements generally cannot exceed 12 months.
- The law covers employees and independent contractors, however non-compete agreements are unenforceable against employees laid-off or terminated without cause, non-exempt employees, students working as interns and employees under age 18.
- Non-compete agreements must be supported either by a “garden leave” pay provision or some other “mutually agreed upon consideration.” Acceptable “garden leave” pay must equal at least 50% of the employee's highest annualized base salary [for 2 years prior to termination] during the non-compete period. Acceptable “mutually agreed upon consideration” could be less than acceptable “garden leave” pay. The new law provides no further definition of “mutually agreed upon consideration.”
- For non-compete agreements entered into at the beginning of employment, an employer must provide at least 10 days notice to employees of the non-compete and must inform the prospective employee of the right to consult counsel regard the proposed agreement.
- For non-compete agreements entered into after the commencement of employment, continued employment alone will not constitute “fair and reasonable” consideration.
- Existing non-compete agreements, non-solicitation agreements and non-compete restrictions in otherwise valid separation agreements are generally not affected by the new law.
What Steps Should Employers Take Now?
Employers using non-compete agreements should review the format of their agreements to ensure compliance with new law beginning October 1, 2018. Instead of non-compete agreements, employers should consider using non-solicitation or non-disclosure agreements which are not subject to the new law.
Please call Kevin Callanan, or Chris Callanan (617) 330-7575 with any questions regarding the foregoing information.
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