After almost ten years of back-and-forth in the legislature, a new non-compete law (M.G.L. c. 149, §24L) will take effect in Massachusetts on October 1, 2018. Although the new law does not wholly do away with non-compete agreements, it does impose numerous restrictions and requirements, and applies to both employees and independent contractors. Key provisions of this new law include the following:

• New employees who are asked to sign a non-compete in connection with the commencement of employment must be provided with that non-compete either before a formal offer of employment is made or 10 business days prior to the employee’s start date.

• Employees asked to sign non-competes at any point during the course of employment must be provided “garden leave pay” or some other mutually agreed upon fair and reasonable compensation, which cannot simply be the continuation of employment. Garden leave pay refers to payment of at least 50% of the employee’s base salary during the non-compete period.

• Non-competes will not be enforceable (i.e., are banned) with respect to (i) nonexempt employees, (ii) employees aged 18 years and under; (iii) employees who are terminated without cause or laid off (but, otherwise compliant non-competes can be entered as part of a separation agreement), and (iv) undergraduate or graduate students with internships or similar short-term employment.

• Enforceable non-competes must be no broader than necessary to protect an employer’s legitimate business interests. The law specifically provides presumptions as to what is reasonable in terms of the scope of proscribed activities, duration and geographic reach.

• All non-competes must be in writing, signed by both parties, and specify the employee’s right to consult with counsel prior to signing.

Takeaway:

This new law applies to non-compete agreements entered into on or after October 1, 2018, so any business that has written employment or independent contractor agreements containing a non-compete provision should be sure to review and revise those provisions prior to then in order to ensure compliance with the new law.