Movement to Eliminate Noncompetes in Massachusetts Makes Compromises

Last week, the Massachusetts State Senate approved a proposal to modify the law regarding noncompete agreements. The bill would, among other things, render all noncompetes with a duration up to six months presumptively reasonable, while all noncompetes longer than six months would be presumptively unreasonable. Noncompetes limited to the geographic area where the employee worked or had “material presence or influences”, as well as limited to the type of services provided by the employee are also presumptively reasonable. The proposal also requires noncompetes to state that the employee has the right to counsel before signing, to be provided five days prior to hire or other formal offer, to have a 10-day waiting period before becoming effective, and must only be entered into to protect trade secrets, other confidential information, and goodwill. The proposal also permits courts to reform overbroad or unreasonable provisions as long as the provision was presumptively reasonable, or if the employer made reasonable efforts to draft a presumptively reasonable provisions; otherwise, the provision must be struck by the court. Noncompetes may also not choose another state’s law if the employee resides or works in Massachusetts. Noncompetes entered into as part of the sale of a business or in connection with severance/separation agreements, as well as “garden leave” agreements, are exempt from the bill’s definition of noncompetes. Perhaps most importantly, the bill also prohibits noncompetes for any employees who are non-exempt from the minimum wage and overtime requirements of the Fair Labor Standards Act, which would include most hourly employees. The bill now goes to conference committee between the Massachusetts House and Senate, although it remains to be seen whether the proposal or one substantially similar comes out of conference and is supported by Governor Deval Patrick, who had come out last year in favor of the abolition of noncompetes in the Commonwealth.

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