Noncompete agreements have become more controversial in recent years. Nationwide attention focused on these common restrictive covenants when the Federal Trade Commission (FTC) attempted to ban them previously. The courts ruled that the ban was unenforceable, and state regulations now largely govern noncompete agreements, as was the case before the FTC rule.
Massachusetts has enacted numerous restrictions on noncompete agreements that employers must ensure they understand. Otherwise, the restrictive covenants intended to protect the company may not be enforceable if a worker violates their agreement later.
What restrictions has Massachusetts established for noncompete agreements?
1. Limits based on profession
Generally speaking, a noncompete agreement must be necessary for the protection of legitimate business interests on the part of the employer to be valid. Even then, the law prohibits the use of noncompete agreements in the contracts for certain employees. The law protects physicians, nurses, psychologists and social workers from noncompete agreements completely. Additionally, the law also prohibits the use of noncompetition agreements in contracts for broadcasting industry professionals and attorneys.
2. Rules against same-day signings
Frequently, workers receive employment contracts with an expectation that they should review and sign them immediately. An immediate turnaround is not an option when the contract includes a noncompete agreement. The employer must provide the worker with at least 10 days to review the agreement, ideally with the assistance of an attorney. Professionals can then review the agreement and determine if signing it is in their best interests or not.
3. Requirements for garden leave pay
When a worker signs a noncompete agreement, they effectively give up their right to earnestly pursue career development in a certain area for a certain amount of time. Those employment concessions can leave a skilled and highly-educated professional struggling to support themselves and their family. As such, Massachusetts requires compensation for the worker who cannot compete. Garden leave pay rules apply to any noncompete agreements signed after October 1st, 2018. The professional is eligible for 50% of their highest base salary during their employment for as long as they cannot compete against their former employer.
Understanding the rules that govern noncompete agreements and other aspects of employment contracts can help organizations take the risk out of onboarding new talent. Noncompete agreements are theoretically still useful for businesses in Massachusetts, provided that they comply with the law and understand the costs inherent in restricting the economic activity of certain professionals.
