Last
year we kept you apprised of the rise and fall of proposed legislation intended
to curb the enforcement of noncompete agreements in Massachusetts. Well, like the legendary Phoenix, the noncompete
legislation has risen from the ashes. On January 20, 2011, State Senator
William Brownsberger reintroduced the bill, called "An Act Relative to
Noncompetition Agreements."
Like its predecessor, if this new offering becomes law, it will dramatically
alter the legal landscape of noncompetition agreements in Massachusetts. However, there are some
significant changes from last year’s bill. For example:
- Gone is the provision restricting noncompete
agreements to employees who earn more than $75,000 a year. - Absent is the presumption that to be
enforceable, a noncompete presented to an employee during the course of
his or her employment must be supported by a payment of at least 10% of
the employee’s salary.
The
bill still has much in common with last year’s proposed legislation:
- It generally limits agreements to a period of no
more than one year. - The bill requires "fair and
reasonable" compensation for noncompetes entered during the course of
employment (i.e., continued employment is not enough). - It mandates that, where "reasonably
feasible," employers must give candidates advance notice that signing
a noncompete agreement is a condition of employment. - The bill continues to make an employer’s
decision to seek judicial enforcement an inherently risky one. Unless the
restriction is presumptively reasonable (e.g., a six-month noncompetition
period and a geographic reach that does not exceed the area in which the
employee worked), the employer is at risk for the cost of the employee’s
legal fees in defending an enforcement action initiated by the
employer.
As currently written, the new law, if enacted,
would apply only to noncompetition agreements entered into on or after January
1, 2012. Therefore, the nightmare of having to rewrite and re-execute all
existing, but noncompliant, noncompete agreements would be avoided.
As before, Prince Lobel will continue to closely monitor the progress of this
bill, and will provide a timely update should it become law.
If
you would like more information about the use or enforcement of noncompetition
agreements or other restrictive covenants, please contact Daniel S. Tarlow,
the author of this Alert, at 617 456 8013 or dtarlow@princelobel.com.