BOSTON—State lawmakers took a step forward in limiting noncompetition agreements in Massachusetts on Thursday, with the Massachusetts State Senate passing S.2148, “An Act relative to the judicial enforcement of noncompetition agreements.”
Most notably, the bill would restrict noncompetition agreements to 3 months and require employers to pay 100% of the employee’s annualized earnings during the restricted period, or other mutually-agreed upon consideration negotiated within 30 days following the employee’s termination which is of equal or greater value than the garden leave clause. If no agreement for other consideration is reached within 30 days, the garden leave clause becomes effective.
“Non-compete agreements can serve a legitimate purpose to protect intellectual property and business interests. There have been, however, significant abuses of these agreements that cause harm to both workers and businesses alike,” said Senate President Stan Rosenberg (D-Amherst). “This legislation provides fairness and balance to the workplace to allow employees to flourish in their profession and not be confined by overly aggressive non-compete agreements.”
“The Joint Committee on Labor and Workforce Development has received testimony year after year on the negative impact non-compete agreements have had on our workforce,” said Sen. Dan Wolf said Senator Dan Wolf (D-Harwich), Senate chair of the Joint Committee on Labor and Workforce Development. “Once designed to protect intellectual property upon an employee’s departure from a company, non-competes have since proven to stymie innovation and prevent employees from working in their field of expertise. This legislation protects workers while ensuring they can thrive in a competitive, innovative, and vibrant economy.”
“This bill ensures that valuable workers will no longer be exploited by corporations looking to stifle innovation for their own self-interest, said Senator Mark Montigny (D-New Bedford), Assistant Majority Leader and Chairman of the Rules Committee. “Now these agreements will have reasonable restrictions for which workers will be adequately compensated and no longer subjected to lengthy, overbroad and arbitrary restrictive covenants with little or no negotiation. There is no justification for denying a person a right to earn a living without proper compensation. This Rules Committee bill, which we have passed today, is one of the country’s most comprehensive reforms of non-compete agreements which will provide relief to thousands of Massachusetts residents for years to come.”
"I'm pleased that my colleagues in the Senate moved this forward, and I look forward to working with the House to come to a final agreement on this important legislation," said Senator Will Brownsberger (D-Belmont), Senate chair of the Joint Committee on the Judiciary.
“This is a bill of fundamental fairness,” said Senator Eileen Donoghue (D-Lowell), Senate chair of the Joint Committee on Economic Development and Emerging Technologies. “It respects the legitimate business interests of employers while giving employees negotiating power and protecting them from undue financial harm. As a result, the legislation will boost labor mobility and spur economic growth across Massachusetts.”
The legislation restricts employers from enforcing noncompetition agreements on interns, undergraduate and graduate students, employees under 18, hourly workers, employees who are terminated without cause or laid off, independent contractors, and employees whose average weekly earnings are less than two times the average weekly wage in the commonwealth, roughly $130,000.
To be enforced, the non-compete must be reviewed with the employee at least once every 3 years and the employer must notify the employee in writing within 10 days of the employee’s termination of the employer’s intent to enforce the non-compete.
The legislation prohibits acourt from reforming a non-compete to make it comply with the bill’s requirements, encourages narrowly-drawn non-competes drafted with specificity as to what activities are proscribed and why and how they relate to the trade secrets or confidential business information that is sought to be protected.