On June 29, 2016, the Massachusetts House of Representatives passed House bill 4434, An Act Relative to the Enforcement of Noncompetition Agreements. Non-compete reform has been brewing in the Massachusetts legislature for several years, but the reform sought by many may finally be here, if the bill is enacted. This bill contains two key provisions: an adoption of a version of the Uniform Trade Secrets Act, and substantial reform of Massachusetts non-competition law, which thus far has been only addressed by the courts. The Uniform Trade Secrets Act section provides for injunctive relief and reasonable attorney’s fees to protect trade secrets, and supersedes any conflicting laws providing for civil remedies for trade secret misappropriation.
The non-compete reform represents significant changes to existing law. The bill provides that a non-compete agreement must comply with seven criteria to be valid and enforceable: (i) if entered into in connection with the commencement of employment, it must be in writing and signed by employer and employee, and state that employees have the right to consult with a lawyer; (ii) if entered into after commencement of employment, it must be supported by fair consideration independent from continued employment; (iii) it must be no broader than necessary to protect trade secrets, other confidential information, or the employer’s goodwill; (iv) it may not exceed a duration of 12 months unless the employee has misappropriated employee property, in which case it may be extended to 2 years; (v) it must be reasonable in geographic scope, defined as where the employee provided services or had a material presence; (vi) it must be reasonable in scope of proscribed activities in relation to the interests it protects; and (vii) it must be supported by a “garden leave clause” or something similar, defined as a payment from the employer to the employee during the restricted period.
Finally, the bill provides that non-competition agreements shall not be enforceable against certain categories of employees, including those classified as nonexempt under the Fair Labor Standards Act, and those terminated without cause or laid off.
While the Uniform Trade Secrets Act provision of the bill is unlikely to draw controversy, as it is generally consistent with current law in the Commonwealth, the House bill 4434 contains significant changes to non-competition law. Should this bill be enacted into law, employers will need to update their non-competition agreements to ensure enforceability.
