The Massachusetts House of Representatives has before it two competing bills relating to non-competition clauses to consider this Spring. Representative Lori Erlich has sponsored House Bill No. 1799, which sets forth the standards by which a non-compete provision could be measured for enforceability. The proposed statute includes (i) a ban on non-competes all together for any employee earning less than $100,000 in compensation, (ii) a mandate that any non-competition agreement entered into after employment must be based on consideration other than continued employment (presumably cash, although it is unclear), and (iii) the requirement that the employer must give the employee at least two weeks’ notice of the agreement before it can become effective.
In addition, and this is perhaps the most rigorous demand — a non-compete agreement may be enforceable only if the the employer pays to the employee "for the full restricted period and without offset for any income the employee may receive from other noncompetitive activities, a minimum of the greater of: (1) compensation equal to fifty percent of the employee’s annual gross base salary and commissions at the time of the employee’s termination or (2) $100,000." The proposed statute does not affect employee or customer non-solicitation agreements and expressly excludes the rights of companies to act to protect trade secrets and confidential information from misappropriation by way of an injunction.
The other statute, House Bill No. 1794 submitted by Representative Will Brownsberger, proposes to ban non-compete and non-solicitation agreements in their entirety. This bill reportedly is gaining support by those who believe that Massachusetts high-tech corridor has not been competitive with California’s Silicon Valley because Massachusetts allows non-compete provisions and California does not.
Although both statutes apply only prospectively by their terms, if either is passed, they clearly would affect all future contracts with employees governed by Massachusetts’ law.