By Erik Weibust and Ryan Malloy
Massachusetts has entered a new chapter in a long-standing effort to enact comprehensive non-compete reform in the Commonwealth. Recall from these previous posts that Senator Will Brownsberger and Representative Lori Ehrlich each introduced competing non-compete legislation in 2008 — Brownsberger’s would have gone the way of California and a few other states and banned all non-compete agreements, whereas Ehrlich’s would have been far less restrictive. In the spring of 2009, the legislators collaborated on a compromise bill, Massachusetts House Bill 2293, entitled “An Act Relative to Noncompetition Agreements.” House Bill 2293 aimed to codify existing common law while affording greater procedural protections to those subject to contractual restrictions on employment mobility. After several revisions, House Bill 2293 ultimately failed to pass.
This session, however, Representatives Brownsberger and Ehrlich have taken a simplified approach with the introduction of a new bill that focuses exclusively on the duration of non-compete agreements in the employer-employee context. The proposed bill, entitled the “Noncompete Agreement Duration Act,” is based on the following findings:
- “[T]he Commonwealth of Massachusetts has a significant interest in its economic competitiveness and the protection of its employers, and a strong public policy favoring the mobility of its workforce” and
- “[T]he Commonwealth of Massachusetts has determined that an employee noncompetition agreement restricting an employee’s mobility for longer than six months is a restraint on trade and harms the economy.”
The proposed bill leaves intact much of the existing common law, but creates a presumption that a non-compete agreement of up to six months is reasonable, whereas a non-compete agreement that lasts longer than six months is unreasonable, with three exceptions: (i) “the employee has breached his or her fiduciary duty to the employer;” (ii) “the employee has unlawfully taken, physically or electronically, property belonging to the employer”; or (iii) “the employee has, at any time, received annualized taxable compensation from the employer of $250,000 or more.” If a court determines that the duration of the non-compete agreement is unreasonable and one of the exceptions does not apply, however, the non-compete agreement will be unenforceable in its entirety. This represents a big departure from existing Massachusetts law, which permits the court to reform an unenforceable agreement to make it enforceable.
Like House Bill 2293, the Noncompete Agreement Duration Act does not impact non-disclosure agreements, non-solicitation agreements, non-competes in connection with the sale of a business, non-competes outside of the employment context, forfeiture agreements, or existing trade secrets law.
We will continue to monitor the progress of this legislation and will provide updates when appropriate.