The basic elements of the bill are:
- An employee non-competition agreement longer than six months is presumed unreasonable — under current judge-made law, agreements of a year or more are often found reasonable.
- An agreement that is unreasonable in duration may not be enforced — under current law, such an overly long agreement may be reformed and enforced for a shorter duration; the risk of unenforceability will give employers strong incentives to stay within the six months length.
- Courts may nonetheless reform and enforce agreements that are longer than six months if the employee has stolen assets or otherwise breached a duty to the employer and also in cases of employees making $250,000 or more — this gives employers protection in the cases that they most need it.
Please share your thoughts on the approach!
Here is the full text of the bill we filed — we’ll post a link to the official copy when it becomes available.
Whereas the 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
Whereas the 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;
Therefore, be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
SECTION 1. Chapter 149 of the General Laws, as appearing in the 2006 Official Edition is hereby amended by inserting after section 24K the following section:-
Section 24L. (a) An employee noncompetition agreement that restricts an employee’s mobility for no longer than six months shall be presumed reasonable in duration.
(b) An employee noncompetition agreement that restricts an employee’s mobility for longer than six months shall be presumed unreasonable in duration.
(c) An employee noncompetition agreement that is determined by a court to be unreasonable in duration shall be unenforceable, unless: (i) the employee has breached his or her fiduciary duty to the employer; (ii) the employee 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.
(d) When any of the three exceptions in section (c) above are present, a court may enforce the employee noncompetition agreement for any duration determined by the court to be appropriate.
(e) Employee noncompetition agreements do not include (i) covenants not to solicit or hire employees of the employer; (ii) covenants not to solicit or transact business with customers of the employer; (iii) noncompetition agreements made in connection with the sale of a business or substantially all of the assets of a business, when the party restricted by the noncompetition agreement is an owner of at least a ten percent interest of the business who received significant consideration for the sale; (iv) noncompetition agreements outside of an employment relationship; (v) forfeiture agreements; or (vi) agreements by which an employee agrees to not reapply for employment to the same employer after termination of the employee.
SECTION 2. This act may be referred to as the Noncompetition Agreement Duration Act and shall apply to employee noncompetition agreements entered into on or after January 1, 2014.