Nutter Partner David Rubin recently contributed an article to Massachusetts Lawyers Weekly that analyzed the Massachusetts Noncompetition Agreement Act. In the article, “Thorny Questions, Issues Emerging as Noncompete Act Takes Hold,” David addressed questions that have arisen since the legislation was enacted, including mutually agreed-upon consideration, employment relationships, non-exempt employees, termination cause, forfeiture for competition agreements, and separation agreements.
In the early morning hours of August 1, 2018, the Massachusetts House and Senate passed long-awaited non-compete legislation. Assuming that Governor Baker signs the bill into law, the legislation will become prospectively effective October 1, 2018. The Massachusetts Noncompetition Agreement Act (the “Noncompetition Act”) is many years in the making, as Massachusetts legislators have made numerous, but unsuccessful, attempts to enact a law addressing non-competes over the past several years.
In the early hours of this morning, the House and Senate advanced the non-compete legislation without any amendments. The legislation now moves to Governor Baker for approval. If enacted, the law would apply to all non-competes signed after October 1, 2018. In the coming days, we will report on what employers will now need to consider if Governor Baker signs the legislation.
Over the past few years, we have reported on the Massachusetts Legislature’s unsuccessful attempts to alter non-compete law in the Commonwealth. In 2016, the Legislature was tantalizingly close to passing legislation before adjourning in July without reaching a compromise, and no fewer than six non-compete bills were introduced in 2017.
On October 31, 2017, the Joint Committee on Workforce and Development once again held a hearing to discuss the possibility of legislative changes to Massachusetts non-competition and trade secrets laws. There were several bills up for discussion. One significant provision in most of the bills that is not receiving as much attention as it perhaps should is a requirement that any lawsuit to enforce a non-competition agreement as to a Massachusetts resident be brought in a Massachusetts court. Such a constraint would have a profound effect on the application of non-compete laws, and in particular, on out-of-state corporations. Where potential large-scale employer companies such as Amazon are considering expanding their presence in the Commonwealth’s flourishing market, such a drastic change in Massachusetts law could loom large.
As we previously reported, the Massachusetts House and Senate passed contrasting versions of non-compete reform bills in 2016 but were unable to come to an agreement by the end of the legislative session. Efforts began anew last month as Senator William Brownsberger and Representative Lori Ehrlich filed a new non-compete bill on January 20: An Act relative to the judicial enforcement of noncompetition agreements (Bill SD.1578). The bill builds on previous versions of legislation introduced in Massachusetts and would make significant changes to the landscape of both non-competes and trade secrets in the state.
This week, the Obama Administration continued its ongoing efforts to curb what it considers to be the “gross overuse” of non-compete agreements. In a “State Call to Action,” the White House encourages legislatures to adopt certain recommendations for non-compete reform. Tuesday’s announcement follows the Obama Administration’s May 2016 report, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses” discussed in an earlier blog post, which highlighted the variety of ways workers may be disadvantaged by non-competes.
In what may be a trend, several courts around the country this year have embraced strict interpretations of non-compete agreements, refusing to blue pencil or equitably reform overbroad or unreasonable clauses in non-compete agreements. Traditionally, courts have exercised the doctrine of equitable reformation to re-write provisions to render them reasonable, or at the very least, strike unreasonable provisions to save those that are reasonable.
Our firm’s Executive Comp Exchange blog recently added a post that is useful to employers who utilize confidentiality provisions in any of their employment documents. The blog post addresses the complications of confidentiality provisions of employee agreements and perceived constraints on the employee’s ability to report relevant information or conduct to certain government agencies. The National Labor Relations Board and now the SEC appear to be ramping up efforts to address what they believe are undue restraints by employers in this area.
Once again, the Massachusetts legislature took on non-compete reform, and once again, came up empty-handed. On July 31, 2016, the legislature adjourned without reaching a compromise to alter the state’s non-compete landscape. Earlier this summer, both the House and the Senate passed contrasting versions of non-compete reform bills, but ultimately could not come to agreement on several important provisions. Their inability to reach a compromise reveals once again that this is a complex issue with many stakeholders, and not one susceptible to end-of-the-session compromise.
In the rapidly changing business world, protecting a company's human capital and proprietary information is critical to maintaining a competitive edge. On this blog, Nutter's experienced Business Litigation and Labor, Employment & Benefits attorneys offer news and insights on all aspects of restrictive covenants and trade secrets—from analyzing a rapidly evolving body of case law, to summarizing new legislation and legislative efforts, to providing other need-to-know updates and more.