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.
In the non-compete arena, the bill would:
- Limit non-competes to 12 months (or two years if the employee breached a fiduciary duty or unlawfully took property)
- Prohibit enforcing non-competes against certain categories of workers such as non-exempt employees, students, and employees terminated without cause or laid off
- Generally prohibit courts from “blue penciling” or reforming overbroad non-competes unless the provisions comply with certain safe harbors defined in the bill
- Require consideration independent of continued employment for non-competes entered into after commencement of employment
- Limit choice of law provisions for Massachusetts residents and employees
- Impose a number of procedural protections for employees both before and after signing the non-compete:
- Pre-signing: Employer must provide advance notice, and non-compete must be in writing and expressly state that employee has right to counsel
- Post-signing: Employer must review non-compete with employee at least once every three years and provide notice of intent to enforce within ten days of termination of the employment relationship
These requirements would compel many employers to overhaul their non-compete policies, and would place significant limits on the reach of non-competes in the Commonwealth.
In the trade secret arena, the bill would:
- Bring Massachusetts in line with the vast majority of states by substantially adopting the Uniform Trade Secrets Act
- Adopt a form of the inevitable disclosure doctrine by clarifying that: “Actual or threatened misappropriation may be enjoined upon principles of equity, including, but not limited to, consideration of party conduct before or after commencement of litigation and circumstances of potential use, upon a showing that information qualifying as a trade secret has been, or inevitably will be, misappropriated.”
While the bill tracks much of last year’s proposed House bill, there are several differences demonstrating that this will be only the start to a lengthy discussion this term. Massachusetts non-compete legislation has been at least eight years in the making and only time will tell whether this year’s efforts gain more traction than those in the past. It is unlikely that the bill will move too quickly through the legislature, but we will keep you updated on any progress, political commentary, or changes.
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.