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.
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.
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 first half of 2016, we have already seen significant changes to a number of state non-compete laws. In this post, we provide a compilation of recently enacted legislation in Alabama, Connecticut, Idaho, Oregon, and Utah, as well as several important developments at the federal level.
Earlier this week, the Joint Committee on Labor and Workforce Development released proposed amendments to the Uniform Trade Secrets Act, which would include the creation of the Massachusetts Noncompetition Agreement Act. The legislation, if enacted, would significantly alter the non-compete landscape, rendering unenforceable or practically unworkable most Massachusetts employers’ non-competition agreements. Here are some of the highlights:
In the last few weeks, Utah and Idaho have each passed bills changing the landscape of non-compete enforceability in strikingly different ways. Utah’s law places further limitations on the use of non-competes. In contrast, the Idaho bill (expected to be signed by the governor shortly) permits greater enforceability of non-competes.
This morning, House Speaker Robert DeLeo announced at a Greater Boston Chamber of Commerce breakfast that the House will be releasing a bill this session that imposes some limitations on non-competes. Although the language of the proposed bill is not yet available, Speaker DeLeo described two key elements:
- Time Limit: The proposed bill would limit non-competes to 12 months in length.
- Notice Requirement: The proposed bill would require that employers inform employees in advance that they will be asked to sign a non-compete, and advise them of their right to seek legal counsel.
The states have a rich tradition of passing legislation forbidding or limiting the use of non-compete agreements with identified classes of employees. As you might expect, a number of states forbid or limit the use of non-compete agreements with:
- Physicians, nurses, psychologists, social workers and other medical professionals
- Individuals working in broadcasting
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.