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.
Last month, the Supreme Judicial Court dismissed a suit brought by a Massachusetts employer to enforce a non-compete on its California-based employee on the ground of forum non conveniens. The SJC held that the non-compete’s Massachusetts choice of law provision was unenforceable and that California substantive law should apply. Recall that even with the recent change in Massachusetts non-compete law, such restrictive covenants are still permissible, while in California, employee non-competes are subject to an outright ban.
This week, the Massachusetts Noncompetition Agreement Act became effective. For employers, this means that all non-compete agreements entered into on or after October 1, 2018 must comply with the new law’s requirements. It is likely that most Massachusetts employers will have to revise their existing agreements.
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.
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:
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.
In American Well Corporation v. Obourn, Civil No. 15-12265-LTS, 2015 WL 7737328 (D. Mass. Dec. 1, 2015), Judge Sorokin of the United States District Court for the District of Massachusetts upheld a non-compete entered into seven months after the employee’s start date. The Court explained that as to whether continued employment constitutes sufficient consideration for a non-compete:
“[T]he SJC has squarely addressed this question. Decades ago, it held that a non-competition agreement signed during employment was not void for lack of consideration because it contained a promise by the plaintiff thereafter to employ the defendant and by the defendant to work for the plaintiff.”
The Boston Bar Association recently held its 7th Annual Symposium on Employee Noncompete and Trade Secrets. In addition to practicing attorneys and an MIT-Sloan professor, the panel included three Massachusetts state legislators – Senators Jason Lewis and William Brownsberger, and Representative Lori Ehrlich – who have each authored pending legislation that would, to varying extents, render non-compete agreements unenforceable in the Commonwealth.
A recent decision from the Business Litigation Session of the Massachusetts Superior Court has broad implications for non-compete cases involving arbitration clauses. In TIBCO Software, Inc. v. Zephyr Health, Inc. and Kevin Willoe, the court denied an employer’s motion for a temporary restraining order enforcing a non-compete, finding the employer’s own arbitration provision required it to pursue its restrictive covenant claims before the American Arbitration Association (AAA) in California.
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.