After years in the making, a Massachusetts law curtailing non-compete agreements took effect this week (Oct. 1), reflecting a nationwide movement to restrict such covenants, which prevent departing employees from joining competing firms or using the knowledge they gained in a new venture.
The law contains several restrictions, including one that precludes the use of non-compete covenants on employees who fall into the non-exempt employment status (hourly workers mostly) under the Fair Labor Standards Act (FLSA). It also restricts the duration of such covenants to one year after the employee departs, unless there is a breach by the employee, in which case it can be extended another year.
Also excluded are undergraduate and graduate students working part-time, employees 18 and younger, and employees laid off or terminated without cause. New hires (and employees) have the right to seek an attorney’s advice before signing the agreement, and the non-compete must be tendered along with the formal employment offer letter or 10 days before commencement of work, whichever is earlier.
If a non-compete is tendered after employment has started, the law says that it must be “supported by fair and reasonable consideration independent from the continuation of employment.”
The Massachusetts statute calls non-competes a “non-competition agreement,” which it defines as:
“[A]n agreement between an employer and an employee, or otherwise arising out of an existing or anticipated employment relationship, under which the employee or expected employee agrees that the employee will not engage in certain specified activities competitive with the employee’s employer after the employment relationship has ended[.]”
Just a few days before the Massachusetts law took effect, New York reached agreement with WeWork, an international firm offering co-work facilities and services, to void and otherwise rewrite its non-compete agreement.