On March 2, 2016, Massachusetts House Speaker Robert A. DeLeo promised to put new legislative limits on noncompetition agreements, reigniting the debate over non-compete reform legislation that has continued since at least 2009. In a speech to the Greater Boston Chamber of Commerce’s annual Government Affairs Forum, DeLeo said that he would push legislative reform with the following restrictions for enforceability of noncompetition agreements:
- noncompetition agreements would be limited to one year;
- noncompetition agreements would not apply to lower-wage workers; and
- workers must be clearly informed that a noncompetition agreement is required before taking a job, including a “stated right to counsel.”
DeLeo’s proposed “compromise” legislation for enforcement of noncompetition agreements does not present the opportunity for significant change in disputes about the enforceability of noncompetition agreements. Rather, it would merely codify some of the key issues judges already look at when analyzing whether an agreement is enforceable under Massachusetts law. In the Superior Court, where most of these cases start and end, noncompetition agreements are rarely enforced beyond the one-year mark or with respect to low wage earners. The only part of DeLeo’s proposed legislation that would present a real alteration would be the requirement that employees would need to be given notice, including a “stated right to counsel,” that they will be asked to sign a non-compete agreement before they accept a new job with an employer.
Over the past seven years, various versions of legislation were introduced before the Massachusetts Legislature. However, the Legislature has not even acted on proposed noncompetition legislation for the past two years. House Speaker DeLeo’s new “compromise” legislation is nowhere near the scope of the limitations in prior attempts at reform legislation. In the summer of 2014, the House declined to move forward a compromise that was part of a larger economic-development bill, which the Senate had approved by a large majority. The Senate’s plan in 2014 would have limited noncompetition agreements to a six-month duration and banned them for hourly employees.
Governor Charlie Baker has not taken a position on noncompetition agreements, but has previously stated through a spokesperson that he will consider any measure that makes it through the Legislature. So, even if DeLeo’s proposed legislation makes it through the Senate and House, it remains unclear whether Governor Baker will sign it into law.
What This Means for Employers
Employers will want to monitor the proposed legislation to ensure that any restrictive covenants that are drafted meet all requirements for enforcement under Massachusetts law. Employers should also review other ways to protect trade secrets and customer good will, whether that be by way of confidentiality agreements or non-solicitation agreements, neither of which are expected to be impacted by the proposed legislation.