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Massachusetts Noncompetition Agreements

On Behalf of | Mar 2, 2011 | Business Transactions

Last month, State Senator William Brownsberger reintroduced the bill, called “An Act Relative to Noncompetition Agreements.”

Like its predecessor, if this bill becomes law, it will severely restrict the enforcement of noncompetition agreements in Massachusetts. Unlike the previous version of the bill this version does not restrict noncompetition agreements to employees who earn more than $75,000 a year, and it does not include a presumption that to be enforceable, the noncompetition agreement if presented to an employee, after the commencement of employment, requires payment of at least 10% of the employee’s salary at the time of execution.

The bill still has much in common with last year’s proposed bill:

1) It generally limits noncompetition agreements to a period of no more than one year;

2) The bill requires “fair and reasonable” compensation for noncompetition agreements entered during the course of employment (i.e., continued employment is not enough);

3) It mandates that, where “reasonably feasible,” employers must give candidates advance notice that signing a noncompetition agreement is a condition of employment; and

4) The bill continues to make an employer’s decision to seek judicial enforcement a risky decision. Unless the restriction is presumptively reasonable both is time and geographic scope the employer may be assessed for the cost of the employee’s legal fees in defending an enforcement action initiated by the employer.

As currently written, the new law, if enacted, would apply only to noncompetition agreements entered into on or after January 1, 2012; therefore, the avoiding the need to rewrite and re-execute all existing, but noncompliant, noncompetition agreements.

Paul D. Creme is an attorney with Hamblett & Kerrigan PA. His practice is focused on business and corporate law. Of particular interest are the areas of software and emerging technologies. You can reach Attorney Creme at [email protected].