Last night, we had our 5th Annual Symposium on Employee Non-Compete Agreements, Trade Secrets and Job Creation. Following that discussion, I spoke with Representative Lori Ehrlich about the status of the current version of her and Senator Will Brownsberger’s noncompete bill (described below). Representative Ehrlich told me that the Joint Committee on Labor & Workforce Development (of which Rep. Ehrlich is the co-chair) will be conducting the hearing on the noncomepte bill on September 10, 2013. (Given my involvement with the bill, I will be testifying at the hearing and will report the details afterward.)
In the meantime, to the extent that you would like a refresher on the details, the current version of the bill – called the “Noncompete Agreement Duration Act” – leaves most noncompete law in tact, and, as its name suggests, focuses on the duration of noncompetes (in the employer/employee context). As before, the bill does not affect the law of trade secrets, nondisclosure agreements, nonsolicitation agreements, no raid/no hire agreements, noncompetes in connection with the sale of business (if the restricted person owns at least a 10 percent interest and received substantial consideration) or outside the employment context, forfeiture agreements, or agreements not to reapply for a job.
The bill starts with, and is premised on, the following two findings:
- “[T]he Commonwealth of Massachusetts has a significant interest in its economic competitiveness and the protection of its employers, and a strong public policy favoring the mobility of its workforce” and
- “[T]he Commonwealth of Massachusetts has determined that an employee noncompetition agreement restricting an employee’s mobility for longer than six months is a restraint on trade and harms the economy.”
The bill then creates a presumption that a noncompete that lasts up to six months is presumed reasonable in duration. The bill also creates the opposite presumption: a noncompete that lasts more than six months is presumed unreasonable in duration. The presumptions are not absolute; they can be overcome. If a court determines that the duration is unreasonable, however, the noncompete will be unenforceable in its entirety (i.e., the court will apply a “red pencil” approach).
There are three instances in which a noncompete that is unreasonable in duration can still be enforced (though the court will shorten the duration to the length of time determined to be appropriate). Those three instances are as follows:
- “the employee has breached his or her fiduciary duty to the employer”;
- “the employee unlawfully taken, physically or electronically, property belonging to the employer”; or
- “the employee has, at any time, received annualized taxable compensation from the employer of $250,000 or more.”