Non-Compete Labor Laws in Massachusetts

Can the law stop you from taking a new job?

Employment agreements and general labor issues are usually a matter of state law. Sometimes an employer requires an employee to sign a non-compete agreement. Such an agreement legally restricts the employee from competing against the employer after the worker leaves his job. The state of Massachusetts carefully scrutinizes these agreements, because they seek to restrict a person from earning a living. Therefore, the courts require employment non-compete agreements to meet certain parameters.

Legitimate Business Interests

A non compete agreement is not a presumed right of an employer. Massachusetts courts will first look to see if such an agreement is reasonably necessary to protect the employer's legitimate business interests. A major example of this is protecting the employer's customer base or trade secrets. Employers want to be protected from an employee "stealing" current customers or proprietary business information. It is not a legitimate business interest to just prevent an employee from leaving to take a job with a competitor company.

Time and Geography

Non-compete agreements must have a stated time and geographic scope. The agreement will seek to prevent the employee from competing for a certain amount of time and in a defined area. The courts expect both of these restrictions to be reasonable under the circumstances. There is a presumption that reasonable means limited. Usually nothing more than two years is considered reasonable. The geographic restriction is normally only allowed to be a metropolitan region or to specific counties.

Adequate Consideration

A Massachusetts courts will also require that the employee receive adequate consideration for an employment non-compete agreement to be valid. The employee must receive something in return for agreeing to restrict his ability to work for others. This does not mean the employee has to get an actual payment for signing the agreement. The employee does need to be given a salary and benefits that are adequate enough to balance the non-compete restriction. Generally, the more severe the non-compete restrictions are, the higher the compensation package will need to be.

Agreement Survivability

There have been many cases in the Massachusetts courts where it was ruled that an existing employment non-compete agreement does not automatically survive when an employee is given a new position with the same employer, such as in a transfer or promotion. Therefore, a new agreement will need to be entered into by the employee. All of the aforementioned requirements will need to be met for it to be enforceable.

References

• Conforto Law Group: Non-Competition Agreements
• Cutler Counselors At Law: Employment and Labor Law: 11/08/2006 Protecting Goodwill And The Non-Solicitation of Customers With a Non-Competition Agreement
• Schwartz Hannum PC: Legal Updates: Significant Changes and Developments in Non-Competition Law in Oregon, Wisconsin and Massachusetts