Non-Compete Agreement Massachusetts: Key Laws & Rules

Key Takeaways

• Non-compete agreement enforceability in Massachusetts is governed by the Massachusetts Noncompetition Agreement Act (effective October 1, 2018).
• To be valid, non-compete agreements must be reasonable in duration (12 months maximum, extendable to 2 years in cases of misconduct), geographic scope, and scope of restricted activities.
• Employers must provide garden leave pay (50% of the employee’s highest base salary during the prior 2 years) or another mutually agreed consideration.
• Non-compete agreements are prohibited for non-exempt employees, interns, minors, and employees terminated without cause or laid off.
• Agreements must be in writing, signed by both parties, and provided at least 10 business days before employment begins.
• Courts retain authority to “blue-pencil” or modify agreements, and choice-of-law provisions cannot circumvent Massachusetts protections.
• Alternatives like non-solicitation and confidentiality agreements remain enforceable and may be better suited in some cases.

Non-compete agreement enforceability in Massachusetts law is a comprehensive set of new laws limiting the enforcement of non-compete agreements in the Commonwealth. The Massachusetts Noncompetition Agreement Act, which, if signed by Governor Charlie Baker, will go into effect and apply to all non-compete agreements beginning October 1, 2018.

Non-Compete Agreement

A non-compete agreement, also known as a covenant not to compete, is a standard contract between an employer and employee stating that the employee agrees not to compete with the employer after leaving their position. This legal contract prohibits employees from entering into employment, business, and other professions that are in direct competition with the employer for a specific amount of time in a specified geographic area, post-employment. Non-competes cover unfair competition; however, it doesn't restrict employees from ordinary competition.

Non-compete agreement enforceability varies in each state. Courts in the state of Massachusetts have specific requirements for a non-compete agreement to be enforceable. The restriction on competition must be "necessary to protect a legitimate business interest, reasonably limited in time and space, and consonant with the public interest." It also:

1. Must be reasonable in scope, duration, and geographic area by:

• Limiting the length of the contract to one or two years
• Limiting the geographical scope of the area

2. Protect legitimate business interest, including:

• Trade secrets
• Intellectual property
• Customer lists
• Supplier lists
• Prospective customers
• Other private or confidential information

3. Supported by adequate consideration:

• The agreement should state what the business is trying to protect and how they plan to accomplish that goal.
• It should remain consistent with the public interest.

Laws and regulations for non-compete agreements continue to change. To avoid future problems, businesses should stay up to date with any new developments.

Requirements for Valid Non-Compete Agreements in Massachusetts

For a non-compete agreement in Massachusetts to be legally enforceable, it must meet specific statutory requirements in addition to common law principles. These include:

• Written and Signed: The agreement must be in writing and signed by both employer and employee.
• Advance Notice: Employers must provide the agreement at the earlier of a formal job offer or at least 10 business days before employment begins.
• Right to Counsel: Employees must be expressly advised of their right to consult an attorney before signing.
• Consideration: If signed at the start of employment, the job offer itself serves as consideration. For existing employees, the employer must provide fair consideration, such as a promotion or bonus, beyond continued employment.

The Massachusetts Non-Competition Agreement Act

Massachusetts Legislature Passes Comprehensive Non-Compete Reform

After years of debating, the law, if signed by Governor Baker, will go into effect and apply to all non-competes entered into or after October 1, 2018. The bill will substantially reduce the control and enforcement of non-compete agreements. The Massachusetts Noncompetition Agreement Act will put a 12-month time limit on post-employment non-compete agreements unless the employee destroys employer property or breaks its fiduciary obligations to the employer, in which case, the duration can be extended up to two years.

The Act also requires an employer to observe "garden leave" pay, in which an employer must pay a former employee 50 percent of their base salary, post-employment, for the duration of their notice period, but during which time the employee is not required to attend work. Employers can avoid the garden leave clause if the contract specifies that the employee will observe another mutually agreed upon arrangement, or if there was an act of misconduct.

Under Massachusetts law, which applies to both independent contractors and employees, employer-arranged non-compete agreements are generally banned unless they meet distinct requirements. To be legally enforceable in Massachusetts, the arrangement must be in writing and signed by both parties, state that employees may seek legal advice before signing, and the employee must receive the contract either before the formal offer of employment, or no more than 10 business days before work begins, whichever happens first.

New minimum requirements for non-compete agreements:

• The Act prohibits non-compete agreements for certain types of employment, including:
  • Employees who are classified by the Fair Labor Standards Act as nonexempt
  • Paid or unpaid internships for both undergraduate and graduate students, or any short-term work while the students are in school
  • Employees under 18
  • Employees who are fired without cause or laid off
• Employers who demand current employees to sign a new non-compete agreement are required to offer an incentive in exchange, for example, a bonus. Otherwise, the employment is no longer considered "fair and reasonable consideration." This is a significant change from the current Massachusetts common law.
• "Springing" non-competes
  • A court can enforce a non-compete agreement as a punishment when a worker violates other applicable restrictive contracts, including:
    • Non-solicit contracts
    • Statutory or common law duties
• Courts have the authorization to reform, review, and modify invalid contracts, and review other sections of the agreement to verify validity.
• Choice-of-law provisions
  • Deems jurisdiction outside of Massachusetts unenforceable if the employee is a resident or has been employed in Massachusetts for a minimum of 30 days.
  • The parties specify or stipulate that any dispute or lawsuit which arises out of the contract between them shall be determined according to the law of a particular jurisdiction.
  • Simply put, the contract cannot extend beyond the geographical areas that an employee provided service.
• Adoption of the Uniform Trade Secret Act
  • Creates procedures for using trade secrets inappropriately or illegally.
  • Employers are reimbursed for attorney fees.
• Non-competes are to be only as broad as necessary to protect trade secrets, confidential information, or customer goodwill.

Who Is Exempt from Non-Compete Agreements

Massachusetts law explicitly prohibits enforcing non-compete agreements against certain categories of workers, including:

• Non-exempt employees under the Fair Labor Standards Act.
• Undergraduate and graduate student interns (paid or unpaid).
• Employees under age 18.
• Employees who are laid off or terminated without cause.

These exemptions reflect the state’s strong public policy favoring employee mobility and fairness.

Duration, Scope, and Garden Leave Pay

The Act caps the duration of most non-competes at 12 months following employment. This limit may be extended to 24 months if an employee breaches fiduciary duties or misappropriates company property.

Employers must also compensate employees during the restricted period with garden leave pay, defined as at least 50% of the employee’s highest annualized base salary during the previous two years. Alternatively, the employer and employee may agree in writing to a different form of compensation.

To be enforceable, the non-compete must also be narrowly tailored:

• Limited to the geographic areas where the employee actually worked.
• Restricted to activities similar to those performed for the employer.
• No broader than necessary to protect trade secrets, confidential information, or goodwill.

Enforcement, Modification, and Choice of Law

Massachusetts courts retain discretion to reform or modify overly broad agreements rather than voiding them entirely. Judges may reduce the duration, narrow the geographic area, or refine the restricted activities to align with statutory requirements.

The law also limits choice-of-law provisions. Employers cannot sidestep Massachusetts protections by designating another state’s laws if the employee has resided or worked in Massachusetts for at least 30 days prior to termination. Any dispute arising under a non-compete must be heard in a Massachusetts court.

Alternatives to Non-Competes

Because Massachusetts law significantly restricts non-competes, employers often rely on alternative agreements to protect their business interests, such as:

• Non-solicitation agreements, preventing former employees from poaching clients or staff.
• Confidentiality and nondisclosure agreements, ensuring sensitive business information remains protected.
• Invention assignment agreements, safeguarding ownership of intellectual property created during employment.

These alternatives are generally more enforceable and avoid the compensation and notice requirements tied to non-competes.

Frequently Asked Questions

1. Are non-compete agreements enforceable in Massachusetts?
   Yes, but only if they meet statutory requirements such as a 12-month limit, garden leave pay, and narrow restrictions tailored to protect business interests.
2. Who cannot be bound by a non-compete in Massachusetts?
   Non-exempt employees, interns, minors, and workers terminated without cause or laid off are excluded.
3. What is garden leave pay in Massachusetts?
   It is compensation equal to at least 50% of the employee’s highest annual base salary from the prior two years, paid during the restricted period.
4. Can an employer choose another state’s law to enforce a non-compete?
   No, Massachusetts prohibits employers from applying another state’s law if the employee has lived or worked in Massachusetts for 30 days before termination.
5. What are alternatives to non-compete agreements?
   Employers often use non-solicitation, confidentiality, and invention assignment agreements, which are generally easier to enforce under Massachusetts law.

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