Noncompetes to Stay in Massachusetts—for Now

By Christopher Kaczmarek, Stephen Melnick and Melissa Mcdonagh © Littler Aug 8, 2016

On Aug. 1, Massachusetts woke up to what is becoming a regular occurrence: the legislature was unable to pass a bill limiting the use of noncompetition agreements in the Commonwealth, although it came the closest it has in years.

On June 29, the House unanimously passed a bill that would have drastically changed the landscape for noncompetes in Massachusetts.  Weeks later, on July 14, the Senate passed its own bill, but with several significant differences.  The House rejected the Senate bill, and on July 18, the bill went to conference. 

The House and Senate conferees worked right up to the July 31 midnight deadline, but were unable to reach a compromise.  The sticking point appears to be what is known as "garden leave" – a requirement that an employer pay the former employee for the time restricted from working because of a noncompete.  The Senate bill called for employees to receive 100 percent of their compensation during the restricted period, while the House bill required 50 percent of their salary, or "some amount of mutually agreed upon compensation."  The conferees also could not agree on how long a noncompete restriction could last: the Senate wanted to limit the restriction to three months, while the House bill would have allowed noncompetes of up to a year.

Other than these points, the House and Senate versions are quite similar.  Both versions required consideration beyond continued employment for noncompetes signed by current employees, and both prohibited the use of noncompetes with lower-wage workers, nonexempt employees, students in an internship, and employees terminated without cause or laid off.

The Massachusetts legislature is now out of session, and therefore January 2017 is the earliest that we can expect a vote on any compromise bill.  Even if the legislature had passed a noncompete law, it likely would not have taken effect until late spring or summer 2017.  A potential compromise measure is not expected to be retroactive, so any future changes to noncompetes should not affect agreements entered into until that time. 

Christopher Kaczmarek, Stephen Melnick and Melissa Mcdonagh are attorneys with Littler in Boston. © Littler. All rights reserved. Reposted with permission.

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