For nearly a decade, Massachusetts legislators have considered various bills aimed at regulating the use of noncompetition agreements in the commonwealth. Noncompetes currently are governed by Massachusetts case law which, although relatively well developed, sometimes leads to inconsistent results, in turn leading to uncertainty as to what restrictions will be enforced. Many proponents of noncompete legislation also believe that the current system has resulted in employers’ overuse and/or abuse of noncompetition agreements. On the other hand, some business advocates argue that noncompete agreements stifle innovation and new business creation in Massachusetts.
Legislative efforts to regulate the use of noncompetes began in earnest in 2009, and there have been multiple bills introduced each year since. Hopes for legislation gained significant momentum in 2016, when both the Massachusetts House of Representatives and Senate passed noncompete bills. However, the 2016 legislative session ended before a compromise could be reached on the bills.
Current Legislative Action
Bill sponsors are back at it again this year. In January of 2017, legislators introduced no fewer than eight different bills to regulate the use of noncompetition agreements. On October 31, 2017, the Massachusetts Joint Committee on Labor and Workforce Development held a hearing on the bills and heard substantial testimony from supporters and opponents of the bills.
The various bills this year build upon bills introduced in prior years and share many similarities among them, including:
- imposing a geographic scope and maximum noncompete duration;
- requiring additional consideration, beyond the continuation of employment, when agreements are executed after employment has commenced;
- requiring employers to provide advanced notice to prospective employees that a noncompete is required;
- addressing a court’s ability to reform an otherwise noncompliant agreement;
- outlining classes of employees exempt from noncompete agreements; and
- outlining procedural protections for employees both before and after signing such agreements.
The bills that address business trade secrets generally call for Massachusetts to adopt the Uniform Trade Secrets Act as well as a form of the inevitable disclosure doctrine under which actual or threatened misappropriation can be enjoined.
Key Takeaways
Though the fate of these bills remains uncertain, concerns about the use of noncompetes, including perceived abuses disadvantaging employees and stifling innovation, suggest that legislation is likely inevitable. For now, Massachusetts employers and employees can take a wait-and-see approach as the bills either progress towards passage or again stall.
