For several years, as noted in prior posts, Massachusetts has been toying with enactment of a law limiting permissible non-competition agreements for employees (other than those relating to the sale of a business). Yesterday the Mass House reported out of committee a bill far more complex and textured than prior efforts. While there can be no clue, let alone assurance, of what the Legislature will finally enact, if anything, nor what the Governor (historically silent on the matter) might sign, the draft legislation is fascinating and unlike any law of which I am aware in any other State. Highlights (lowlights) follow:

Who is covered? Employees (and independent contractors of certain types).

Who cannot be restricted? Low-paid employees (non-exempt), students on internship, anyone terminated without cause or laid off, anyone under 18.

How long can you restrict someone? Normally one year tops; if someone breaches his fiduciary duty or steals property/secrets whether physically or electronically, two years tops.

How broad a net can you cover? Aside from being necessary (not just convenient) to protect trade secrets or employer goodwill, an employer-imposed noncomp can only restrict to a geography in which the employee worked or had influence (not the area in which the company did business), and must relate to the tasks performed by the employee (not the overall business of the company).

Do you have to pay someone during the restricted period? Yes! Unless the employee breached a duty or stole secrets or property, you must pay at least 50% of highest annualized base salary paid during last two years. This is called “garden leave.” A major departure from prior practice in Massachusetts and the other States, this rule already has attracted negative comment from the Boston Chamber of Commerce.

Massachusetts courts have a history of redrawing noncomps to a standard which the judge considers reasonable to protect employers. Still possible? Nope, strictly prohibited.

What about a company with most of its operations out of state but with someone working in Massachusetts, or someone who is a Mass resident? The proposed law would apply, the company cannot elect the law of another State which is less favorable to the employee.

When would this come into effect? July 1, 2016, but only for agreements after that date and for misappropriations of information and property by employees after that date.

Employers often spring noncomps on employees when they first report for work or after they are hired, and such agreements were historically reviewed by the courts on an individual basis. Is there now a mandatory waiting period before a noncomp can attach to an employee? Yes, ten days with a right to say “no” which means there will be a mandatory lag time at the front end. If you are already working, you have ten days to say no (and I’ll bet you won’t be able to be fired if you say no). Employment noncomps must be in writing, signed by both sides, must expressly say that the employee is entitled to have a lawyer if sought after employment started and must be supported by “fair and reasonable consideration independent from the continuation of employment.”

Bottom line: if this proposed legislation becomes law, Massachusetts will move very far towards the California rule which is that, except in cases of a business sale, noncomps are not enforceable.