Perhaps you are considering finding employment at a new company or already have a new job offer and remember that the employment agreement you have with your current or recent employer includes a non-compete clause. What is a non-compete agreement? Does this mean you cannot take the new job? Is the non-compete clause enforceable?
The answer to the first question is straightforward. In Massachusetts, a non-compete, or noncompetition, agreement is an agreement between an employer and employee in which the employee agrees that she or he will not “engage in certain specified activities competitive with his or her employer after the employment relationship has ended.” G. L. c. 149 § 24L(a). If you have an employment agreement, it may be a separate document from your employment agreement or a clause in your employment contract itself that specifies the type of activity you agree to not engage in after ending your employment. If you don’t have an employment agreement and you are an employee at will (an employee who can be fired at any time, for any reason, or for no reason) or an independent contractor, the non-compete agreement is likely to be a separate document that your employer has asked you to sign.
The answers to the second and third questions depend on factors specific to your current or former job, the non-compete itself and your new job. In Massachusetts, it is unlawful for employers of certain professionals, namely physicians, nurses, social workers, psychologists, lawyers, and persons in the broadcast industry, to impose non-competes on those employees. For other types of employment, in order for a non-compete covenant to be enforceable it must meet certain statutory requirements. Generally, to be enforceable a non-compete covenant put in place on or after October 1, 2018 must:
- be in writing, signed by both the employer and employee, explicitly state the employee has a right to consult counsel before signing and be provided to the employee before the employment offer is made or at least 10 business days prior to the effective date of the agreement;
- be tailored to protect the employer’s trade secrets, confidential information, or goodwill;
- be for 12 months or less in length (unless the employee breached a fiduciary duty to the employer, in which case the length cannot exceed two years);
- be reasonable in geographic area;
- be reasonable in the scope of activities prohibited;
- be supported by consideration (often some sort of payment from the employer to employee); and
- not violate public policy.
G. L. c. 149 § 24L(b). Given the requirements that the non-compete covenant be “reasonable,” the analysis of whether such a covenant is enforceable is typically fact-intensive and will heavily depend on many factors specific to your own situation including (but not limited to) the language in the non-compete covenant itself, the duration and geographic limitations of the restriction, the type of work you will be doing in your new employment, and the extent to which it restricts you from working in your field altogether. Non-compete covenants put in place after October 1, 2018 must provide that the employer will pay the employee at least 50% of their highest salary in the two years prior to the termination of their employment or provide some other mutually-agreed-upon compensation during the period of restriction. Because there is no one-size-fits-all answer to these questions, if you have a questions about a non-compete clause, it is advisable to consult with counsel experienced in employment agreements and litigation.