Non-Competes to Stay in Massachusetts…For Now

This morning, Massachusetts woke up to what is becoming a regular occurrence: the legislature was unable to pass a bill limiting the use of non-competition agreements in the Commonwealth, although it came the closest it has in years.  On June 29, 2016, the House unanimously passed a bill that would have drastically changed the landscape for non-competes 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 non-compete.  The Senate bill called for employees to receive 100% of their compensation during the restricted period, while the House bill required 50% of their salary, or “some amount of mutually agreed upon compensation.”  The conferees also could not agree on how long a non-compete restriction could last: the Senate wanted to limit the restriction to three months, while the House bill would have allowed non-competes 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 non-competes signed by current employees, and both prohibited the use of non-competes with lower-wage workers, non-exempt 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 non-compete 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 non-competes should not affect agreements entered into until that time. 

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.