Last year, the business community worried that noncompete agreements could become a thing of the past in Massachusetts. Legislation aimed at limiting the use of noncompete agreements nearly made it to former Governor Patrick’s desk for signature. The legislation died on the last day of the 2013-2014 legislative session to the surprise of many.
Had it passed, the law would have limited most noncompete agreements to six months in duration for exempt employees. Noncompetes would have been eliminated entirely for nonexempt employees. Anti-solicitation agreements, i.e., agreements that prohibit employees from soliciting or transacting business with the employer’s actual or prospective customers or clients, were still permissible under the proposed law. Similarly, nondisclosure agreements, which prohibit disclosure of confidential company information, were also fair game. Noncompete agreements made in connection with the sale of a business, where the restricted party was an owner or partner with at least ten percent interest in the business, were also carved out of the noncompete restrictions.
As expected, Massachusetts legislators recently resurrected the noncompete debate when new bills were filed last month. One version proposes banning noncompete agreements for any period of time, while maintaining exceptions for anti-solicitation and nondisclosure agreements, as well as noncompetes ancillary to a business sale. This version is similar to legislation former Governor Patrick supported last year.
Another version similarly seeks to ban noncompete agreements outright, while making exceptions for nondisclosure agreements and agreements related to the sale of a business. However, there is no carve out for anti-solicitation agreements in this bill, meaning employees would not be prevented from working for direct competitors and immediately soliciting former employers’ top accounts.
Yet another version contains no carve outs at all.
With a new Governor in office who is expected to be friendlier to the business community, it’s difficult to predict whether these bills will gain as much traction (and hype) as last year. While campaigning, Governor Baker suggested he believes there is a path for noncompete legislation in the Commonwealth. Time will tell whether this was simply campaign rhetoric.