Lori
House 2293
SECTION 1. Chapter 149 of the General Laws, as appearing in the 2006 Official Edition is hereby amended by inserting after section 24K the following section:-
Section 24L. (a) As used in this section, the following words shall have the following meanings:
“Employee”: an individual who is considered an employee under section 148B of this chapter.
“Employee noncompetition agreement”: an agreement between an employer and employee, or otherwise arising out of an actual or expected employment relationship, under which the employee or expected employee agrees to any extent that he or she will not engage in activities directly or indirectly competitive with his or her employer after the employment relationship has ended. Employee noncompetition agreements include forfeiture for competition agreements, but do not include (i) covenants not to solicit or hire employees of the employer; (ii) covenants not to solicit or transact business with customers of the employer; (iii) noncompetition agreements made in connection with the sale of a business or substantially all of the assets of a business, when the party restricted by the noncompetition agreement is an owner of at least a five percent interest of the business who received consideration for the sale; (iv) noncompetition agreements outside of an employment relationship; (v) forfeiture agreements; or (vi) agreements by which an employee agrees to not reapply for employment to the same employer after termination of the employee.
“Forfeiture agreement”: an agreement that imposes adverse financial consequences on a former employee as a result of the termination of an employment relationship, regardless of whether the employee engages in competitive activities following cessation of the employment relationship. Forfeiture agreements do not include forfeiture for competition agreements.
“Forfeiture for competition agreement”: an agreement that by its terms or through the manner in which it is enforced imposes adverse financial consequences on a former employee as a result of the termination of an employment relationship if the employee engages in competitive activities.
“Restricted period”: the period of time after the date of cessation of employment during which an employee is restricted by an employee noncompetition agreement from engaging in activities competitive with his or her employer.
(b) To be valid and enforceable, an employee noncompetition agreement must meet the minimum requirements of subsections (i) through (iii) hereof and meet or be capable of being reformed to meet the minimum requirements in subsections (iv) through (viii) hereof.
(i) The agreement must be in writing and signed by both the employer and employee and expressly state that the employee has the right to consult with counsel prior to signing.
(ii) The agreement must, to the extent reasonably feasible, be provided to the employee by the earlier of five business days before the commencement of the employee’s employment or when any formal offer of employment is first made to the employee.
(iii) If the agreement is entered into after commencement of employment, it must be supported by fair and reasonable consideration in addition to the continuation of employment, and notice of the agreement must be provided at least ten business days before the agreement is to be effective.
(iv) The agreement must be necessary to protect one or more of the following legitimate business interests of the employer: (A) the employer’s trade secrets, as that term in defined in section 30 of chapter 266, to which the employee had access while employed; (B) the employer’s confidential information that otherwise would not qualify as a trade secret; or (C) the employer’s goodwill.
(v) The agreement must be reasonable in duration in relation to the interests protected and the duration of actual employment. In no event may the stated restricted period exceed six months from the date of cessation of employment, unless the agreement was entered into in connection with the separation from employment of the employee, in which case the duration may not exceed two years from the date of cessation of employment. An agreement may permit the restricted period to be tolled by a court if, and for the time during which, the employee’s breach of the employee noncompetition agreement was neither known to nor reasonably discoverable by the employer.
(vi) The agreement must be reasonable in geographic reach in relation to the interests protected. A geographic reach that is limited to only the geographic area in which the employee, during any time within the last two years of employment, provided services or had a material presence or influence is presumptively reasonable.
(vii) The agreement must be reasonable in the scope of proscribed activities in relation to the interests protected. A restriction on activities that protects a legitimate business interest and is limited to only the specific types of services provided by the employee at any time during the last two years of employment is presumptively reasonable.
(viii) The agreement must be consonant with public policy.
(c) Notwithstanding anything to the contrary in this section, a court may, in its discretion, reform an employee noncompetition agreement so as to render it valid and enforceable provided that, with regard to scope of the proscribed activities and the geographic reach, the reformed portion of the agreement was either presumptively reasonable as set forth above or the employer made objectively reasonable efforts to draft the relevant restriction so that it would be presumptively reasonable as set forth above.
(d) The substantive, procedural, and remedial rights provided to the employee in this section are not subject to advance waiver.
(e) No choice of law provision that would have the effect of avoiding the requirements of this section will be enforceable if the employee is, and has been for at least thirty days immediately preceding his or her cessation of employment, a resident of or employed in Massachusetts at the time of his or her termination of employment.
SECTION 2. This act may be referred to as the Noncompetition Agreement Act and shall apply to employee noncompetition agreements entered into on or after January 1, 2013.
House 2293
SECTION 1. Chapter 149 of the General Laws, as appearing in the 2006 Official Edition is hereby amended by inserting after section 24K the following section:-
Section 24L. (a) As used in this section, the following words shall have the following meanings:
“Employee”: an individual who is considered an employee under section 148B of this chapter.
“Employee noncompetition agreement”: an agreement between an employer and employee, or otherwise arising out of an actual or expected employment relationship, under which the employee or expected employee agrees to any extent that he or she will not engage in activities directly or indirectly competitive with his or her employer after the employment relationship has ended. Employee noncompetition agreements include forfeiture for competition agreements, but do not include (i) covenants not to solicit or hire employees of the employer; (ii) covenants not to solicit or transact business with customers of the employer; (iii) noncompetition agreements made in connection with the sale of a business or substantially all of the assets of a business, when the party restricted by the noncompetition agreement is an owner of at least a five percent interest of the business who received consideration for the sale; (iv) noncompetition agreements outside of an employment relationship; (v) forfeiture agreements; or (vi) agreements by which an employee agrees to not reapply for employment to the same employer after termination of the employee.
“Forfeiture agreement”: an agreement that imposes adverse financial consequences on a former employee as a result of the termination of an employment relationship, regardless of whether the employee engages in competitive activities following cessation of the employment relationship. Forfeiture agreements do not include forfeiture for competition agreements.
“Forfeiture for competition agreement”: an agreement that by its terms or through the manner in which it is enforced imposes adverse financial consequences on a former employee as a result of the termination of an employment relationship if the employee engages in competitive activities.
“Restricted period”: the period of time after the date of cessation of employment during which an employee is restricted by an employee noncompetition agreement from engaging in activities competitive with his or her employer.
(b) To be valid and enforceable, an employee noncompetition agreement must meet the minimum requirements of subsections (i) through (iii) hereof and meet or be capable of being reformed to meet the minimum requirements in subsections (iv) through (viii) hereof.
(i) The agreement must be in writing and signed by both the employer and employee and expressly state that the employee has the right to consult with counsel prior to signing.
(ii) The agreement must, to the extent reasonably feasible, be provided to the employee by the earlier of five business days before the commencement of the employee’s employment or when any formal offer of employment is first made to the employee.
(iii) If the agreement is entered into after commencement of employment, it must be supported by fair and reasonable consideration in addition to the continuation of employment, and notice of the agreement must be provided at least ten business days before the agreement is to be effective.
(iv) The agreement must be necessary to protect one or more of the following legitimate business interests of the employer: (A) the employer’s trade secrets, as that term in defined in section 30 of chapter 266, to which the employee had access while employed; (B) the employer’s confidential information that otherwise would not qualify as a trade secret; or (C) the employer’s goodwill.
(v) The agreement must be reasonable in duration in relation to the interests protected and the duration of actual employment. In no event may the stated restricted period exceed six months from the date of cessation of employment, unless the agreement was entered into in connection with the separation from employment of the employee, in which case the duration may not exceed two years from the date of cessation of employment. An agreement may permit the restricted period to be tolled by a court if, and for the time during which, the employee’s breach of the employee noncompetition agreement was neither known to nor reasonably discoverable by the employer.
(vi) The agreement must be reasonable in geographic reach in relation to the interests protected. A geographic reach that is limited to only the geographic area in which the employee, during any time within the last two years of employment, provided services or had a material presence or influence is presumptively reasonable.
(vii) The agreement must be reasonable in the scope of proscribed activities in relation to the interests protected. A restriction on activities that protects a legitimate business interest and is limited to only the specific types of services provided by the employee at any time during the last two years of employment is presumptively reasonable.
(viii) The agreement must be consonant with public policy.
(c) Notwithstanding anything to the contrary in this section, a court may, in its discretion, reform an employee noncompetition agreement so as to render it valid and enforceable provided that, with regard to scope of the proscribed activities and the geographic reach, the reformed portion of the agreement was either presumptively reasonable as set forth above or the employer made objectively reasonable efforts to draft the relevant restriction so that it would be presumptively reasonable as set forth above.
(d) The substantive, procedural, and remedial rights provided to the employee in this section are not subject to advance waiver.
(e) No choice of law provision that would have the effect of avoiding the requirements of this section will be enforceable if the employee is, and has been for at least thirty days immediately preceding his or her cessation of employment, a resident of or employed in Massachusetts at the time of his or her termination of employment.
SECTION 2. This act may be referred to as the Noncompetition Agreement Act and shall apply to employee noncompetition agreements entered into on or after January 1, 2013.
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Representative Lori A. Ehrlich, CPA, MPA
Vice Chair Committee on Labor and Workforce Development
State House Room 39
Boston, MA 02133
