Executive Summary: For several years, Massachusetts has tried—and failed—to pass restrictions on non-compete covenants, and this year is no exception. Massachusetts’ 2017-18 legislative session includes seven bills focusing on reforming non-compete covenants. Yet just this week, Massachusetts’ legislature released a new economic development bill, S.2625, that would significantly limit the use of non-compete clauses in employment.
Articles Discussing Restrictive Covenants In Massachusetts.
On December 27, 2017, we wrote about the Massachusetts Legislature’s efforts to regulate the use of non-compete agreements, including three bills that sought to require post-separation “garden leave” payments to former employees while they were restricted from engaging in competitive activities.
With the approaching New Year bringing the possible passage of non-compete legislation in Massachusetts, we examine here the “Garden Leave” provision included in several proposed bills. The proposed “Garden Leave Bills” attempt to limit the frequency of enforcement of non-compete agreements and require compensation to employees for any financial hardship caused in the event their former employers pursue enforcement of the agreements.
The Massachusetts Legislature has spent the past several years seeking to regulate the use of restrictive covenant agreements in the Commonwealth. Despite repeatedly falling short in that initiative, the 2017 legislative session strongly signaled the Legislature’s enduring interest in this subject by introducing a whopping eight new competing bills.
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.
Once again, the Massachusetts legislature was unable to agree on non-compete reform legislation by the July 31, 2016, end of the current legislative session. The House and Senate had passed versions of non-compete reform that differed on key provisions. At the end of the session, however, the House and Senate failed to pass a compromise bill.
The use of LinkedIn to notify professional contacts of a change in employment did not constitute competition. according to a recent Massachusetts ruling. In KNF&T v. Muller, No. 13-3676-BLS1 (October 24, 2013), the Massachusetts Superior Court denied a request for a preliminary injunction where an employer alleged that a former employee violated her non-competition agreement by, among other actions, using her LinkedIn profile to notify contacts of her new position. In denying the injunction, the court shed further light on the definition of competition and solicitation in the era of social media.
The First Circuit Court of Appeals issued its most significant decision to date on non-solicitation provisions in restrictive covenants by upholding a preliminary injunction in Corporate Technologies, Inc. v. Harnett, No. 13-1706 (August 23, 2013). The court affirmed a decision from the District of Massachusetts granting a preliminary injunction to an employer whose former employee used a targeted email blast to announce his new position with a competing company. In upholding the injunction, the court took a much broader view of the meaning of “solicitation” than that argued by the defendant employee and shed light on the “hazy” line separating “actively soliciting” business from “merely accepting” it.
Your Vice President of Sales announces that she is leaving to work for your biggest competitor. She signed a noncompetition agreement when she joined the company five years ago as a junior sales associate. Can you get an injunction preventing her from competing with your company? In Massachusetts, the answer may depend on the applicability of the “material change doctrine.”
The federal appeals court in Boston has underscored the importance of carefully examining and understanding restrictive covenants, such as non-competes and non-solicitation agreements, that may be acquired in a business purchase. The Court found a one-year non-compete clause in a restrictive covenant agreement expired and unenforceable against former employees when it was sought to be invoked more than one year following the sale of the company that had entered into the agreements with them. OfficeMax, Inc. v. Levesque, 2011 U.S. App. LEXIS 18816 (1st Cir. Sept. 12, 2011). Accordingly, the Court refused to enforce the District Courtâ€™s preliminary injunction restricting the former employees from competing with OfficeMax, an office supplies company that bought the assets of Boise Cascade Office Products Corp. (BCOP), another office supply company.