A non-compete agreement restricts employees from competing with their employers after their time of employment ends. These agreements are beneficial to employers, who have often invested significantly in developing the skills of their employees. But employer concerns must be balanced with those of employees, who need to be able to work after they leave an employer.
These agreements are legal in Massachusetts, but they are severely restricted. Courts will closely scrutinize non-compete contracts to ensure they do not unfairly infringe upon the rights of employees. SederLaw’s Labor and Employment practice advises employers on their legal obligations while working to protect their best interests.
What Is A Non-Compete Agreement?
Non-compete agreements, sometimes simply called non-competes, are contracts that limit the ability of employees from going into competition with their employers once they leave employment. These agreements usually include additional related terms that prohibit employees, for instance, from revealing trade secrets or other proprietary information to third parties. Non-competes may be stand-alone agreements or clauses included in broader employment contracts.
There are different ways a non-compete agreement can restrict employees. For example, it may specify an amount of time after the period of employment in which the employee is barred from working for a competitor. Non-competes also frequently contain geographical limits which prevent a former employee from working for competitors within a certain vicinity. These agreements may also restrict the former employee’s ability to solicit clients from his or her former employer.
Employers have various reasons for insisting that their employees agree to non-compete terms. Primarily, these agreements protect employers’ market position by limiting the ability of former employees to help their competition. Also, employers are mindful of the amount of time and other resources that go into training employees. It would be unfair for a company to invest so much in an employee who then takes what they learned and goes to work for a competitor.
Finally, employers prefer these agreements to protect proprietary information from reaching the public. For example, in training an employee, a company may utilize certain methods that are not readily available to competitors. If there is no restriction on how this information is used, a former employee could reveal it to a new employer. This would put the prior employer at an economic disadvantage by exposing it to unfair competition.
Are Non-Competes Legal In Massachusetts?
There’s a misconception that non-compete agreements are illegal in Massachusetts. They are legal, but they have to follow certain restrictions before a court will uphold them. Having an attorney who understands state employment and labor law is therefore essential if you wish to require non-compete terms of your employees.
Members of certain professions cannot legally be asked to sign a non-compete agreement. Those include:
- Social workers
In 2018, Massachusetts enacted legislation that in most cases limits non-compete agreements to no more than twelve months. The employee must also be given advance notice of the non-compete terms and the agreement itself must be in writing. Finally, an employee has the right to have legal counsel review the terms of the agreement prior to signing it.
These are some of the specific rules that govern non-compete agreements. More generally, employers must be careful in how they draft these contracts to avoid accusations that they are overly broad, don’t relate to a legitimate employer interest, and/or violate the employment rights of their workers. Careful drafting is key to meeting these requirements.
How To Ensure Your Non-Compete Agreement Is Enforceable
In deciding whether to enforce a non-compete agreement, courts will consider two main questions:
1. Is the agreement reasonable? This question takes several factors into account such as how long the prohibition on competition is, the geographic area in which the employee would be prohibited from competing, and the nature of the employee’s work.
Length of time. As mentioned above, the state sets a twelve-month time limit in most cases involving non-compete agreements. But just because an agreement’s time limit is under one year does not automatically make it reasonable. The longer the length of time, the more reluctant the courts will be to enforce the agreement.
Geographic area. If the scope of the agreement exceeds the geographic area in which the company actually operates, this could prove detrimental. For example, if a company only operates in one city, a former employee will most likely be permitted to work in another city, even if doing so is in competition with the former employer.
Type of work. The more technical or specialized the work is, and the more the employer has invested to train an employee, the more likely it is that a court will allow a reasonable and temporary prohibition on the worker seeking new employment in competition with it. This is especially so because a highly trained employee is more likely to be privy to confidential employer information.
2. Does the agreement serve a legitimate business interest? Courts will require that the non-compete protect a legitimate business concern, such as keeping business plans, trade secrets, and client lists confidential. This becomes even more of a concern with a highly trained employee in a specialized field of work. During the course of training, employees gain access to certain information that could put an employer at a disadvantage if it fell into a competitor’s hands.
Contact Our Worcester Non-Compete Agreement Attorney
It’s fairly clear that the law and courts are not on the side of employers wishing to restrict their employees. At the same time, however, employers have genuine business concerns that deserve to be protected to the extent possible. If you’re an employer and have questions about non-compete agreements, let the team at SederLaw help you today.