If you are about to take a job at the end of next month, you might want to stall for a few days ... and negotiate a better non-compete agreement for yourself.
Why? State lawmakers passed a bill earlier this week that will put limits on the so-called "non-competition" agreements that can temporarily prevent workers from starting their own businesses or taking new jobs that would make them rivals with their current employers.
The legislation -- which would require the signature of the Gov. Charlie Baker -- would take effect Oct. 1.
Following years of debate over the non-compete agreements, the new measure would add some protections for workers, while restricting employer demands in contracts.
The measure, for example, would block companies from enforcing the contracts if they lay off or fire a worker without cause. It would also stop companies from asking some types of workers, such as student interns or those eligible for overtime pay, to sign them. In addition, it would put time caps – typically about a year after a worker leaves a company – on the contracts and introduce an option for the so-called “garden leave,” which typically lets workers who leave a company to collect half their pay while bound by the contract.
While legal experts framed the bill as a compromise they did say the new measure has significant changes and clarifies some of what’s allowed on the agreements.
“It’s pretty significant” that the law would exempt workers who are laid off or fired without cause, said Michael L. Rosen, a partner at Foley Hoag, who specializes in employment law. But, he said, the legislation could open another can of worms around matters such as defining what is “cause.”
“The bill does provide more predictability on some issues, but it also creates new issues that inevitably judges will have to grapple with,” said Rosen, who expects to see many companies scramble to revise their contracts over the next few months.
Adding in language around the “garden leave” is a big deal, added Erik J. Winton, a principal in the Boston office of Jackson Lewis P.C. But, Winton said, letting employers and employees come up with a “mutually agreeable” alternative to the "garden leave" waters the bill down from earlier proposals.
As opposed to an earlier proposal, this bill leaves open the meaning of what “other” agreement employers and employees could agree to instead of the garden leave, said Winton.
“I think it’s a compromise bill,” said Winton, noting that half dozen other proposals were in play last year, one of which would have called for a California-style abolishing of the non-compete agreements.
Both attorneys also noted the legislation lets Massachusetts non-compete law trump other state laws when litigating the agreements -- no matter where the company is incorporated -- so long as the employee is residing or working in Massachusetts.
In addition, they pointed out that many employers see non-compete agreements as a way to protect their business interests.
The New England Venture Capital Association, a critic of non-compete contracts, however, painted the measure as a very slow step in the right direction.
"Noncompetes hurt Massachusetts' workers and its economy," said the group in a statement, adding that the new legislation will help protect "innovation workers" as well as some low-wage employees, minors, students and others. But, the group said it wants to see high-tech companies "curtail the use of noncompetes of their own accord.”
