Now, roughly five years and one federal trade secrets statute later, Massachusetts has become the 49th state, leaving New York as the lone holdout. The new law, which takes effect on October 1, 2018, is part of an amendment to a $1.1 billion economic development bill that Massachusetts Governor Charlie Baker signed into law on August 10, 2018. With the enactment of the UTSA, Massachusetts courts will have newfound power to enter injunctions against actual or threatened misappropriation of trade secrets.
Beyond the trade secrets ramifications, Massachusetts’ new law is, at its core, focused on narrowing the scope of noncompete agreements. Some key takeaways of the new law include:
- Limits the period of no competition to one year.
- Applies to independent contractors as well as employees.
- Prevents noncompetes from being used with non-exempt employees, students who are working part-time, or employees who were terminated without cause or laid off.
- Does not allow continued employment to count as sufficient consideration for noncompetes.
- Requires that, if entered into at the commencement of employment, the noncompete must be signed by both the employer and employee and state that the employee has the right to seek counsel prior to signing. The noncompete must also be provided either: (a) at the time of the formal offer or (b) 10 business days before employment begins (whichever is earlier).
- Contains a “garden leave” provision, which states that, during the period of no competition, the employee must be paid at least 50% of his/her highest annualized base salary for two years preceding termination. However, an employer may instead comply with this requirement by providing “other mutually agreed-upon consideration.” The wide gap between these requirements and the somewhat ambiguous terminology are likely to generate disputes between parties in litigation.
The law will apply only to agreements entered into on or after October 1, 2018.