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Employment Law Alert

House Passes Bill Restricting Employee Noncompetition Agreements

June 30, 2016

The Bill Now Heads to the Senate

In a prior alert, we notified clients about H. 4323, a proposed bill imposing strict new requirements on the use of employee noncompetition agreements in Massachusetts. Yesterday, the Massachusetts House of Representatives unanimously approved a slightly modified bill, H. 4434. One amendment was added allowing an employer and employee to agree on alternative consideration to substitute for the 50% “garden leave” salary payments required during the post-employment non-compete period. The full text of H. 4434 is available at: https://malegislature.gov/Bills/189/House/H4434. The issue now heads to the Senate, which previously has supported non-compete reform.

A few points to keep in mind about H. 4434:

  • It restricts non-compete provisions.  It expressly does not apply to non-solicit provisions, i.e. “covenants not to solicit or transact business with customers, clients, or vendors of the employer,” covenants not to solicit or hire employees, non-competes in the sale of business context, Non-Disclosure/Confidentiality Agreements, and Invention Assignment Agreements.
  • As currently drafted, it will apply to noncompetition agreements entered into on or after October 1, 2016.

We will continue to monitor this situation closely and advise clients of new developments.

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