Massachusetts now has one of the toughest laws restricting non-compete clauses in work contracts, increasing the likelihood that businesses in the Bay State will shy away from them.
One reason the law might inspire skittishness about the clauses among employers is the so-called “garden leave,” a unique part of the Commonwealth law.
If workers sign a contract with a non-compete clause, the employer will have to pay them part of their wages after they leave the job to lighten the financial burdens that weigh upon a person in the time between leaving one job and finding another. The law applies to both workers and employers.
Josh Davis, Director at the Goulston and Storrs law firm and an attorney specializing in employment law, said businesses are now thinking twice about including non-compete clauses in employment contracts. He noted that prior to the passage of the new law, employers were quite cavalier about including non-compete clauses.
“The law makes them more expensive than they used to be,” Davis said. “It’s not something you just do anymore. For a long period of time, in Massachusetts and in other jurisdictions, it really was something that employers just did – you know, ‘You want to work here? You need to sign this.’ Now, I think there’s a little more thought about who should be bound and why it makes sense.”
Business owners might be thankful for at least one aspect of the law. According to Davis, the law does not apply to contracts that were signed before it went into effect on Oct.1.
The Massachusetts legislature passed the law due in part to complaints that employers were abusing their ability to subject workers to the restrictions imposed by non-compete clauses. Some argued that workers in many fields faced increased difficulty in their searches for new employment after leaving jobs that required them to sign contracts containing non-compete clauses.
Under the new law, business owners are still allowed to draw up contracts that include non-compete clauses, but they’re now obligated to abide by certain rules.
Employers who include a non-compete clause in a contract can pay 50 percent of a worker’s wages when they leave the job. Their other option is to give the employee a payment described as a “mutually agreed-upon consideration,” a term Davis says does yet have a definition that everyone can agree on. He noted that the murkiness of the language could give rise to more conflict.
“There’s some question about what this other ‘mutually agreed consideration’ language might mean,” he said. “So, there could be a spike in litigation around that.”
Massachusetts joins just a few other states that limit non-compete clauses. California still has the strictest policy, banning almost all non-compete agreements.
More information is online at masslive.com.
Via Commonwealth News Service.