Beware of Boiler-Plate Non-Compete Agreements…

…as well as Non-Disclosure Agreements, Non-Solicitation Agreements, and other Restrictive Covenants!

Massachusetts has long been poised to change the law with regard to Non-Compete Agreements (also known as Non-Competition, Covenants Not to Compete, or simply Non-Competes). This type of agreement is typically combined with other restrictive covenants like non-solicitation agreements and non-disclosure / confidentiality agreements.

The latest bill before the Massachusetts Legislature is H.2293 “An Act Relative to Noncompetition Agreements”. If your non-compete agreement was drafted before this bill, and fails to take into consideration the new limitations and requirements contained in this new bill, even though this bill has not yet passed, you may discover the hard way that your non-competition agreement is unenforceable. See also the remarks prepared by the Massachusetts Housing and Economic Development Secretary Gregory Bialecki before the Joint Committee on Labor and Workforce Development on September 15, 2011.

However, the problem with boiler-plate non-competition, non-solicitation and non-disclosure agreements does not stop there. The law, and especialy case law (judge made decisions that serve as precedent for future cases) is different from state-to-state. Therefore, the requirements of an enforceable non-compete agreement vary from state-to-state as well. A non-compete agreement (or non-solicitation / non-disclosure agreement) that was drafted with one state’s laws in mind, may be entirely inapplicable to another state – and therefore unenforceable – eliminating the protections they can provide to your business.

Some key issues affecting enforceability and which can vary from state-to-state include (1) the reasonableness of the geographic restriction and duration of the time constraint, given the facts of each case, (2) whether the non-compete agreement was presented to the employee upon the start of employment, mid-employment or upon termination of employment, (3) whether there was consideration (some additional benefit to the employee) to support the non-compete agreement (continued employment alone is generally insufficient) and (4) whether the non-compete agreement violates public policy in some way. It is this public policy argument that could be the most devastating to the enforceability of your non-compete agreement, especially if other elements of a valid and enforceable non-compete agreement are lacking.

If you have non-compete, non-solicitation, or non-disclosure agreements with your employees, you should consider revising them and updating them to reflect the current state of the law in the Commonwealth of Massachusetts with regard to non-compete agreements. If your business has no non-compete or other restrictive covenants with its employees, you may want to consider using them to protect your business, customer base, confidential information, trade secrets and other key information. If you are an employee who has been presented with a non-compete agreement, or an employment agreement that contains non-compete, non-disclosure and/or non-solicitation provisions, you should have an attorney review that document BEFORE you sign it. Similarly, if you are involved in a dispute over a non-compete agreement, non-solicitation agreement, or non-disclosure agreement, it is extremely important that you consult an attorney.

The Jacobs Law, LLC is based in Boston, Massachusetts and has experience drafting and litigating issues involving non-compete agreements in Massachusetts. Email The Jacobs Law, LLC at ContactUs@TheJacobsLaw.com if you need an attorney to draft, revise, or review an employment agreement that involves non-compete, non-solicitation or non-disclosure agreements or other restrictive covenants. The Jacobs Law, LLC can also pursue or defend the enforcement of non-compete, non-solicitation or non-disclosure agreements against an employee.

For additional resources go to “Massachusetts Law About Non-Competition Agreements” at the Massachusetts Law Library online.