Tags: massachusetts legislation, non-compete, non-compete duration
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By: Bob Shea
Over the past several years legislators in Massachusetts have filed various bills seeking to address perceived employer overreaching in the area of non-competition agreements. According to the legislators, many employers impose non-compete restrictions on employees in circumstances where such restrictions are not appropriate, or impose restrictions that go beyond what might be necessary to protect legitimate business interests (i.e., customer good will, trade secrets and other confidential business information).
Recent bills introduced by Representative (now Senator) Will Brownsberger and Representative Lori Erlich addressed non-compete issues in a fairly comprehensive way, attempting to codify, clarify, and modernize existing common law in Massachusetts. The bills met opposition by some business groups which viewed the bills as trying to place unacceptable limitations on the legitimate use and scope of non-compete restrictions. Although the bills garnered some support, including from employee advocates, the Governor’s office and some journalists, the legislators’ efforts were unsuccessful.
This year, Sen. Brownsberger and Rep. Erlich have presented a bill that focuses only on the duration of non-compete restrictions. The bill, House Bill No. 2221, referred to as “the Noncompetition Agreement Duration Act,” seeks to create a presumption that a non-compete restriction lasting up to six months is reasonable in duration, whereas a non-compete restriction lasting more than six months is presumed unreasonable in duration. The bill provides that a non-compete agreement that is determined by a court to be unreasonable in duration shall be unenforceable.
The bill provides for three exceptions: a non-compete agreement of unreasonable duration will not be unenforceable if (i) the employee has breached a fiduciary duty to the employer, (ii) the employee unlawfully took the employer’s property, or (iii) the employee has received $250,000 in annual taxable compensation from the employer. When one of these exceptions applies, a court could enforce the non-compete agreement for any duration the court determines is appropriate.
We believe the bill will face strong opposition, and its prospects for passage are, at best, uncertain.
If you have questions or want more information on this proposed legislation, you can contact Bob Shea.
MBBP Obtains Successful Non-Compete Ruling 10/23/2012Posted by Morse, Barnes-Brown Pendleton in Attorney News, Employment, Legal Developments.
Tags: employment law, material change doctrine, non-compete
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Last week, MBBP Employment Attorneys Chris Perry and Maura Malone successfully opposed a motion for preliminary injunction to enforce restrictive covenants against three sales executive clients based on the material change doctrine. In Akibia, Inc. v. Jeffrey Hood, Ryan Gavigan and Charles Krueger (Mass. Super. Ct. 10/9/2012), Judge Jeffrey A. Locke ruled that the non-compete agreements each former employee had signed at Akibia were likely voided by material job changes that included promotions, demotions, increases and decreases in compensation, changes in responsibilities and sales territories, and changes in the employer’s sales strategies and product offerings. As such, Judge Locke denied Akibia’s motion to prevent Hood, Gavigan and Krueger from working for their current employer, IOvations. Judge Locke did not address language in the three employees’ non-compete agreements, which stated that their obligations under the non-compete would continue regardless of any job changes, plainly implying that such language did not influence his case analysis.
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Tags: employment, new hampshire law, non-compete
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By: Bob Shea
Effective July 14, 2012, employers in New Hampshire must disclose any “non-compete” or “non-piracy” agreement to an employee or potential employee prior to making an offer of employments or an offer of change in job classification. Under RSA 275:70, if an employer fails to provide the employee or potential employee with a copy of the agreement prior to the offer the agreement will be deemed “void and unenforceable.”
The law is intended to prevent situations in which an employee leaves a job for a new position and is then told that he or she must sign a non-compete or non-piracy agreement as a condition of employment. Unfortunately, the law does not define what constitutes a “non-compete” or “non-piracy” agreement, and thus leaves unclear whether the law applies to non-solicitation agreements. It will be left to courts to decide the scope of the new law.
For more information on this topic, please contact Bob Shea.
Tags: non-compete, superior court, wage act
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Severance Claims Covered By Wage Act According To Superior Court
In a surprising ruling, a Superior Court Justice has ruled that a former employee’s claims to severance pay are covered by the Massachusetts Wage Payment Statute (the “Wage Act”). As a result, such claims could give rise to treble damages and an award of attorney’s fees to the employee.
After getting approval from the Massachusetts Attorney General to make a claim under the Wage Act, Juergens brought a law suit against Microchip, under various legal theories. In ruling on Microchip’s motion to dismiss Juergens’ Wage Act claim, the Court opined that a 2005 Supreme Judicial Court decision, Wiedmann v. Bradford Group, Inc., 444 Mass. 698 (2005) authorized an “expansive interpretation” of the Wage Act than had prior cases. With no additional analysis, the Court ruled that claims for severance pay fell within the Wage Act, and denied the employer’s motion to dismiss.
To learn how employers can protect themselves in these situations, please read our full Employment Law Alert.
Non-Competition Legislation Introduced Once Again
For the second time in the last two years, members of the Massachusetts House of Representatives have introduced legislation regarding non-competition agreements into the Legislature. If passed, the proposed bill would significantly curtail the ability of employers to enforce non-competition agreements in Massachusetts.
The bill is quite similar to the bill filed in 2010, with two exceptions. First, the requirement that, in order for a non-competition agreement to be binding on an employee he/she must earn at least $75,000 annually has been removed. In addition, employees who enter into non-competition agreements during employment must no longer be made a payment from their employer of at least ten percent of their then annual compensation for there to be adequate consideration for the agreements; however, the agreement must be supported by “fair and reasonable consideration.”
To learn what this legislation could mean for employers, please see our full Employment Law Alert.
For more information or any questions on employment, please contact Chris Perry.