Are You Ready? Three Weeks Until New Noncompete Law Takes Effect

As discussed in more detail in our recent client alert, Massachusetts’ new noncompete law takes effect on Monday, October 1. While the new law raises as many questions as it answers, for companies with Massachusetts employees, there are some clear to-dos in the short term:

1. Noncompete agreements currently being negotiated or nearing finalization should be executed before October 1 to ensure coverage under existing law rather than the new law. (Agreements entered into before October 1 are not covered by the new law.)

2. Template noncompete agreements for new hires should be reviewed and if necessary revised on or before October 1. On a high level:

a) Noncompete agreements should no longer be used for non-exempt employees. For these employees, employers should rely on well-drafted nonsolicitation and confidentiality provisions.
b) New executive or other exempt employee noncompete agreements should be reviewed for compliance. They remain enforceable if entered into in a severance agreement or if consideration is provided and the employee is terminated for cause. Careful drafting and structuring will be critical to ensure enforceability.

3. Noncompete provisions in equity plans are also covered by the law. Such equity plans should be reviewed for compliance as to future Massachusetts-based grantees.