Massachusetts Legislature Passes Noncompetition Statute that Brings an Array of New Rules to the Employment Arena

It took years and came down to the last minutes of the current session, but the Massachusetts Legislature finally passed a noncompetition law on July 31, 2018. If signed by Gov. Charlie Baker, as it presumably will be, the statute will take effect on October 1 and will bring a number of major changes to this rather complex area of employment law.

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Massachusetts Legislature finally passed a noncompetition law on July 31. If signed by Governor Baker, a number of major changes to this area of employment law will be affected.

Of note is the requirement that non-compete forms be presented to new employees at least 10 days prior to the start of work. When an employer asks existing workers to sign noncompetition agreements, it must provide them something of value – a pay raise, e.g., or perhaps a promotion. Enforceable agreements must be in writing and signed by both parties, a seemingly simple requirement that is often unsatisfied under current noncompetition practice. The parties’ contract must state expressly that a worker has a right to consult with counsel before signing. It must also provide for pay during the noncompetition period equal to at least 50% of the worker’s average annual salary during the prior two years. For workers who are entitled to overtime under federal law, non-competes are unenforceable. Neither can they be used for students engaged in short-term employment, workers under 18, and, notably, anyone who is laid off or fired without cause.

While these requirements apply to employees and independent contractors alike, they have nothing to do with other forms of restrictive covenants that are commonly used in the Commonwealth and almost always bundled together with noncompetition agreements. The law applies only to contracts that ban employees from competing with their former employers. That leaves employers free to create agreements that might ban workers from soliciting their employees or customers and, of course, from disclosing confidential data. As to this latter issue, the noncompetition statute also includes enactment of a form of the Uniform Trade Secrets Act, which protects a company’s trade secrets from misappropriation. The new law will not apply to noncompetition agreements signed before it takes effect in October, saving employers and the courts the trouble of figuring out what to do with existing agreements.

Noncompetition Agreement Legislation Appears No Closer to Passage in Massachusetts

The effort to regulate the use of noncompetition agreements continues to languish in a legislative committee, where most of several competing proposals were referred early in 2017. Alongside them – or, as it were, within the same proposed bills – sits the uniform trade secrets act, a law aimed at protecting the advantage businesses enjoy from confidential trade information.

No fewer than six bills are now being considered by the Massachusetts Legislature’s joint committee on labor and workforce development. One proposed law would void restrictions on post-employment competition contained in written employment agreements while permitting limitations on solicitation of customers or employees in those same contracts to be enforced. Another would permit noncompetition agreements under specifically prescribed conditions, including 10-day advance notice for employees, opportunities to consult with counsel, and payment of wages during any restricted period of time. Some versions of the proposed law would ban noncompetes for lower level workers and limit them to time periods of between three and 12 months. Two bills require renewal of noncompetition agreements at regular intervals, and some permit enforcement of them only in the county where an employee resides.

It’s unclear whether or when the state Senate and House of Representatives will agree on and pass a version of noncompetition legislation or, if they ever do, whether the governor will sign it into law. Given the long history of failed efforts to ban these contracts, it seems most likely that, if any legislation is ever to become law, it will impose conditions on noncompetition agreements while permitting businesses to continue to enforce them where they are essential. Such enforcement might very well require that employers pay at least a portion of the wages their former workers will lose as a consequence of a noncompetition restriction.

Preventing Identity Theft — The New Employer Duty

A tough new data protection law is on the books and will soon require virtually all Massachusetts businesses to implement comprehensive policies to protect against identity theft. The statute applies so broadly that employers of every size and shape will be subject to it. All must create, implement, monitor and regularly update internal data protection procedures and encrypt information that is either transmitted via the internet or stored on portable devices.

Though the data security law became effective in October 2007, enforcement has been delayed until March 1, 2010 to permit Massachusetts companies time to become compliant. Doing so is a daunting task, since the statute’s broad reach captures virtually every every piece of what’s called “personal information.” That phrase refers to a combination of an individual’s name and either a social security number, driver’s license number, or financial account/credit card number or password. Employers must be certain to protect against both external data thefts and internal breaches. Not surprisingly, the latter sort is far more common. [Read more…]

Court Clarifies Punitive Damages Guidelines

In a ruling that may be useful to Massachusetts employers, the Supreme Judicial Court in October made clear that puntive damages can only be awarded to discrimination plaintiffs when their employer’s conduct is “outrageous or egregious.” Punitive damages are, after all, available only to punish bad actors, not to permit windfall awards to discrimination victims who are generally entitled only to recover what they lost in wages and what they suffered from proven emotional injuries.

Apparently recognizing the subjective natures of the terms “outrageous” and “egregious” — who, after all can define either with more than a modicum of confidence — the court did what it often does. It created a list of factors that should be considered by judges and juries when evaluating whether to issue punitive damage awards. As always, the list is intended as a guideline only. Other factors that are relevant in particular cases can always be considered. The five punitive damages factors created by the SJC are: [Read more…]

Misclassifying Workers Can Mean Big, Big Damages

Employers who misclassify their workers as independent contractors now have even more to worry about. In August, the state’s highest court made clear they could pay huge damages for this transgression of the law, even if they merely made an honest mistake.

In a majority opinion, the Massachusetts Supreme Judicial Court concluded that employers can’t defend an independent contractor classification lawsuit by claiming a worker would have made less money if he/she had been properly classified as an employee. Damages are not measured by the difference between what a worker received and what he would have received as an employee.  Instead,  under the independent contractor provisions of the state’s Wage Act, damages equal the value of “wages and benefits [a worker] should have received as an employee, but did not,” the court wrote. [Read more…]

SJC Makes Arbitration of Discrimination Lawsuits Tougher

In a surprising decision, Massachusetts’ highest court ruled in July that not all arbitration agreements are created equally and, consequently, only some of them are enforceable by employers. When it comes to suits under the state’s anti-discrimination law (Chapter 151B), the language in a workplace arbitration clause must be clear and unequivocal. Unless it demonstrates that an employee specifically bargained away the right to sue at the Commission Against Discrimination or in state court, the worker’s lawsuit for sexual harassment, age or race bias, failure to reasonably accommodate, or other discrimination issues may escape arbitration. That means employers will face the far more difficult and expensive task of defending themselves in front of a jury or at the MCAD or its federal counterpart, the Equal Employment Opportunity Commission (EEOC).

The message for employers is clear: review any and all arbitration agreements you entered with your employees and, if you still believe arbitration of discrimination claims is in the company’s best interest, make sure Chapter 151B is specifically referenced. For many employers, [Read more…]

Wrongful Termination Law in Massachusetts

Wrongful termination is a phrase frequently used by employers and employees alike to cover the whole rubric of potential causes of action that an individual could have against the company when he or she is fired.

Wrongful termination means, simply, that there is some kind of legal action that the an employee may take after being let go by an employer.

There are several discrete categories of wrongful termination in Massachusetts. Under the local law, all employees, unless they have a specific contract that they have negotiated with their employer, either in writing or orally, are At-Will employees.  This means they can leave whenever they choose to, or be let go whenever the employer chooses to let them go.  There are a couple of very narrow exceptions to the At-Will rule in Massachusetts that would constitute Wrongful Termination under the States Law. The exceptions are:

  1. A violation of Good Faith and Fair Dealing, meaning an employer, in a typical case, lets an employee go to avoid paying an employee a commission or large sum of compensation that would normally be due.
  2. Another way to violate the At-Will law is if an employer lets someone go in violation of something called the Public Policy Exception. There are very few Public Policy Exceptions. However, if an employee is serving on a jury, testifying in court, or performing some other act that the government wants to protect, the employer can not fire the employee for those actions.
  3. An employer also cannot fire or discharge someone in Massachusetts if they have a contract that provides otherwise. Sometimes employees have an employment contract that says,  for example,  they can only be fired for specific reasons, such as stealing from the employer, insubordination, or committing a crime. Where a company violates those terms, a breach of contract claim can arise in Massachusetts and that would be Wrongful Termination.
  4. The final category for Wrongful Termination involves discrimination cases. In Massachusetts, and under Federal Law, you can not let an employee go or treat them less favorably because of their race, gender, national origin, age, sexual orientation, handicap status, or genetic disposition.

If any of these factors are in play in your situation when you are let go from work, call me for a consultation.

If you have questions about Massachusetts employment law, consult an qualified Massachusetts employment lawyer before you take action.

Boston employment lawyer, Attorney Jack Merrill provides legal services to employees and employers throughout the Boston metro and Worcester County region including Ashland, Dedham, Framingham, Franklin, Hopkinton, Maynard, Marlborough, Milford, Natick, Needham, Newton, Shrewsbury, Sudbury, Waltham, and Worcester, Massachusetts.

Massachusetts Employment Law: How To Let Your Workers Go

One thing Massachusetts employers must understand is that you are free to do as you see fit with your employees. You can let them go for any reason, at any time, with or without cause. An employer does not need to be concerned about lawsuits as long as they have covered these three basic areas:

  1. Be sure your employees do not have contracts.
  2. Make sure you don’t discriminate against your employees. You need to look at how a worker was treated and whether or not he or she has made prior claims of discrimination. If they have made claimes, be careful,  retaliation is a viable cause for action.
  3. Pay them all wages they have earned and all money owed to them immediately.

For more discussion about “How To Let Your Workers Go“, watch my video:

If you have questions about an employee or any issue regarding Massachusetts employment law, consult an qualified Massachusetts employment lawyer before you take action.

Boston employment lawyer, Attorney Jack Merrill provides legal services to employees and employers throughout the Boston metro and Worcester County region including Ashland, Dedham, Framingham, Franklin, Hopkinton, Maynard, Marlborough, Milford, Natick, Needham, Newton, Shrewsbury, Sudbury, Waltham, and Worcester, Massachusetts.

COBRA Law Benefits Expanded

It’s commonly known as the “Stimulus Bill,” and is officially called the American Recovery and Reinvestment Act of 2009. This is the huge federal bill passed in February at the urging of President Barack Obama. While the overall idea was to stimulate the American economy, included in the bill’s details are unexpected benefits like the one that laid off employees will enjoy under COBRA. As most know, this federal law guarantees continued health care coverage for workers who lose their jobs, regardless of the reason. Under the Stimulus Bill, employers now must cover 65% of the COBRA premium for employees fired – or laid off, if that term is preferred, the distinction being meaningless in this context – between September 1, 2008 and December 31, 2009. This percentage must be paid for up to nine months, but applies only to periods of time between [Read more…]

Massachusetts Attacks Independent Contractors

In 2004, Massachusetts changed its independent contractor law in a rather radical way. The amendment essentially banned the use of independent contractors in the Commonwealth, regardless whether workers and employers agreed that the arrangement made good business sense. The new law so narrowly defined who could and couldn’t be an independent contractor that most observers figured it represented a case of legislative over-drafting. How, after all, could the state have intended such a radical result when important segments of the business community had for so many years operated openly and productively under the independent contractor model?

Five years later, the anti-contractor law not only is unchanged but is being vigorously enforced under the leadership of Governor Deval Patrick. In 2008, he formed a joint task force to target violators of the independent contractor statute, calling them purveyors of an “underground economy” that underpays employees, reduces state tax revenues, and undermines safety laws. The task force’s mission statement takes an aggressive stand against what’s termed improper employee classification, which the Governor believes affects one in every seven Massachusetts workers. In its one year of existence, the task force has already launched hundreds of coordinated investigations and leveled numerous fines against Massachusetts employers. An anonymous tip line makes starting an [Read more…]