Connecticut employers with employees who work or even who simply reside in Massachusetts must abide by Massachusetts’ onerous new non-compete law. Under the new law, a provision in a non-compete providing for the application of another state’s (such as Connecticut’s) law is not enforceable if the employee is, and has been, a resident of or employed in Massachusetts for at least 30 days before his or her employment ceases. The law applies to non-compete agreements entered into on or after October 1, 2018.
Connecticut employers with Connecticut operations and Connecticut non-competes must now be concerned with whether a single employee resides across the border in Massachusetts. If that is the case, the employer can still use its Connecticut non-compete for other employees, but could not enforce it against the Massachusetts resident. However, an employer will not always know at the time the agreement is signed which employee(s) will reside in Massachusetts for 30 days before separation. It appears that if an employee resided in Connecticut and worked in Connecticut when the agreement is signed and the agreement provided for the application of Connecticut law, if the employee then moves to Massachusetts, the agreement will not be enforceable. This may present significant hardships for Connecticut employers whose contractual benefits can be thwarted by the unilateral action of employees.
Employers who wish to play it safe and craft their non-competes to abide by Massachusetts law must note the following:
- Only exempt employees can be subject to a non-compete.
- If the employee is laid off or terminated without cause, the agreement is not enforceable.
- The maximum duration is one year, unless the employee has engaged in certain acts of misconduct, which may allow for an extension.
- Non-competes must be presented to new employees with the formal offer or 10 business days before the start date, whichever is earlier.
- The non-compete must be signed by both parties and must state that the employee should consult a lawyer.
- The non-compete must provide for “garden leave” or “other mutually-agreed upon consideration.” “Garden leave” is defined in the statute as payment during the period of the non-compete of 50% of the employee’s highest annualized based salary within the prior two years.
- Separation agreements with non-compete clauses are not subject to the new law, but the agreement must provide that the employee has seven business days after signing to rescind acceptance.
Connecticut employers face difficult decisions in light of this new legislation. Our team of labor and employment attorneys can assist employers with restrictive covenant agreements and keeping up with legislative changes.