Once again, the Massachusetts legislature took on non-compete reform, and once again, came up empty-handed. On July 31, 2016, the legislature adjourned without reaching a compromise to alter the state’s non-compete landscape. Earlier this summer, both the House and the Senate passed contrasting versions of non-compete reform bills, but ultimately could not come to agreement on several important provisions. Their inability to reach a compromise reveals once again that this is a complex issue with many stakeholders, and not one susceptible to end-of-the-session compromise.
While similar in some respects, the Senate bill greatly differed from the bill previously passed by the House on four key points:
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The Senate version limited the length of a non-compete’s restricted period to three months, while the House version’s was twelve months.
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The Senate version expanded the House’s (already extensive) list of individuals exempt from non-compete agreements to independent contractors and employees whose average weekly earnings are less than twice the average weekly wage in the Commonwealth.
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The Senate version’s “garden leave” clause required payment to the employee during the restricted period to be equal or greater to 100% of the employee’s highest annualized earnings during the last two years of employment, while the House version required payment of 50% of the employee’s highest annualized base salary over the last two years, or other “mutually agreed upon consideration.”
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In what would have been a dramatic change to current Massachusetts non-compete law, the Senate version did not permit “blue-penciling” — a court’s equitable reformation of overbroad non-compete provisions — while the House version did.
Those following the Massachusetts legislature’s repeated, unsuccessful efforts at non-compete changes will have to wait until next year, as the next legislative session does not begin until January 2017.
