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Noncompete bill including ‘garden leave’ clears Massachusetts Legislature

Posted On: Aug. 3, 2018 12:24 PM CST

Noncompete bill including ‘garden leave’ clears Massachusetts Legislature

The Massachusetts Legislature has approved noncompete legislation that says employers must pay “garden leave” to workers restricted from going to other firms.

H. B. 4868, which was approved by the Massachusetts Legislature late Tuesday, just before the end of its legislative session, would become effective Oct. 1 if it signed into law as expected by Gov. Charlie Baker.

The bill provides that restricted employees must be paid either 50% of their highest annualized salary for the two years prior or some other agreed-upon compensation.

“Basically, I’m not aware of any other state that has this requirement,” said Michael P. Elkon, a partner with Fisher & Phillips L.L.P. in Atlanta, whose specialties include noncompete covenants.

He said garden leave is an English concept that is based on the idea that in England, “while you’re not working, you tend to go to your garden.”

Other provisions of the legislation include that if the noncompete agreement is entered into at the beginning of employment, it must be signed by both the employer and employee, and the employee given the right to consult counsel before signing.

It must be given to the employee either with the formal offer of employment, or 10 days before the employment begins, whichever is earlier. Already-employed workers must also be given 10 days’ notice.

The agreement, which generally cannot exceed 12 months from the date employment ends, must be “no broader than necessary” to protect the employer’s “legitimate business interests,” including trade secrets and confidential information, the legislation says.

Among other provisions, noncompete agreements are banned for employees who are nonexempt under the Fair Labor Standards Act, as well and for those 18 and younger; undergraduates and graduate students who are not working full time; and employees who have been terminated without cause or laid off.

The noncompete provisions are part of broader legislation in the bill that also includes an updated trade secrets law.