Noncompete “Reform” Movement Marks the Death of an Era

By Andrew P. Botti

As published in the Boston Business Journal (7/26/2018)

I have been practicing law for nearly 30 years and have handled a variety of noncompete cases in our Superior Court system.  We are very lucky in Massachusetts to have a fine, well-balanced and thoughtful judiciary.  In my experience, they take the enforcement of noncompetes very seriously, and will not hesitate to reform or change the agreement if they think it is too harsh or unfair to the departing employee.  This has been the case for well over 200 years now.

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Massachusetts Poised to Pass Important Amendments to State Trade Secrets Law

By Nicholas F. Casolaro

As part of its seemingly annual effort to revise or limit the scope of non-competition agreements in Massachusetts, the legislature has introduced a bill for 2018 that would not only change existing non-competition agreement law but also make significant changes to Massachusetts law on trade secrets.

The bill, titled “An Act Relative to the Judicial Enforcement of Noncompetition Agreements,” is likely to pass and would become effective October 1, 2018.  The new law would apply to misappropriation of trade secrets claims that arise after the effective date.  The bill eliminates the existing limited statutory law on trade secrets claims and would effectively enact a version of the Uniform Trade Secrets Act, putting Massachusetts in line with the vast majority of states that have some version of the UTSA.

The most-significant change that the bill would make to existing law is the definition of “trade secret.”  The proposed bill contains a narrow list of categories of information or tangible things that would constitute a trade secret.  Specifically, trade secret is defined under the bill as information or things such as “a formula, pattern, compilation, program, device, method, technique, process, business strategy, customer list, invention, or scientific, technical, financial or customer data.”

The bill omits things like designs, prototypes, procedures, software code, and the catch-all category of “other business information.”  The key takeaway is that this bill will undoubtedly make it harder for businesses, employers, or trade secret owners to prove that something is in fact a trade secret.  Trade secret litigation is difficult enough under existing law.  Plaintiffs will now face an even tougher standard to successfully prove that something is a trade secret in court.

The other effect of this bill if it passes is that Massachusetts will have a different definition of trade secrets than the Federal Defend Trade Secrets Act, which was enacted in 2016.  The Federal statute has a much more detailed and comprehensive list of information or data that may constitute a trade secret.  Thus, if a business is uncertain whether its information or data meets the definition of trade secret under the new Massachusetts state law, it will have to consider whether the information or data meets the broader definition of trade secret under the Federal law.  This could lead to an increase in lawsuits filed in federal court in Massachusetts alleging violations of the Federal Defend Trade Secrets Act.

Legislature Fails to Reach Compromise on Non-Compete Bill

By Andrew P. Botti

Although burning the midnight oil last night, a Joint Conference Committee failed to reach agreement on a compromise bill by the established deadline of midnight, July 31.

Among other differences, the House and Senate versions of so-called non-compete reform contained very different “garden leave” provisions.

The House version required 50% pay for a one year “sit it out” period, while the Senate version required 100% pay for a maximum 3 month non-compete period. The House version also allowed the parties to come up with another form of acceptable consideration to support the non-compete period.

The Governor indicated that he favored the House version of the proposed reform.

At this point, the issue of non-compete reform is off the table until January 2017, the start of the next legislative session on Beacon Hill.

Governor Puts Imprimatur on House Version of Non-Compete Bill

Joint Letter Image

Click the image above to read the joint letter from various Massachusetts businesses supporting H.4434 and objecting to S.2418.

By Andrew P. Botti

On Friday, July 22, 2016, the Governor’s office released the following statement concerning the various legislative reform bills recently promulgated by Beacon Hill lawmakers:

“The Governor favors the House version of the non-compete legislation because he believes it better balances workers’ abilities to seek new employment while ensuring cutting edge businesses can protect essential intellectual property. Finding the right compromise on this issue is essential to ensuring innovative businesses want to stay and grow in the Commonwealth.”

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Dodging the Bullet When Market Matters: Salesman Avoids Full Enforcement of Non-Competition Agreement with Ex-Employer

By Andrew P. Botti

A recent case out of the Superior Court Business Litigation session in Boston illustrates the Court’s inherent power – when sitting in equity – to fashion an injunction which appears fair to all parties, given the circumstances of the case. In Simplivity Corporation v. Hofdahl, the Plaintiff corporation attempted to stop an ex-salesman from working for a company which had developed a similar high tech software product. The salesman had signed a “Proprietary Information and Inventions Agreement” which, among other things, prohibited him for one year after termination of employment, from:

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When It Comes to Protecting Your Business, In a Sea of Change There Remain Steadfast Legal Mechanisms Which May Yet Work

By Andrew P. Botti

The recent activity in the Massachusetts House indicates that changes to the long-standing law of non-competes may be imminent. Despite what may occur on Beacon Hill, there remain a variety of ways that businesses may protect their proprietary information. Even before non-competes became fashionable, intellectual property rights were recognized and secured in the United States Constitution. Article I, Section 8, Clause 8 expressly provides: “The Congress shall have the Power …To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive right to their respective Writings and Discoveries.” Thus, both copyrights and rights to inventions are recognized as fundamental Constitutional concepts.

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Mass House Votes to Pass Noncompete Reform Bill

By Andrew P. Botti

Last week the Massachusetts House of Representatives voted 149-0 to change the long-standing common law concerning non-compete agreements. The bill voted on – HO 4434 – requires employers to pay 50 percent of a former employee’s salary during the non-compete period, or “other mutually-agreed upon consideration between the employer and the employee.” This 50 percent formulation – and the required payment for a non-compete “sit-it-out” period – does not exist in any other state. The bill also prohibits non-compete enforcement against “employees that have been terminated without cause or laid off[.]” The maximum restriction period is 12 months.

While the passage of HO 4434 does not yet make the bill law, the unanimous vote in favor does not augur well for those who would prefer to keep the present law as it currently exists, i.e., common law recognizing the importance of a private contract between private parties. The Senate has yet to act on the formulation set forth in HO 4434, thus no final formulation has landed on the Governor’s desk for review.

Bill H 1701

Non Compete Act thumbnail

Massachusetts Noncompetition Agreement Act

By Andrew P. Botti

Out of the Joint Committee on Labor and Workforce Development has come the proposed “Massachusetts Noncompetition Agreement Act,” which would be an amendment to Chapter 149 of the General Laws.

The major provisions are as follows:

  • the non-compete must be provided to the employee with a formal offer of employment or 10 days before employment, whichever is earliest;
  • restrictive period of no more than 12 months;
  • requires that the non-compete contain a garden leave clause such that the employee will be paid for the duration of the restrictive period;
  • prohibits enforcement of non-competes against certain types  of workers including those classified as nonexempt under FLSA, as well as employees that have been terminated without cause or laid off.

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