10/10/2018 Molly Moseley

Non-competes challenged in new ‘garden leave’ legislation

Do you have a noncompete agreement at your job? It seems like noncompetes are passed out like candy on Halloween these days. From sandwich makers and hair stylists to salespeople and members of the C-suite, every position in every industry may be subject to one if the company deems it necessary.

While executives may seek the advice of a lawyer before agreeing to the terms of a noncompete, for average workers it’s something they typically read over once and sign, along with all the other forms necessary to get a job.

And most people put little thought into that noncompete until years later when they want to get a new job and that pesky agreement becomes a thorn in their professional side. Do you quit your job and wait the appropriate time until your noncompete expires? Do you move out of the area so your noncompete doesn’t apply?

Lack of a paycheck or a big move is certainly not ideal for most people!

While noncompetes make sense for certain positions that have access to critical company information or high-level positions at an organization, they aren’t necessary for everyone. Many companies have taken advantage of the free-range noncompete movement, but the fun has come to an end, at least in one state.

As of Oct. 1, 2018, Massachusetts law now includes a “garden leave” provision that states if you sign a noncompete agreement, the company has to pay you 50 percent of your wages for up to a year while you’re restricted from finding new employment, or, a mutually agreed-upon payout.

What inspired Massachusetts to approve this legislation? The state was losing top talent — particularly in the technology sector — to other states because people could not stay due to their noncompetes. It also was seen as a hindrance to innovation because people would end up long term at a job that didn’t challenge them.

Bored workers who feel stuck are certainly not good for the company or local economy.

With this law, Massachusetts employers will have to think twice before making a new employee sign a noncompete because if it’s activated, it could mean a payout into the thousands. This isn’t necessarily a bad thing for employers.

When all companies are held to the same standard, employees are able to move freely to different positions that best utilize their skills. This contributes to a growing economy, improved innovation and competitive wages. It could also be good for employers in eliminating vulnerability in certain positions, which helps keep critical information secure.

Of course this is a win for employees who have long felt restricted by noncompetes. Now, if they are handed one, they have the ability to take the time needed to contemplate what it means and how it might impact their future before signing it. If they ever can’t work due to its restrictions, at least they have some income to help financially.

It’s a fine balance supporting companies who want to keep trade secrets secure but also protecting employees from unnecessary restrictions that impact their future. This law appears to appeal to both sides of the coin. Do you think this type of legislation will be coming soon to a state near you?