The Massachusetts legislature has renewed its effort to limit the effect of noncompete agreements on employees. As readers of this page know, state leaders across the country have noticed that California's ban on such restrictive covenants has been a boon to the tech sector and other creative entrepreneurs.
A noncompete agreement is a contract (or clause within a contract) under which one party, usually an employee, agrees not to engage in activities which are similar to the activities of the other party, usually an employer. The purpose of a noncompete agreement is to allow a party to protect its legitimate business against possible unfair competition from the other party. Noncompete agreements allow an employer to provide its employee with valuable resources, including increased salary and access to proprietary information, in order to maximize the employee's value to the employer.
Although disfavored in New York, noncompete agreements remain enforceable. If you are asked to accept a noncompete agreement as a condition of your employment, take a moment to consider a few factors before you sign:
- Are you bringing assets (contact lists, customers, intellectual property, etc.) you developed at a prior job with you to your new employer?
- Is your new employer willing to pay you additional compensation for bringing those assets with you?
- Will you be permitted to utilize the assets you brought to your new employer after your employment ends?
- Does the noncompete agreement provide for additional compensation to refrain from competing after your employment ends (sometimes referred to as "garden-leave" provisions)?
- Will your new employer hire you if you refuse to sign? Is there room to negotiate?
This list of considerations is not exclusive. Anyone asked to enter into a noncompete agreement as a condition of employment should consult with experienced employment counsel before signing. No two employment situations are identical. The enforceability of noncompete agreements is highly fact-dependent in New York. One truth is universal - no one should sign a noncompete agreement in New York without first considering its impact on one's post-employment ability to earn a living.