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What makes a noncompetition agreement valid and enforceable?

On Behalf of | Oct 11, 2022 | Employment Law |

Many employers in Massachusetts ask their educated and skilled workers to sign a contract that contains certain restrictive covenants when taking a new job. These agreements or clauses can limit what a worker does both while employed by the company and after ending the employment arrangement.

It is common for companies to ask their workers to sign noncompetition agreements, which many people casually refer to as non-compete agreements. Although employers often view restrictive covenants like noncompetition agreements to be crucial for the protection of the company’s interests and trade secrets, most workers would obviously prefer to have no limitations on their future opportunities when they leave one employer.

Massachusetts state law attempts to both protect the needs of companies fearing worker misconduct and the needs of employees who just want to support themselves. Although such agreements are theoretically legal, they must adhere to strict standards. What is necessary for a company to have an enforceable noncompetition agreement with its employees?

They must abide by state law

Massachusetts does restrict the use of noncompetition agreements. If the professional in question is a medical physician, nurse, psychologist, social worker, lawyer or broadcasting professional, a non-compete agreement cannot restrict their future economic activity.

Additionally, if the employer needs to take the worker to court to enforce the agreement later, they need to show that the agreement was necessary for the protection of the company and that the worker received something of valuable consideration for giving up some of their future opportunities.

Finally, there generally need to be specific limitations regarding the geographic area and time frame where the agreement will apply. Many businesses have workers sign noncompetition agreements when accepting a new job or a promotion, as the job itself can serve as the consideration for their concessions.

Noncompetition agreements are currently under intense scrutiny

There has been a lot of discussion at the federal level about reforming the current approach to non-compete agreements. Companies that overuse such agreements or that make mistakes when negotiating or signing such agreements may have a harder time enforcing them later when needed.

Tracking policy changes and educating yourself about existing rules can help ensure you understand what is necessary to draft an enforceable noncompete agreement for the protection of your company.