Legal Hotline: What Brokers and Agents Need to Know About New Non-Compete Law

At the end of the last legislative session, Governor Baker signed into law what has commonly been referred to as the “Grand Bargain.” Included within the GrandBargain were significant reforms to Massachusetts’ law regarding non-compete agreements.

The law applies to all non-compete agreements entered into with Massachusetts residents and Massachusetts employers on or after October 1, 2018. The law only applies to non-compete agreements; it does not apply to other restrictive covenants, such as non-disclosure and non-solicitation agreements, or existing non-compete agreements. Further, the new law does not apply to non-compete agreements entered into as part of an employee’s separation, so long as the employee is provided a seven (7) day window to rescind acceptance.

How does the new law affect real estate brokers and salespersons?

Of important note, despite the consistent use of the term “employee” throughout the law, the law applies to both employees and independent contractors. Further, the new law specifically prohibits the use of non-compete agreements with hourly employees, interns, students and teenagers under the age of 18, or anyone laid off without cause.

The minimum requirements for a non-compete agreement to be valid and enforceable are:

• Must be in writing;
• Must be signed by both the employer and employee;
• Must provide the employee the right to counsel prior to signing;
• Employee must be given the agreement at least ten (10) days prior to the date of hire, or prior to the effective date if after the date of hire;
• Cannot exceed twelve (12) months;
• Must include a “garden leave” provision, which would require the employer to pay the employee at least 50% of their base salary, or other mutually agreed upon consideration; and
• If entered into after commencement of employment, the employer must provide fair and reasonable consideration, which must be more than an offer of continued employment.

In addition to the above requirements under the new law, the common law principles remain. Any non-compete agreement must be reasonable in scope – both geographic and prohibited activities – and must be no broader than necessary to protect the employer’s legitimate business interest.

As with any contract, it is strongly recommended that an attorney is consulted prior to drafting or signing a non-compete agreement.

The information and services provided through the Massachusetts Association of REALTORS® is intended for informational purposes and does not constitute legal advice, nor does it establish an attorney-client relationship. The Massachusetts Association of REALTORS®, by providing this service, assumes no actual or implied responsibility for any improper use of responses to questions through this service. The Massachusetts Association of REALTORS® will not be legally responsible for any potential misrepresentations or errors made by providing this service. For more information regarding these topics authorized callers should contact the MAR legal hotline at 800-370-5342 or e-mail at legalhotline@marealtor.com.