In the past several years, there has been significant movement in the non-competition space in a number of states (with change on the federal level potentially on the horizon). One such place with significant movement has been Massachusetts, which in 2018, passed the Massachusetts Noncompetition Agreement Act (“MNAA”).
The MNAA imposed several new substantive requirements on employers, but drafted many of them in a manner that was left open to interpretation. One such example is that the law requires a non-competition restriction to be supported by “garden leave or other mutually-agreed upon consideration.” While the law clearly defines “garden leave,” i.e., payment “on a pro-rata basis during the entirety of the restricted period, of at least 50 percent of the employee’s highest annualized base salary paid by the employer within the 2 years preceding the employee’s termination,” it leaves “other mutually-agreed upon consideration” wholly undefined.
Given this ambiguity, in order to ensure the validity of their non-competition agreements, many employers with Massachusetts-based employees have opted for the safest approach to consideration and agreed to provide garden leave. Others have opted to provide some other form of “mutually-agreed upon consideration,” such as, for example, a sign-on bonus, an equity grant, or a lump sum cash payment. A question has remained, however, whether the courts would uphold such alternative forms of mutually-agreed upon but non-garden leave...
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