State legislatures have been busy enacting or considering new laws governing trade secrets and noncompete agreements, including Colorado, Idaho, Massachusetts, New Hampshire, New Jersey, Pennsylvania, Utah, Vermont, and Washington. It may be time to blow the dust off your form agreements and confer with intellectual property (IP) counsel to see if changes are necessary to conform with current state and federal laws, which continue to evolve.
Massachusetts Noncompetition Agreement Act (MNAA)
In 2018, Massachusetts passed the Massachusetts Noncompetition Agreement Act (MNAA), codified in Section 24L of Chapter 149 of the Massachusetts General Laws. The MNAA applies to noncompete agreements entered into on or after October 1, 2018, and imposes new restrictions concerning:
- scope of prohibited activities
- geographic scope
- notices for new hires and current employees
- right to consult with counsel before signing
- timing of signature
- revocation rights
- “garden leave” pay or other consideration
- employees who are laid off, terminated without cause, under age 18, students, or nonexempt under Fair Labor Standards Act (FLSA)
- independent contractors
- choice of law
- forum for disputes
New Noncompete Laws in Other States
Other states also recently enacted or considered new noncompete laws. Colorado, Idaho, and Utah passed new laws restricting noncompete agreements in 2018. New Hampshire and Washington recently rejected proposed noncompete legislation. Proposed noncompete legislation is pending in New Jersey, Pennsylvania, and Vermont.
Uniform Trade Secrets Act (UTSA)
Massachusetts joined 48 states in adopting a version of the Uniform Trade Secrets Act (UTSA). The Massachusetts Uniform Trade Secrets Act (MUTSA), H. 4868, Section 19, became effective October 1, 2018. The MUTSA is similar in some respects to the federal Defend Trade Secrets Act (DTSA). New York remains the only state that has not adopted some form of the UTSA.
Defend Trade Secrets Act of 2016 (DTSA)
The federal Defend Trade Secrets Act of 2016 (DTSA), codified at 18 U.S.C. § 1836, et seq., became effective May 12, 2016. The DTSA requires employers to provide notice of whistleblower immunity “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” The DTSA broadly defines “employee” to include “any individual performing work as a contractor or consultant for an employer.” Failure to comply with DTSA notice requirements may forfeit important remedies.
State and federal laws continue to evolve. Businesses should periodically review their form agreements and practices with IP counsel to ensure compliance with current laws. For example, companies may need to update form nondisclosure agreements (NDAs), employee handbooks, and other confidentiality agreements drafted before May 12, 2016, noncompete agreements drafted before October 1, 2018 that are governed by Massachusetts law, and other agreements to comply with current laws and avoid loss of important rights and remedies.
The Beggs & Lane Intellectual Property Group assists clients with nondisclosure agreements (NDAs), noncompete agreements, trade secret litigation, and other IP matters.