New law provides compensation for noncompete contracts

Workers with noncompete contracts in Massachusetts will soon be the first in the U.S. to enjoy a “garden leave” provision allowing them to get paid even after leaving a job, whether they spend the idle time working in their yards, or not.

The rule taking effect today is part of a major revamp of state law covering noncompetition agreements and protection of trade secrets. Both are highly sensitive topics in Massachusetts, where the economy is largely driven by brainpower and technological innovation.

Millions of U.S. workers sign agreements that restrict them for a designated period of time after departing a job from working for competitors or launching potentially competing startups.

The merits and fairness of noncompetes are fiercely debated, and a handful of states — including California — prohibit them. The new law restricts the contracts to no longer than a year and exempts certain categories of employees, including most hourly wage workers, from ever having to sign one.

But no state, until now, has expressly written into law garden leave, a term first popularized by the British.

“It’s a very English concept that you would pay somebody to sit on the sidelines and tend to their gardens,” said Michael Elkon, a partner with Atlanta-based Fisher Phillips, a law firm that specializes in noncompete and trade secrets litigation.

The Bay State’s garden leave provision states that during the restricted period in which a former employee is barred from working for a competitor, the previous employer must continue paying at least 50 percent of the departed worker’s base salary.

Compromise language added by lawmakers before passage in the final hours of the 2018 legislative session also allows for “mutually-agreed upon consideration,” to be substituted for garden leave.

“It’s potentially a big loophole,” Elkon said. “Theoretically an employer and employee could agree that $10 is sufficient compensation.”