What Every C-Level Executive Should Know About Non-Competes

This post was published in Ivy Exec on July 23, 2025.

In today’s competitive business environment, non-compete agreements remain common—and can be consequential—for C-level executives. Whether you’re joining a startup, negotiating a promotion, or considering an exit, the terms of your non-compete can have a major impact on your career.

This article offers a guide for C-level and senior executives to protect their careers, including

• Coverage of non-competes under current Massachusetts law as an example of non-competes executives may expect to have to cope with in most states,
• Techniques to navigate or avoid terms that could restrict your future,
• Key items to seek in other restrictive covenants for non-solicitation, confidentiality, and assignment of inventions.

Massachusetts Law Restricting Non-Compete Agreements

In 2018, Massachusetts approved a law that restricts and regulates non-compete agreements for employees and independent contractors working in Massachusetts. The law is effective for contracts entered into on and after October 1, 2018. Contracts that the parties enter into up to September 30, 2018, are not affected by the new state law.

The law prohibits the enforcement of non-compete agreements for “non-exempt employees” (typically hourly workers who are eligible for overtime pay) or for an employee who is terminated without cause or is laid off.

The law further sets limits to the enforceability of non-compete agreements that employers may enter into with exempt employees and contractors, provided those employees leave their positions voluntarily or are terminated for cause. In those cases, to be enforceable, such non-compete agreements must meet the following standards:

• not exceed one year in duration after employment termination,
• provide the employee some consideration, which at a minimum is either “garden pay” or other mutually agreed upon consideration,
• be reasonable in the scope of prohibited activities and geographic coverage, and
• be included at the time of the job offer or 10 days prior to employment, whichever occurs earlier.

Garden pay is an amount at least equal to 50% of the highest salary over the employee’s last 2 years of employment (the term derives from its use in England – “payment to tend your garden”). The term “other mutually agreed consideration” is not defined in the law and could be significantly less than 50% of the salary. However, many commentators assume that to be safe an employer would be wise to provide that the mutually agreed amount would need to be more than a mere nominal sum but can be less than normal garden pay.

Additionally, if the non-compete agreement is not entered into as part of the job offer, the non-compete introduced during employment must be supported by independent consideration. That means consideration that is in addition to the employee being able to keep his or her job.

The legislation expressly excludes any restrictions on these other restrictive covenants, whose enforcement will continue to be governed by Massachusetts state common law:

• non-solicitation of customers and suppliers,
• non-solicitation of employees,
• assignment of inventions, and
• confidentiality/non-disclosure agreements.

The law also does not affect non-competes that are part of the sale of a business or non-competes that are part of separation agreements negotiated at the time of employment termination. Thus, if an employee has no right to severance pay at the time of employment termination, then as part of the separation agreement, the employer can introduce a non-compete obligation in addition to the employee’s release as part of the employee’s consideration of the severance pay offered.

Other Limits to Non-Compete Enforcement

Prior to the 2018 non-competition agreement law, Massachusetts, like most states, allowed agreements that prevent an executive from engaging in a business competitive with his or her employer for a certain period after termination of employment. To be enforceable, a non-compete must

• be necessary to protect an employer’s legitimate business interests,
• be reasonable in time and scope, and
• be consistent with the public interest.

The 2018 law set a maximum one year in duration, which is also consistent with most states. The law also expressly provides that the reasonableness of the non-compete in the scope of activities prohibited and its geographical coverage are largely a continuation of recent court rulings enforcing non-competes in Massachusetts.

Along with these limits recognized in most states, many states also have dollar limits in an employee’s earnings. While Massachusetts prohibits enforcement to non-exempt employees, many states limit non-compete agreements to employees making over certain amounts, for example, these states, with dollar thresholds for enforcement, in effect for 2025, as follows: Colorado – $127,091; Oregon – $116,427; Virginia – $76,081; Illinois – $75,000; Maine – $62,600.

Navigating Around an Enforceable Non-Compete

It is wise, if appropriate, for the C-level executive to review and try to negotiate the terms of a non-compete before starting employment. However, under many circumstances, it is not the right time. While your bargaining position may be strong, it is generally better to leverage that strength for enhanced compensation, equity, terms of employment, and severance. All come well ahead of non-compete terms. Additionally, there may be strong resistance to an employer changing its standard terms.

On the other hand, at the time of your exit, there may be an opportunity to include revised non-compete terms as part of your exit package. This negotiation can cover particular positions and types of work for which you are restricted and industry segments in direct competition. The contract might even list 4 to 6 direct competitors of gravest concern, or bar you from forming a company in the precise field, or going “in-house”, taking a position with one or more of the company’s key customers that can also be listed in the contract.

When you enter into a non-compete agreement, you should have a plan in mind for where you can work, the markets and market segments where your skills would be in demand, during the 12 months of the non-compete period.

Seeking Executive Indemnity When You Are Taking a New Position

Often, when taking a new position, the executive will be asked to represent that he or she is not subject to the terms of a non-compete or that his or her new employment will not be in conflict with an existing non-compete. If you as the executive are in a situation where you are being heavily recruited for a new position, this is a clause you want to pay attention to. Often the enforceability of a non-compete is unclear. It may be overbroad and sometimes not enforceable. Yet, the old employer may try to enforce it and seek an injunction that could put you out of work with no rights or severance and a black mark against you as you now have to seek new employment.

In those circumstances, you as a candidate should not make the desired representation that there is no conflict. Instead, both parties need to acknowledge the presence of this other agreement, and both parties also affirm their belief that it poses no conflict. But for critical protection, you should seek an indemnity and hold harmless so that if the old employer does bring action, your legal fees in defense would be covered and you would receive some settlement or severance from the new employer if an injunction does issue.

Non-Solicitation and Other Important Restrictive Covenants

Besides the non-compete agreement, careful review should also be undertaken over these key restrictive covenants:

Non-Solicitation of Customers. The danger for the executive here is generally two-fold. First that the company is large, has multiple divisions and you cannot do any sort of business with any of those customers, including those you did not deal with and may not even know. The second concern is a sweeping coverage of all “prospects” – this often covers a long period and does not specify the level of contact with the prospect and again, where you had no involvement. This can be important because these covenants are often two or three years post termination in duration.

Non-Solicitation of Employees. The concern here is the bar it places to hiring former and trusted colleagues. One of the reasons CEOs and senior executives are hired is their ability to bring in their team. So, in place of the typical bar to hiring present or former employees or contractors, try to exclude contractors and those who voluntarily left employment either prior to your departure or who were not solicited by you to leave the company.

Confidentiality. As a CEO or senior executive, you are being recruited because of your knowledge, your contacts and experience. The confidentiality / NDA needs to reflect that and specifically exclude information you had before you joined the company or acquired from non-company sources. Also, you should try to have access to key company documents that you negotiated and your emails, so that if liability issues arise in the future, you have some ability to defend yourself.

Assignment of Inventions. There should be exclusions for items you conceive or develop unrelated to the company’s business or on your own non-company time and not using any of the company’s facilities.

For C-level executives, non-competes are too important to accept without scrutiny. These clauses can shape your post-employment freedom and future earnings. Yet, with the right legal guidance and a proactive approach, you can often negotiate terms that protect your current employer without sabotaging your career trajectory. If you’re facing a new job offer, negotiating a promotion, or planning an exit, it is wise to seek counsel experienced in executive employment matters capable of negotiating clear boundaries that will enable you to continue working in your chosen field.

 

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Representative case: Senior Vice President of Massachusetts financial institution

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