Non Compete Blocking a New Start Up Business

Mike, Jeff and Tim were sales representatives for a staffing company in Massachusetts. As they faced increasing challenges in the workplace, they began to consider starting their own agency. They made careful and thoughtful plans, and researched the idea thoroughly.

The one wall they kept bumping into was their non compete agreements. The agreements were extreme, and imposed restrictions for four years after employment. Management had also signaled that they would aggressively seek enforcement of the agreements if Mike, Jeff and Tim left to pursue their dream of running a business they way they thought was right.

This put them in a very difficult position.  They were highly skilled at what they did, and liked and respected by customers.  They had a vision for what a well-run staffing business could look like.  But they felt they could not take the plunge to start that business with the threat of a non compete lawsuit hanging over their heads.

At the same time, they knew they could not stay where they were for many reasons, including inconsistent payment of their commissions, material changes in their responsibilities, and other conflicts with management.

They also knew, however, that there had been many problems with payment of sales commissions in the company. At the time of their resignation, they were each owed substantial commissions.

In addition, there had been material changes in each of their positions, titles and responsibilities since signing the non compete agreements.

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One reason a court may not enforce a non compete clause is if the employee has not been paid as agreed. Below is one example of a non compete dispute we were able to resolve favorably due to non payment of commissions.

Non Compete Solution

When Mike, Jeff and Tim came to slnlaw, they were looking for a way out of their non compete.  Though four years was almost certainly too long to be enforceable, under Massachusetts law a court can still enforce the agreement for whatever it considers a reasonable time period.  At that time, before the Massachusetts Non Compete Act, one could expect an agreement to be enforced for anywhere from six months to two years.  This was too big a risk for them in starting their own business.

The non payment of commissions and material job changes, however, provided a different avenue to help them reach their goals.  Material changes in job duties have at times been found to invalidate a non compete. Failure to pay as agreed can also be a material breach of the employment agreement that excuses the employee's performance.   Even if that were not the case, the substantial commissions owed to these individuals gave them a viable and significant claim under the wage and hour laws.

We filed a complaint on their behalf, seeking payment of the commissions and also a declaratory judgment that the non competes were not enforceable. The employer, in turn, filed a counterclaim seeking enforcement of the agreements.

After initial discovery in the case, we were able to resolve it in such a way that the clients received compensation and they were allowed to continue with their business plans.  

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Postscript

The business started by Mike, Jeff and Tim is still operating and growing after more than seven years.  They have taken many of the lessons learned from their prior employment experience to ensure that their policies are both legally compliant and fair to their employees and contractors. They continue to engage with us for proactive legal advice as their business grows.

The company they left revised its commission policy after the lawsuit to bring it into compliance.  This brought a benefit to all of the other sales representatives still at the company.

Can We Help You?

We have years of experience representing people in non compete lawsuits in Massachusetts state and federal courts, as well as responding to cease and desist letters, and we would be happy to help. You can use the button below to schedule a call back from a member of our team, or give us a call at  781-784-2322.

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