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Non Compete Agreements

In Massachusetts, enforceability of non compete agreements depends whether they are reasonable in time and geographic scope, and whether they protect a legitimate business interest of the employer.  It is important to remember that “reasonableness” depends upon the circumstances, and there is no bright line rule about how long a non compete can last, or how far it can reach geographically, because both of those questions depend on whether the time or scope of the non compete is reasonable in light of the interest the employer is seeking to protect.  So, for example, a nationwide non compete might be enforceable if the affected employee had a nationwide sales territory, while a 25 mile non-compete might be unenforceable for a hair stylist, whose range of influence while employed was much smaller than that.

“Legitimate business interests” that can be protected through a non compete agreement include protection of trade secrets and confidential information and protection of the employer’s good will.  Though simply preventing a competitor from hiring a key employee may have value to your business, that alone is not a reason that a court will accept as grounds to enforce a non compete agreement.

Non compete agreements must also be supported by “consideration.”  This means the employee must receive something in exchange for agreeing to the non compete.  It is fairly well settled that a new employee can be asked to sign a non compete agreement as a condition of being hired, but much less clear that continued employment is sufficient consideration for an existing employee to sign one.

Finally, enforceability of non compete agreements can be affected by things that happen after a non compete agreement is signed.  For example, there have been cases where a material change in job responsibilities or compensation were found to nullify an existing non compete agreement, or where the employer's breach of a material term of the employment agreement (such as nonpayment of wages or commissions) excused the employee from honoring the non compete agreement.

Some examples from cases our employment lawyers have handled:

A salesperson for a Massachusetts carton manufacturing company was unable to accept a job offer after his employment was terminated due to his non compete agreement.  The non compete agreement was very broad, and sought to block his employment anywhere in the packaging industry, anywhere in the world, for a year and a half.  Our employment lawyers filed a lawsuit seeking a declaratory judgment that the non compete agreement was unenforceable and damages from the former employer, and ultimately the employer had to agree to a much narrower non-compete in order to settle the lawsuit.

Several sales representatives left their employer to start their own business, and the employer threatened to enforce non compete agreements against them.  In part because of the broad reach of the agreements, and in part because the employees identified a substantial amount of money that was owed to them in unpaid commissions, our employment lawyers were able to resolve the matter on terms that released the employees from the non-compete agreements and involved a payment to them on the commissions claim.

An employee was classified as an independent contractor but also subject to a non-compete agreement. When the employer tried to enforce the non-compete, the potential consequences of the misclassification were significant enough that the employee was able to negotiate a settlement that included payment to him as well as a release of the non-compete.

Rules of the Road Massachusetts Employment Laws
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