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Legitimate Business Interest Supporting a Non Compete

A non compete must be reasonably necessary to protect the employer's legitimate business interest. Many disputes about non compete agreements turn on whether the interest the employer is asserting is a legitimate business interest.

Legitimate business interests generally fall into two categories. One involves trade secrets or confidential information. The second is protection of the employer's goodwill, usually with customers or prospective customers.

Trade Secrets and Confidential Information

A non compete designed to prevent the use and disclosure of trade secrets most likely protects a legitimate business interest. In seeking to enforce the agreement, the employer will need to demonstrate this point.

A trade secret is some process or methodology that is kept secret by the employer. Information that is shared with customers is generally not a trade secret. Information available on a company's website is generally not a trade secret. It has to be valuable in part because of its secrecy, and can't be just the employee's general knowledge.

Confidential information is a slightly broader category and includes information that might not meet the definition of a trade secret. Confidential information also has to be protected in the company, and cannot be something that is publicly known or widely distributed.

Goodwill as a Legitimate Business Interest

"Goodwill" in the context of non compete agreements refers to the employers relationship and reputation with customers and prospective customers. Customer facing employees are often key players in developing and maintaining these relationships. The law recognizes these customer and client relationships as part of the employer's "goodwill."

The most common example is a sales representative who works with the same customers repeatedly over time. The company "brand" is reflected through that employee. The employer will want to ensure that a competitor can't leverage that brand by hiring the sales representative. This too is generally considered a legitimate business interest that supports a covenant not to compete.

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What is Not a Legitimate Business Interest

Simply not wanting employees working for competitors is not a legitimate business interest. A back office employee with no customer relationships or confidential information will likely not be held to a non compete.

The new Massachusetts non compete law addresses legitimate business interests explicitly. The statute codifies the common law about trade secrets, confidential information and goodwill. It also specifically excludes certain kinds of employees who are unlikely to trigger these concerns. This includes lower level workers who are not exempt from overtime, students, and employees who are under 18 years old.

Legitimate Business Interests and the Scope of the Non Compete

The scope of the non compete has to match the legitimate interest claimed. If the agreement covers a specific geographic location, that location should match the territory covered by the employee.

This means a nationwide non compete might be enforceable for a sales representative with a nationwide territory. In contrast, a 20 mile restriction might be overbroad for a hairdresser.

If the purpose of the restrictive covenant is to protect trade secrets, the length of time should also be considered. A trade secret that takes a year to replicate could probably justify a one year non compete. A trade secret whose value becomes stale or outdated within weeks may not.

How We Can Help

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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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  • Home
  • Employment Law
    • Guide To Employment Law Content
    • Employment Contracts in Massachusetts
    • Discrimination in the Workplace
    • Employment Termination >
      • Massachusetts Paid Family Leave
      • Severance Pay
      • Unemployment in Massachusetts
    • Sexual Harassment at Work >
      • Sexual Harassment in a Small Business
      • Sexual Harassment and Non Disclosure Agreements
      • Sexual Harassment and Remote Work
    • Wage and Hour Laws
    • Independent Contractor Law
    • Non Compete Agreements >
      • Are non competes enforceable
      • Massachusetts Non Compete Act
      • Pre 2018 Massachusetts Non Competes
  • Estate Planning
    • Guide To Estate Planning Content
    • Legacy Protection
    • Why You Need an Estate Plan
    • Why You Don't Have an Estate Plan
    • Estate Planning Documents >
      • Children with Special Needs
    • Planning for Assisted Living
    • Probate Process
  • Business Law
    • Guide To Business Law Content
    • Small Business Law
    • Business Contract Basics
    • Civil Suit Defense
    • Legal Issues for Start Ups
    • Trademark Basics
    • How to Incorporate
    • Sale of Business
  • About
    • Reviews
    • Slnlaw Offices
    • slnlaw core values
    • Publications and Interviews
    • New Client Intake and Consultation
    • Contact
  • Attorneys
    • Emily Smith-Lee >
      • 2018 Lawyer of the Year
    • Jenna Ordway
    • Rebecca Rogers
    • Andrew Silvia
    • Elijah Bresley
  • Legal FAQs
    • Estate Planning FAQs
    • Probate FAQs
    • Small Business FAQs
    • Wage Act FAQs
    • Commission Pay FAQs
    • Overtime FAQs
    • Independent Contractor FAQs
    • Non Compete FAQs
    • Employment Discrimination FAQs
    • Employment Termination FAQs
    • Massachusettts Unemployment FAQs
    • Severance Package FAQs
    • Medical Leave FAQs
    • Sexual Harassment FAQs
    • Employer FAQs
    • Civil Lawsuit FAQs
  • Blog