Massachusetts Non-Compete Law: What You Need to Know

Massachusetts Law on Non-Compete Agreements:

Massachusetts Law on Non-Compete Agreements is well-settled, yet does not exactly provide the finality and “yes or no” answers we are often asked as attorneys.  Specifically, a non-compete in Massachusetts is valid and enforceable if it is reasonable.  What’s reasonable?  Well, that depends on a case by case basis.  A case by case review requires a detailed analysis of the contract, the employment or relationship between the parties, the bargaining powers (big corporation vs. low-level employee) and what is the basis for the non-compete in the first place.  The Massachusetts Supreme Judicial Court stated the non-compete test in 1961 case Novelty Bias Binding Co. v. Shevrin:

“It has been long settled in this Commonwealth that a covenant inserted in a contract for personal service restricting trade or competition or freedom of employment is not invalid and may be enforced in equity provided it is necessary for the protection of the employer, is reasonably limited in time and space, and is consonant with the public interest. What is reasonable depends on the facts in each case.”

 

Massachusetts Non-Compete Special Interests & Considerations:

Business People Working Outdoors with Work Related Images Above
Massachusetts Innovation Relies Upon Non-Compete Agreements

Massachusetts is unique, and our state is positioned quite differently than others because of the following industries: Healthcare, Technology & Start-Ups, and Higher Education.  These are the three top thriving industries in the Boston area, and they have an interest in using non-competes to retain top talent (Harvard, MIT, etc.) and not allowing those top employees to compete and steal business.  Non-competes are the most often used vehicle to protect a business, retain top employees and prevent stealing business secrets and clients.  However, what is “reasonable” will be determined by a Court and depends on the specifics of a case.

The Massachusetts legislature stepped in to prevent non-competes for Physician/Doctors, Nurses, and Psychologists.  [M.G.L. chapter 112].  As a result of lobbying and protection of the public health, doctors and nurses lobbied Congress to prevent non-competes for doctors and nurses, and allow these healthcare professionals to move between jobs without limitations or restrictions because of non-competes.  However, other industries do not have these statutory protections.

The White House’s Position on Non-CompetesWhite House Report on Issues with Non-Compete Agreements

Many employers rely upon non-compete agreements for all employees, both executives and low-level wage employees.  The differences are apparent however: low level employees (as opposed to executives or management) do not usually have access of trade secrets or confidential client relationships, and do not possess the bargaining power or ability to understand the implications of a non-compete agreement.   Potential Employees also have less bargaining power or leverage to negotiate when the non-compete agreement follows the employment agreement.  At this point, the new employee may have already begun working and rejected other job offers.  While Massachusetts gives the parties the right to enter into contracts, New Hampshire law states that where already accepted employment is then made conditional upon a future non-compete agreement, that agreement will be void.  The so-called “bait and switch” is harmful to employees and against public policy.  [N.H. Senate Bill 351, 2014].

What Should Employees or Executives Do When Presented with a Non-Compete Agreement?

Have an Attorney review the agreement.  The only true way to equal the playing field is to be represented by counsel, and potentially negotiate a more favorable employment/non-compete agreement.  This is not always an option, but many non-compete agreements are drafted by an employer’s lawyers.  The only real way to understand the limitations, legality, and most importantly the enforceability of a non-compete agreement is to have a lawyer perform a review.  The enforceability of a non-compete depends upon an analysis of all the facts and circumstances.

If you have a non-compete agreement and have questions over the enforceability of that clause, or have been fired and have questions over your rights and ability to obtain new employment, please feel free to contact my office to schedule a consultation.

 

Massachusetts Selected Case Excerpts:

Boulanger v. Dunkin’ Donuts, Inc. , 442 Mass. 635 (2004)
Under the circumstances, “covenants not to compete signed by the plaintiff as part of his franchise agreements with the defendant were enforceable.”

F. A. Bartlett Tree Expert Company vs. Barrington , 353 Mass. 585 (1968)
This case sets the standard for the material change doctrine “where it appeared that after working under that contract for some years the salesman’s remuneration and sales area were changed substantially…”

Invidia, LLC v. DiFonzo  (Mass. Superior Court, Middlesex, Oct. 22, 2012), Memorandum of Decision and Order on Plaintiff’s Motion for Preliminary Injunction, Wilson, Paul D., J.)
Hairdresser posting news of job change on Facebook is not solicitation of former employer’s customers

Marine Contractors Co., Inc. v. Hurley , 365 Mass. 280 (1974)
“Agreement not to compete with Marine was reasonable in time and space.”

All Stainless, Inc. v. Colby , 364 Mass. 773 (1974)
“A covenant not to compete contained in a contract for personal services will be enforced if it is reasonable, based on all the circumstances.”

Richmond Brothers, Inc. v. Westinghouse Broadcasting Co., Inc. , 357 Mass. 106 (1970)
An employer is not entitled to protection against ordinary competition

Novelty Bias Binding Co. v. Shevrin , 342 Mass. 714 (1961)
“It has been long settled in this Commonwealth that a covenant inserted in a contract for personal service restricting trade or competition or freedom of employment is not invalid and may be enforced in equity provided it is necessary for the protection of the employer, is reasonably limited in time and space, and is consonant with the public interest. What is reasonable depends on the facts in each case.”

New England Tree Expert Co., Inc. v. Russell , 306 Mass. 504 (1940)
“It is settled in this Commonwealth that such contracts are divisible and will not be enforced as to any parts of the covenant that are not reasonably necessary for the protection of the good will of the employer’s business.””What is reasonable depends upon the facts in each case”

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