Whether you are an employer looking to protect your business interests from a discharged or separated employee or a separated employee looking to find new work after separation from your former employer each needs to understand the legal ramifications of the Non-Compete Agreement. In the last year Massachusetts state and federal courts1 have clarified what is necessary to form binding and enforceable Non-Compete Agreements. As a result, Non-Compete Agreements are becoming increasingly difficult to enforce if not drafted properly.
By way of background, Non-Compete Agreements are called restrictive covenants. Restrictive covenants are enforceable in Massachusetts when it: (1) protects an employer’s legitimate business interest; (2) is supported by consideration; (3) is reasonable in time and space; and (4) is consonant with the public interest.
The three most recent cases reinforce and clarify that a Non-Compete Agreement is only enforceable and binding upon an employee if there is true and actual consideration to enter into the agreement. Then, only if it is reasonable in its restrictions.
The element most employers and employees fail to recognize is the need for consideration. Consideration is what is offered to the employee in exchange for the employee agreeing to be limited in his or her choice of future employment. This is especially true when the employee has a change in position, title or compensation during the course of employment. Thus, a Non-Compete Agreement must change as the relationship between the employer and employee changes.
An employee, on the other hand, must decide whether the benefit he or she derives from entering into the Non-Compete Agreement is worth the geographical and time limitation he or she is agreeing to. Specifically, the employee needs to seriously analyze the hardships he or she may encounter, as a result of the Non-Compete Agreement, in his or her search for new employment. A Non-Compete Agreement should not be entered into lightly.
A Non-Compete Agreement is not necessarily enforceable simply because an employee signs one upon being hired. Thus, it may not be enforceable by an employer if there is not proper consideration. This is especially true over time as the relationship between the parties change. Therefore, an employer and employee should seek specific legal advice in preparing a Non-Compete or before accepting a Non-Compete Agreement.
1Interpros, Inc v. Athy, 2013 Mass.Super. LEXIS 48; 31 Mass.L.Rep. 144; 2013 WL 2181650 (Mass.Super. May 5, 2013); Rent-A-PC, Inc. v. March, 2013 U.S. Dist. LEXIS 74535 (May 28, 2013); and Advanced Micro Devices, Inc. v. Robert Feldstein, Civil Action No.: 13-40007-TSH (May 15, 2013).
This Article is intended to provide generally helpful information. It is not intended to provide legal advice or specific information for any or all circumstances. For more information regarding Non-Compete Agreements or assistance with enforcing, refuting, reviewing or drafting a Non-Compete Agreement please contact the law office of Ann E. Cascanett, LLC.
This article may be considered advertising under the rules of the Supreme Judicial Court of Massachusetts. This article is not to be considered a legal opinion or advice and it does not create an attorney-client relationship.