Do you stay up late at night worrying about what would happen if your employee, you know, the one that you have trusted with the keys to the castle moved on? What if that employee started their own business, wouldn’t it be very helpful to them to have at their fingertips the knowledge that you have spent years accumulating. Are the worry lines on your brow all for naught?

These and many similar questions haunt employers, both established and new employers in Massachusetts. The trouble is clear – the employer spends years developing through trial and error a base for its business that will not fail, then, because business cannot be a one person show, other employees come into the fold. Soon, these employees accumulate knowledge, and aggressive and driven employees become a challenge to the employer. The employer is soon faced with the decision to promote these individuals until they have reached whatever ceiling exists, or bring them into partnership or ownership roles to retain them and satisfy they innate drive.

But, what happens when the employer cannot afford to go through these steps? What happens when the employer can afford to promote an employee until they are satisfied that they are being paid their worth, but that employee still decides to venture forth alone – conveniently using the knowledge they have acquired from your years of hard work?

The answer is – a non-compete agreement. While not a panacea, non-compete agreements in Massachusetts provide a basis for a lawsuit, or the threat of one that hangs over the head of an employee who is considering violating the non-compete. A non-compete agreement is a fairly inexpensive remedy for a business owner.

How Does the Non-Compete Agreement Work in Massachusetts?

For a non-compete agreement to be enforceable in Massachusetts, the employer must have a legitimate business or proprietary interest that is sought to be protected under the agreement. While it may be argued as to what precisely is a legitimate or a proprietary business interest, and case law will set most of the stage for this interpretation, generally a legitimate business or proprietary business interest is one which is unique to, tailored or developed by that employer. An intake form, for example, may be a legitimate proprietary interest to an employer because that form is unique to that organization. The employer has not created the intake form for the purpose of another individual’s use for their own business purpose, it has created the form for use in the business, and is, therefore, proprietary to that business.

The idea of a non-compete agreement or clause in a contract is to obtain the agreement of an employee that they will honor that fact that such proprietary and unique business information exists, and will not take advantage of that fact for their own personal or business use. If they do, take advantage that is, and a Massachusetts Court is in agreement with the employer’s position on the violation of a valid non-compete agreement, the employer will have a legal solution available to them.

What Makes a Massachusetts Non-Compete Agreement Valid?

Valid, enforceable non-compete agreements are:

• IN WRITING
• SIGNED BY ALL PARTIES
• INFORM THE EMPLOYEE OF ITS RIGHT TO CONSULT A LAWYER PRIOR TO SIGNING THE NON-COMPETE

There are many other requirements that would make a non-compete agreement enforceable in Massachusetts, some of which are beyond the scope of this article so I would invite you to contact attorney Gaudet at 978-273-8337 for more information. However, here are some of the requirements that might make a non-compete agreement or clause in a contract enforceable in Massachusetts.

When Did Employment Begin?

The timing is important here. In Massachusetts, if the employee is a current employee, then some from of compensation (called consideration in the law) must be provided to that employee in return for their signing the non-compete agreement. There are ways around this fact, to include a garden leave clause which essentially provides the employee with a payout for a period of time upon leaving the company. However, most employers are not in a position to achieve such a bargain. So, if possible, it is a good idea to get non-compete agreements signed by employees prior to their being employed. Contact us form more information.

Did the Employee Receive Notice of the Non-Compete?

Employers in Massachusetts must also provide notice when a non-compete agreement is involved as part of or as a pre-condition to their employment. At the beginning of employment the employer needs to give the employee a copy prior to formalizing an employment offer or at least 10 days prior to the employee beginning work for the employer (which ever comes first). If the non-compete is executed during employment, the employer must give notice to the employee no fewer than 10 business days before the agreement would become effective.

Is There Consideration for the Non-Compete Agreement?

Consideration, in some cases, compensation must be given to an employee who is currently employed at the time that the non-compete agreement is signed. Massachusetts law requires current employees to have essentially bargained for the non-compete agreement and they must receive something from that bargain…not, by the way, continued employment. A workaround exists in the form of a garden-leave clause and we can include that in your contract if that if needed.

Is the Non-Compete Agreement Reasonable?

Reasonableness is a slippery thing, and the concept can and will be argued six ways to Sunday by attorneys on both sides of the fence. Still, some attempt must be made in the non-compete agreement to address the reasonableness of the agreement. The courts will want to see that the agreement is reasonable in duration, scope and geographic area. In other words, you would not want a non-compete to have language in it that restricts an employee from working for 10 years in any related field within a 400 mile radius of the company’s headquarters. While I am exaggerating here for effect, there are non-compete agreements which tread a fine line and may be held unenforceable in court for a violation of one of these points.

Akin to reasonableness in a non-compete agreement in Massachusetts is whether or not the non-compete violates or otherwise goes against public policy. Employees must be free to pursue their trades and talents for the purpose of earning a living, as a matter of public policy. Unfair restrictions to that basic right will frustrate or anger a court and may result in a non-compete agreement being found to be unenforceable as a matter of public policy.

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