Non-Competition and Non-Solicitation Agreements
Non-compete agreements and non-solicitation agreements are often enforceable in Massachusetts, provided that no exceptions apply and that the restrictive covenants serve a legitimate business purpose, as opposed to simply being designed to prevent competition. These contractual provisions are hotly contested because once an individual’s employment ends, the worker’s best employment chances are often with a competitor. Many times, working for a competitor includes servicing customers or prospective customers of the former employer.
Non-compete agreements are typically used to prevent an individual from working for a competitor in a particular field, occupation or industry. The scope of the restriction is crucial and is carefully scrutinized by the courts. Courts also evaluate whether a restriction contains a reasonable geographic area and limited period of time (e.g. 1 year) in assessing enforcement.
Non-solicitation agreements are typically designed to prevent an employee or former employee from soliciting, contacting, and doing business with a client (or prospective client), customer (or prospective customer). These types of restrictions routinely include a restriction from soliciting employees or contractors of the former employer.
Most disputes concerning non-compete agreements and non-solicitation agreements arise after an employee separates from employment. Litigation often begins when a former employer files a lawsuit seeking to enjoin a former employee from working for a competitor. This comes in the form of a motion for preliminary injunction against the former employee, asking the court to issue immediate relief preventing the former employee from violating the agreement – that is working for a competitor or soliciting employees, clients, or prospective clients of the former employer.
Employees have a number of defenses to restrictive covenant actions when attempting to demonstrate that the terms are anti-competitive rather than protecting legitimate business interests. Many such defenses are rooted in contract, such as, for example, a material change in circumstances on the job since signing the agreement (e.g. change in position) or that the parties to the agreement have changed as a result of a merger or acquisition.
Courts have wide latitude in deciding whether or not a non-compete or non-solicitation clause is enforceable, and may rule in one of a number of ways. In deciding whether or not to enforce a restrictive covenant, courts will balance an employee’s right to work in their chosen field, against an employer’s legitimate business need to prevent or restrict the employee from working for a competitor or from servicing clients of the former employer. Enforcement of these types of restrictive covenants for purely anti-competitive reasons--that is, to prevent a competitor from utilizing the skills of a particular employee to gain an advantage in the marketplace--is prohibited, and will generally not be enforced by either Massachusetts state or federal courts . Some of the factors a court will consider in deciding whether or not to enforce a non-compete or non-solicitation agreement include whether the restriction:
* Is necessary to protect the legitimate interests of the employer;
* Is limited in scope and geography;
* Is harmful to the public interest; and
* Is reasonable under the circumstances.
There are a number of other legal considerations that courts entertain, including whether an employee’s position has materially changed, whether the employer has breached the agreement by failing to live up to its obligations, or whether an employee has absconded with confidential information or trade secrets. Courts have the power to enforce or strike down the restrictive covenant in its entirety, to strike certain language in the restriction or to re-draft the restrictive covenant, usually to narrowly protect legitimate business interests.
Bennett & Belfort, P.C. regularly handles disputes relating to employment contracts, including restrictive covenants. We are experienced in handling both the enforcement and defense of non-compete agreements, non-solicitation agreements, non-disclosure agreements, confidentiality agreements, and issues relating to the improper use or dissemination of proprietary information and/or trade secrets.
Employees and employers alike are advised to seek capable legal counsel when drafting non-compete and non-solicitation agreements, and when determining whether a violation of a restrictive covenant has taken place and what relief is available.
If you would like further information regarding restrictive covenants, or you have a specific legal issue involving non-competition or non-solicitations provisions you wish to discuss with our attorneys, please call our office at (617) 577-8800 or email firstname.lastname@example.org