A recent decision from the Business Law Section of the Superior Court in Massachusetts held that a former employer’s effort to enforce its noncompete agreement (NCA) was overly broad, prohibiting the former employee from working for any employer with “similar” or “competitive” products.

Non-compete agreements have been on a very tight rein in Massachusetts, requiring careful drafting to ensure enforceability. The 2018 statute requires that every noncompete agreement meet specific criteria to be enforceable.

This case involved two companies competing in some fields, but the employee’s new role did not directly compete with the former employer’s business. The court found the agreement overly broad and thus unenforceable.

Background

The employee held a senior-level position at the original employer and voluntarily signed three agreements at the time of hire: non-compete, non-solicitation, and non-disclosure agreements. After 14 months, the employee accepted a position at a company that competes with his original employer.

His role at the new employer involved responsibilities that were not considered competitive with the business of his previous employer. Despite this, the original employer sought to enforce the non-compete agreement and prevent the employee from working at the competitor.

The court, however, was not convinced of the business necessity of the non-compete agreement and chose not to enforce it.

The court relied heavily on the testimony of the employee being replaced, who clarified that the duties at the new employer were different from those at the former employer. The court stated that all three agreements, including the non-compete, were enforceable only if the employee’s duties at the new employer breached any of the agreements.

Crucial to this court case, the original employer could produce no evidence that the employee worked on any of the products involving trade secrets or other confidential information, or that would likely damage the employer’s goodwill. As a result, the court was satisfied that the former employee’s obligations not to disclose or use confidential information and trade secrets and not to solicit employees or customers provide the original employer with adequate legal business interests over the next 12 months.

To quote from the opinion, “The Court finds and concludes, however, that the original employer’s non-competition agreement is not enforceable against the employee to the extent that it purports to bar him from working for any company with ‘similar’ products or from working for any company with ‘competitive’ products if the employee is siloed off from and will have nothing to do with the competitive offerings.”

The court further stated, “The employer’s attempt to keep the employee from working at a competitor on product lines that do not compete with it and merely because it wants to limit the talent pool available to a competitor is an impermissible attempt to stifle ordinary competition, not a permissible effort to protect trade secrets, other confidential information, or good will.”

Takeaway

The original employer’s primary mistake was drafting an NCA so broad in scope that it barred any employment by the employee at any company that competes with the original employer, no matter what work the employee would perform at the new company. By preventing the employee from working for any company that develops, manufactures, or sells products that are ‘similar’ to those offered by the original employer without showing that those products compete in the market with the former employer, it had completely overreached.

Any AIM member interested in discussing non-compete agreements or any other related HR topic may contact the AIM helpline at 1-800-470-6277 or email us at helpline@aimnet.org.