When are noncompete agreements enforceable in Massachusetts?

| Mar 27, 2014 | Contract Disputes

Most people’s work lives take place in a relentlessly competitive marketplace marked by constant technological change.

In such a marketplace, it often makes good business sense for employers to ask new hires to sign a covenant not to compete when they come on board. After all, if a company is about to entrust someone with sensitive and commercially valuable information, it may be reasonable to seek protections for itself in the form of a noncompete agreement.

But if such agreements are too broadly worded, they could unfairly restrict the legitimate ability of workers to use their skills in another setting. That is why the law insists on compliance with pretty stringent standards in order for noncompete agreements to be enforceable.

Employers are increasingly requiring noncompete agreements from new workers. The Wall Street Journal reported on this last year in this article. And it is certainly understandable to have concerns about workers misusing customer relationships or trade secrets by going elsewhere.

This does not necessarily mean working for another employer. It could mean workers seeking to go out on their own and establish their own businesses.

So what are some of the elements that must be in place to create an enforceable noncompete agreement? Our answer will not constitute legal advice. It will, rather, take the form of a basic outline of the issues involved.

First of all, the employer must establish that it has legitimate business interests at stake in insisting on a covenant not to compete. For example, are there trade secrets or confidential information involved in an employment setting?

It is also fair to ask about harm to the employer. Would it truly harm the employer for an employee to take his or her expertise elsewhere? More specifically, would it harm the employer so irreparably that an injunction would be in order against a worker who did not comply with a noncompete agreement?

There is also the question of geographic scope to consider. It would be one thing to ask for restrictions on certain economic activities within a prescribed area – such as the greater Boston area. But if the employer tries to insist on restrictions whose geographic scope is excessive, those restrictions start to seem unreasonable.

Finally, it should be noted that courts are very aware of the public policy considerations involved in these cases. In a dynamic capitalist economy, there is definitely a role for properly tailored covenants not to compete. But if too many restrictions start to unduly fetter the freedom of the marketplace, concerns about the enforceability of such covenants in specific cases are understandable.

Source: Westlaw, 45 Massachusetts Practice, Employment Law, Section 5.4