In an earlier post, we reported on the passage of the new Massachusetts Noncompetition Agreement Act, which takes effect on October 1, 2018, and significantly changes the law in this area by narrowing the permissible protections and imposing several new requirements.
Although the Act does not invalidate existing noncompetition agreements, what is not known is whether the passage of the Act will impact those contracts. The question simply put is:
Should employers who already have noncompetition agreements with their employees sit tight or update them to comply with the new law?
The answer to that question becomes critical at the stage of enforcement. The classic fact pattern: an employee with such an agreement (i) leaves employment; (ii) joins a competitor; and (iii) starts taking business away. Armed with the violation of the agreement, the employer rushes into court seeking an injunction to stop the bleeding. Will the court enforce the pre-October 2018 agreement and stop the former employee from competing?
Judges weighing such a request have always been required to take “public policy” into consideration in determining whether the equities of a situation warrant issuing the injunction. As a result, we have been cautioning clients that even though the pre-existing agreements are valid, the new Act may sway a court when time comes for enforcement. A recent decision by the Massachusetts Supreme Judicial Court gives direct support for that cautionary note.
In Oxford Global Resources v. Hernandez decided on September 7th, a Massachusetts employer sought to enforce a non-compete against one of its California employees. Ultimately, the Court rejected the request and dismissed the case on procedural grounds.
In his decision, Chief Justice Ralph Gants took a recently enacted statute into consideration, stating: “Although this [California] statute applied only to contracts entered into, modified or extended on or after January 1, 2017, and consequently does not affect the agreement here, the enactment of the statute reflects a public policy to protect employees.”
This quote from the highest judicial officer in Massachusetts speaking for the highest court in Massachusetts anticipates that judges may very well look at the newly minted Massachusetts Noncompetition Agreement Act as a reflection of our public policy. If existing agreements run contrary to that public policy, it may be an uphill battle to convince a court that an injunction should be granted. As a result, existing noncompetition agreements should be reviewed with legal counsel to determine whether they will provide the hoped-for protection when the need arises. As they say, “forewarned is forearmed.”
If you have any questions about the Act or need any assistance reviewing, modifying, and/or drafting noncompetition agreements, as well as any other restrictive covenant agreements such as non-solicitation or nondisclosure agreements, please contact one of Mirick O’Connell’s Labor, Employment & Employee Benefits Group attorneys.
offtheclockemploymentblog 