Legal Question in Business Law in Massachusetts

Re: non-compete agreement

Nothing like a general question for the afternoon's amusement.

The strongest case for enforcement is where it is executed as part of the sale of a business. There is also considerable sympathy for enforcement if an employee receives highly confidential information from his employer -- the idea being that mere covenants against misuse of the confidential information would be inadequate protection.

In general, here in MA, covenants not to compete are enforceable if the geographic scope and the duration of the non-competition clause are reasonable. The higher one is in a company, the likelier that a longer time and greater geographic scope will be upheld. Further, the issue of how broadly the concept of "competition" is asserted can be a factor -- i.e., if you worked for IBM and they tried to prevent you from working for Ford, a court would take some serious convincing that this really constituted competition.

Just a few thoughts, hopefully of some use.

Re: non-compete agreement

Noncompete agreement have been the subject of much litigation and debate in recent years. I will limit my answer to issues relative to Massachusetts law.

Noncompete agreements can, and very often are, successfully challenged. There are a few basic issues that should be looked at. First, see if the employee's job has substantially changed since he signed his initial agreement. For instance, was the employee initially hired as a consultant but later hired on as a full time employee. Another example would be if the employee originally signed the agreement as a R&D manager in Atlanta, but now works as a sales manager out of the companies Portland, Maine facility. The change must be "substantial" to negate any noncompete clause.

The second thing to look at is simply if the agreement is fair. Massachusetts Courts will look to see if the noncompete provision is equitable. The court will look at the employee's ability to earn a living based on experience, skill level and age. The court will not allow a provision which effectively puts an employee out on the street.

A third consideration is the length of the noncompete provision. While agreements with one or two year terms may be allowed, agreements for three or more years are scrutinized.

A fourth test which is not as relevant as in the past, is geographical bounderies. With the internet, territories have expanded and larger geographical noncompete bounaries are being allowed.

In short, you should have a legal professional view the contract in light of the above issues. It would be wise to seek out counsel with experience both in employment law and civil litigation. As always, it is always wise to attempt negotiation prior to litigation.

Re: non-compete agreement

If it's overreaching or unfair, for one thing, i.e., let's say in connection with the sale of a Newton center barber shop the seller agrees not to compete anywhere within 100 miles ... since hair cutting clients don't travel that far, the 100 mile limit would not be enforced that far out. It would be 'reformed' if tested in court to be a couple or few miles only in scope. If it said that the seller couldn't open ANY business in Newton, that would be overreaching, too, or if it said that he couldn't open a barber shop in Newton for the next 20 years, that MIGHT be overreaching.

In these cases, it's non-binding only to the extent that it's unreasonable, but it isn't thrown out completely; as I said, it gets reformed.

If the agreement wasn't properly bargained for, in some manner, it might not get enforced. If it were illegal for some reason, it wouldn't be enforceable, too, of course. If it restrains trade without helping the other party, it wouldn't be binding. It couldn't be enforced by just any old third party, either. There could be public policy reasons not to enforce such an agreement, too. There are lots of reasons to not bind a party to such an agreement. ("What do you need?" There's a joke about an accountant being asked "what is 1 plus 1" and he answers "2". Then the lawyer is asked, and he pulls down the shades, lowers his voice, and says, "what do you want it to be?" The law can be malleable!, and needs to be, to be able to be fair at times.)