By Kenneth J. Rossetti, Esq.
Many readers of this blog are either sales professionals bound by non-competition agreements ("noncompetes"), or employers of sales professionals who require their personnel to execute and comply with noncompetes both as a requirement of employment and as a post-employment condition intended to protect the business' confidential information, trade secrets, and good will (for a discussion of noncompetes in Massachusetts, please see this author's 6/9/09 article on this blog, entitled, "The ABCs of Noncompetes in Massachusetts").
While sales professionals and their employers in Massachusetts routinely deal with the conditions and enforcement of noncompetes, not all states enforce noncompetes; for example, California bars noncompetes.
This fact begs a question recently addressed by the Massachusetts Superior Court – what happens if an employee bound by a Massachusetts noncompete takes a position with a competitor in California, where noncompetes are unenforceable? Is the Massachusetts noncompete enforceable?
The Massachusetts Superior Court recently answered that question in the affirmative, in a case where the Court granted an injunction barring the departing employee, bound by a Massachusetts noncompete, from taking a position with a particular competitor in California, despite that state's bar on the enforcement of noncompetes. The departing employee, who had not yet moved to California to start the position he accepted with his prior employer's competitor, argued that California's bar on noncompetes trumped both the Massachusetts noncompete with his prior employer, and Massachusetts law upholding the enforcement of noncompetes.
The Superior Court disagreed. The Court noted that the noncompete at issue contained a provision expressly stipulating that the agreement was to be governed and construed under Massachusetts law, and ruled that enforcement of the noncompete's choice of law provision was proper because (i) that choice did not violate a fundamental public policy of a state with a materially greater interest in the dispute and (ii) Massachusetts law would have applied even if the noncompete failed to contain this choice of law provision. The Court recognized that Massachusetts has a significant interest in the relationship of Massachusetts employers and employees, which outweighed California's interest in barring noncompetes, particularly since the departing employee was not a resident of California.
Further, even though the departing employee expressed an imminent intention to move to California and work for a competitor, the Court did not hesitate to issue an injunction preventing the departing employee from taking the new position, given Massachusetts' greater connection to the dispute.
The Court also noted that enforcement of the noncompete was proper because the parties intended to be bound by the noncompete when the parties entered into it. Issuing the injunction, therefore, advanced the parties' justified expectations at the time the contract was formed, particularly since the parties did not intend at the time for the agreement to be governed by the law of any state other than Massachusetts.
The ruling described in this article illustrates several important points for employers and employees alike in Massachusetts. For employers, your noncompetes must be carefully drafted and reviewed by experienced legal counsel, as the choice of law provision that was in the noncompete at issue was an important factor in the Court's decision. Further, employers should not hesitate to take action to protect their rights under their noncompetes, as Massachusetts courts will enforce noncompetes that meet the legal parameters of such agreements.
For employees, you may not escape enforcement of a Massachusetts noncompete, even if you intend to work in a different state that bars noncompetes. You should expect to abide by the terms and conditions of any noncompete you execute, keeping in mind that the protection of your employer's confidential information, trade secrets, and good will simultaneously protects your bottom line and that of your company.
Attorney Ken Rossetti has been a licensed attorney in Massachusetts since 1997, and his practice covers various employment-related matters, including representing employers and employees regarding the review, drafting, and litigation of noncompetes. Ken welcomes your telephone calls at 781-944-4200, ext. 203, and e-mails at krossetti@BartonRossetti.com, to discuss how he may help you. Ken is not affiliated with Treeline, Inc., and this article, furnished for informational purposes only, does not constitute legal advice. Please seek legal counsel if you have questions about noncompetes, or any other legal matter.