Poorly Drafted Noncompete Leads To Important Decision On The Massachusetts Noncompetition Agreement Act

After nearly three years of waiting, a substantive decision has finally been issued addressing the consideration requirements of the October 2018 Massachusetts Noncompetition Agreement Act (the “MNAA”). 

In an Order issued on July 15, 2021 in KPM Analytics North America Corp. v. Blue Sun Scientific, LLC (C.A. No. 4:21-CV-10572-TSH), U.S. District Court Judge Hillman dismissed a breach of contract claim against an employee who was alleged to have breached his non-compete agreement.  In dismissing the claim, Judge Hillman found that the non-compete agreement failed to satisfy the MNAA’s requirements for (1) notice of the right to consult with counsel; and (2) garden leave or other mutually agreed upon consideration.   The non-compete agreement simply did not include any reference to counsel, and for consideration merely provided that the agreement was entered into “[i]n consideration for his/her employment by the Company.” 

The KPM Order not only confirms that it is critical that Massachusetts non-compete agreements clearly contain reference to the employee’s right to counsel, but finally provides some clarity on the permissible contours of “mutually agreed upon consideration” – a topic which has had employers and employment law practitioners scratching their heads since the MNAA went into effect in October 2018.  Prior to the KPM Order, the only hint of judicial guidance available on this topic was in U.S. District Court Judge Casper’s dicta note that the broad statement summarizing the consideration for the non-compete at issue in the NuVasive case – i.e., “In consideration of my engagement by the Company, the compensation I . . . receive from the Company (including for example monetary compensation, Company goodwill, confidential information, restricted stock units and/or specialized training)” – would satisfy the MNAA’s consideration requirements.  NuVasive, Inc. v. Day, 2019 WL2287709, at *4 (D. Mass. May 29, 2019).

Although the question of what is sufficient consideration remains open, the KPM Order makes clear that something more than “employment by the Company” is required.

We will continue to monitor court opinions on the MNAA and provide updates as new opinions are issued.  Massachusetts noncompetition agreements should be reviewed carefully to ensure compliance with the MNAA, and we are happy to help.

 

This information is a general description of the law and is intended for general information purposes only.  It is not intended to provide specific legal advice nor is it intended to create an attorney-client relationship with Chinitz Law LLC.  Before taking any action on this information you should seek professional counsel.  Attorney advertising.  Prior results do not guarantee a similar outcome.

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