Are Non-Compete Agreements Enforceable in Massachusetts
Are non-compete agreements enforceable in Massachusetts? Yes, non-compete agreements are enforceable in Massachusetts.4 min read
Are non-compete agreements enforceable in Massachusetts? Yes, non-compete agreements are enforceable in Massachusetts, provided they must meet certain specific conditions with regard to reasonableness, legitimate business interest, and public policy concerns.
What Is a Non-compete Agreement?
A non-compete agreement is a contract that prohibits one of the parties in the contract (usually an employee), from engaging in a competing business with the other party (usually an employer).
Elements of a Valid Non-compete Agreement in Massachusetts
If you are an employer looking to include a non-compete clause in your employment agreements, it's advisable that you consult an experienced Massachusetts attorney.
In order to be enforceable, non-compete agreements in Massachusetts must meet all the following requirements:
- They must apply for a reasonable duration, scope, or geographic area.
- They must be necessary in order to protect a legitimate business interest.
- The agreement must not be against a public policy.
A non-compete agreement must pass the test of reasonableness. While looking for an element of reasonableness in a contract, courts consider the public interest as well as the circumstances of the parties. A non-compete agreement must be made for a reasonable duration. If it bars an employee from competing against the employer throughout his or her life or for an extremely lengthy period of time, the agreement may not be enforceable.
In addition to the duration of restriction, the geographic area covered under the agreement must also be reasonable. For example, a business operating only in Massachusetts may not legally restrict its employee from starting a similar business throughout the United States. Courts decide upon the reasonableness of the geographic area depending upon the facts of each case.
The scope of a non-compete agreement must not exceed the activities performed by the employee during his or her employment; the restrictions imposed must be necessary to protect the business interest of the employer in a reasonable manner.
2. Legitimate Business Interest
Non-compete agreements are enforceable in Massachusetts only for the purpose of protecting a legitimate business interest, including any of the following:
- Trade secrets
- Confidential business information like business plans, clients database, and computer data
- Customer goodwill
You cannot use a non-compete agreement merely for the purpose of preventing an employee from using the skills acquired during the employment.
3. Public Policy Concerns
Usually, public interest requires that an employee should be able to change his or her job without any restriction. Hence, in order to not violate the public policy, a non-compete agreement must be narrowly tailored to impose restriction only to the extent required to protect a legitimate business interest.
Common Usage of Non-Compete Agreements in Massachusetts
In Massachusetts, non-compete agreements are more common in the following situations:
- Sale of a Business: While selling a business, it is common to have a non-compete clause in order to prevent the seller for a certain period of time from entering into a similar business that may bring him in direct competition with the buyer.
- Technology Companies: Companies engaged in developing and selling software and other technology often include non-compete clauses in the employment agreement in order to protect their trade secrets.
- Higher Level Executives: Companies usually subject the higher level executives to a non-compete agreement since they are more likely to have in-depth knowledge about the company's business strategy. However, the use of non-compete agreements is increasingly spreading to lower positions, even to the level of hourly-paid workers employed in fast food restaurants.
- Franchise Agreements: Since a franchisee gets to access the trade secrets and other business data, franchise agreements usually include a non-compete clause.
Prohibition of Non-Compete Agreements in Massachusetts
Keeping up with its public policy, Massachusetts has barred the use of non-compete agreements in the following professions:
- Social Workers
Using a non-compete agreement in any of the above professions is against public policy, and hence not enforceable in Massachusetts. This is to ensure protection of public health and free flow of ideas.
Remedies for Non-Compete Agreements in Massachusetts
An employer can file a lawsuit seeking enforcement of a non-compete agreement. However, the burden of proof lies with the employer, meaning that he must prove that the non-compete agreement is valid and the employee is obligated to abide by it.
Remedies for breach of a non-compete agreement include money damages and injunction to prevent the breaching employee from working for another employer or engaging in a competing business.
If you need help with questions like “Are non-compete agreements enforceable in Massachusetts?” you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.