Thursday, March 10, 2016

The Price of a Job: Non-Compete Agreements in Massachusetts

On your first day at a new job, or if you are lucky maybe a day or two before, you are handed a stack of papers to sign. Many of these documents are standard forms; one of them, however, could significantly limit your opportunities if this job does not work out: the non-compete.

It is not exactly optional, or negotiable.  Sure, you can say no to the job, but chances are you have invested a lot of time and energy into getting the job offer, and that you have accepted it because it is a job you really want and/or need.

So, is your non-compete enforceable?  The answer is a resounding "maybe."  A non-compete agreement is enforceable in Massachusetts if it is: (i) supported by consideration; (ii) reasonable in time and geographic scope; and (iii) necessary to protect a legitimate interest of the employer.

"Consideration" means you have to get something of value in exchange for your promise not to compete.  A job offer counts, if you sign the non-compete at the time you accept employment. it is less clear whether there is adequate consideration if you are asked to sign the agreement after you are already working, and your employer does not offer you anything new (i.e., more compensation or a promotion)in exchange.

"Reasonable" is highly dependent on the facts and circumstances.  A restriction of as few as 10 miles could be considered unreasonable if the reach of the business is only 3-5 miles, while nationwide or even global restrictions might be upheld if the employee's territory was national or global in scope. Similarly, a two year restriction might be found acceptable in certain industries, while one year might be excessive in an industry with high employee turnover and mobility.

A "legitimate interest of the employer" does not include an interest in suppressing competition: your employer must be seeking to protect either trade secrets/confidential information or goodwill belonging to the employer. Typically, non-competes for employees in a technical environment are primarily concerned with confidential information, while non-competes for employees in a sales or marketing area are primarily concerned with the company's goodwill (its relationships with and reputation among customers and potential customers).

What does this mean for you? If you have the luxury of time, a relatively brief consultation with an experienced employment lawyer should provide you with some guidance as to what is and is not restricted and the likelihood that it will be enforced.  If you don't, here are some simple pointers:

First, because there are no bright lines in Massachusetts law regarding non-compete agreements, as a practical matter you should understand the very real risk that it will be enforceable before you sign it. Though it is hard to do when you are anxious to start a new job, if you really don't believe you can live with the restrictions if the job does not work out, or if you think you may only be there a short time, you might decide than another several months of job hunting is preferable to a two year restriction on your ability to work in your field.

Second, if that is not a practical option, either because you really need the job or because you work in a field where you will find non-compete agreements pretty much anywhere you go, pay careful attention not only to the length and scope of the agreement, but also to exactly what it says you can and cannot do.  Some agreements define "competition" very broadly; others are more careful to define what they consider competition.  Your employer may not be interested in negotiating the terms of the non-compete with you, but may be able to explain to you what they are really concerned about so you can evaluate your risk accordingly.  For example, a software company may have a broadly worded non-compete, but in actuality only be concerned about competition in the narrow space in which they operate.

Third, the way you handle your departure from the company has probably more impact on whether you will find yourself in a lawsuit than the document itself.   Most employers (of course, not all) are reasonable, and will only seek to interfere with what you do after leaving a job if they are concerned about some risk that they see as important.  The non-compete cases we have seen fall into three major buckets: (i) concern about confidential information; (ii) concern about customer relationships; and (iii) bad blood, justified or not, between the employer and the employee.

You can't control whether your employer is reasonable or not, but you can protect yourself by understanding that confidential information and customer relationships are very important to most employers, for lots of good reasons, and very innocent actions can raise their suspicions in that regard.  For example:

  • You may work remotely, and need to email yourself documents and materials from time to time- if you make sure you discuss this with someone at your company, and ask for and follow any protocols or procedures the employer has for that kind of information transfer, you are far less likely to raise "red flags" on your departure if the employer searches your company email (yes, always know they can do this) and finds you have been sending arguably confidential information to yourself.
  • When you are ready to resign, or if you are fired, resist the temptation to do a "data dump" of your contacts and other information.  It may feel like your own work product and/or your own digital rolodex- it may in fact be.  It will, however, immediately cause your employer to assume you are planning to use that information inappropriately.  If there is information you need, and believe is appropriate to take or copy, ask permission. The downside is the answer may be "no," but generally that is preferable to the expense, inconvenience, and risk of being sued.

Finally, relationships matter. This has been true in my experience with almost every sort of employment dispute.  Generally, people don't like lawsuits.  For everyone except the lawyers, they are time-consuming, distracting, and expensive.  For this reason, there are lots of things people could sue over and don't, usually because the parties have a relationship of respect, even when the employment ends.

The lack of clarity in the law of non-compete agreements in Massachusetts has been frustrating to both businesses and employees, and every so often legislation is proposed to define more clearly what is and is not a legitimate post-employment restriction.  To date, none of these bills have passed, however, leaving all parties with little guidance about how to proceed.  In the meantime, we hope the above information is helpful to you in charting a reasonable course through these waters.

+slnlaw LLC 

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