The District of Massachusetts recently held that garden leave payments, whereby a former employee subject to a restrictive covenant is paid by the former employer for the duration of the restrictive period, do not constitute “wages” under the Massachusetts Wage Act.
This article was originally published in the Boston Bar Association’s Fall 2022 Boston Bar Journal.
Just over four years ago, the Massachusetts legislature finally passed a bill long in the works addressing non-compete agreements and replacing the Commonwealth’s trade secret misappropriation statute with a version of the Uniform Trade Secrets Act (the “UTSA”), referred to herein as “MUTSA.” See M. G. L. c. 93, § 42-42G. While the Commonwealth’s “new” non-compete law has received the most attention, the adoption of the UTSA was also notable. Even though Massachusetts is the 49th state to adopt the UTSA, MUTSA differs from other states’ versions of the UTSA. This piece will discuss the differences in pre- and post-MUTSA jurisprudence and what issues may be implicated by the law.…
A Superior Court in Massachusetts has allowed an aesthetician’s lawsuit to proceed against her former employer after it sought to enforce her allegedly void restrictive covenant.
After being terminated by defendant Vanity Lab, the plaintiff and aesthetician Tori Macaroco established her own business providing aesthetician services. Macaroco then received a cease-and-desist letter from a New York law firm, citing the contract she signed as a Vanity Lab employee that contained various restrictive covenants preventing her from “solicit[ing] any employees or patients/customers of Vanity Lab, attempt[ing] to persuade any customer, patient, or employee from leaving Vanity Lab’s services, or reveal[ing] any of Vanity Lab’s confidential information.” The letter also stated that Macaroco was prohibited from practicing as an aesthetician for one year following the end of her employment with Vanity Lab. The letter further advised Macaroco that Vanity Lab would take legal action to enforce its rights in the event of a breach of her contract.
Continue Reading Aesthetician’s Proactive Suit Puts a Wrinkle in Spa’s Attempts to Mar Her Reputation
Nearly five years ago, the Massachusetts Noncompetition Agreement Act (“MNAA”, also sometimes abbreviated as the “MNCA”) went into effect. That statute ushered in new requirements for non-competes in the Bay State (including not only residents of Massachusetts, but also those who are merely employed in Massachusetts). Among the MNAA’s requirements is a forum selection provision that purports to require civil suits related to non-competes to be brought exclusively in the county in which the employee resides, or if both parties agree, in Suffolk county in Massachusetts.
Despite being in effect for nearly a half-decade, there have been relatively few published cases interpreting the MNAA (see here and here for a synopsis of a couple of those cases). Recently, however, a federal judge in Virginia weighed in on the statute’s forum requirement, determining that a suit against a Massachusetts employee could proceed in federal court in the Eastern District of Virginia, rather than be dismissed and re-filed in Massachusetts.
Continue Reading Massachusetts’ “Provincial” Forum Selection Requirement May Not Trump Reasonable Foreign Forum Selection Clause
Recently, we wrote about New Hampshire’s attempts to piggyback on Massachusetts’ material change doctrine. In this post, we’re taking a look at Connecticut’s latest legislative effort to limit non-competes—House Bill 5249.
In many ways, HB 5249 borrows from Massachusetts’ 2018 bill (although unlike the New Hampshire bill, it doesn’t tackle the material change doctrine). For example, like the Massachusetts Noncompetition Agreement Act, the law would limit non-competes to a geographic area commensurate with where the employee works during the last 2 years of their employment, and to the kinds of work the employee performs during those 2 years. The duration of a non-compete would typically be limited to no longer than one year like under Massachusetts law, except that the Connecticut bill would permit a covenant of up to two years where the employer pays the employee’s base salary and benefits.
Continue Reading It’s Déjà Vu All Over Again—Connecticut Borrows Heavily from Massachusetts Law in Proposed Non-Compete Legislation
The Massachusetts Superior Court recently held in Now Business Intelligence, Inc. v. Donahue that a temporary reassignment during a business slowdown, consisting of the addition of certain non-billable duties, does not constitute a material change invalidating a non-compete agreement. The dispute centered on Now Business Intelligence, Inc.’s (“NBI”) ability to hold its former employee, Sean Donahue (“Donahue”), liable for breach of his covenant not to compete. …
Continue Reading Massachusetts Superior Court Axes an Attempt to Expand the Scope of the Seminal Non-Compete Law Concerning Material Change in Employment
The “return to normal” in courts across the country has brought with it a flurry of trade secrets decisions that address some interesting and instructive issues, both procedurally and substantively. In the last ten days alone, courts in Illinois, Massachusetts, and Texas have weighed in on issues such as the specificity necessary to assert a viable trade secrets claim, the enforceability of a restrictive covenant against an employee who is laid off temporarily but quickly finds a new role and is rehired by the same organization, and the validity of a $700,000,000 jury verdict that was based on a jury question that combined multiple theories of liability. Let’s take a look:…
Continue Reading Courts Across the Country Continue to Address Trade Secrets Issues
Late last spring we reported on the second published decision out of the District of Massachusetts citing the Massachusetts Noncompetition Agreement Act (“MNCA”), NuVasive, Inc. v. Day. On April 8, 2020, the First Circuit issued a decision on the defendant’s appeal, upholding the lower court’s ruling. While the First Circuit’s decision does not directly analyze an agreement that is subject to the MNCA, it is still instructive for out-of-state employers with personnel who may be subject to that law.
Continue Reading The First Circuit Weighs in on the Applicability of Massachusetts’ Non-Compete Law
Continuing our annual tradition, we have compiled our top developments and headlines for 2019 & 2020 in trade secret, non-compete, and computer fraud law. Here’s what you need to know to keep abreast of the ever-changing law in this area.
1. Another Year, Another Attempt in Congress to Ban Non-Competes Nationwide
Senators Chris Murphy (D-Conn.) and Todd Young (R-Ind.) introduced legislation in 2019 entitled the Workforce Mobility Act (“WMA”). The WMA seeks to ban non-compete agreements outside of the sale of a business or dissolution of a partnership.
Not only would the WMA abolish covenants not to compete nationwide, outside of the extremely narrow exceptions highlighted above, but it would also provide the Department of Labor (DOL) and Federal Trade Commission (FTC) with broad enforcement power. If enacted, the legislation would empower the FTC and DOL to enforce the ban through fines on employers who either fail to notify employees that non-compete agreements are illegal or who require employees to sign covenants not to compete. Additionally, the WMA establishes a private right of action for all employees allegedly aggrieved by a violation of the WMA.
The WMA contains a carve out for parties to enter into an agreement to protect trade secrets. As currently drafted, the WMA does not abrogate the scope of protections provided by the Defend Trade Secrets Act.
Presently, there are no generally applicable federal restrictions on non-compete agreements, and enacting such a law would have to pass Constitutional muster. We expect to see continued activity at the federal legislative level to attempt to ban or limit the use of non-competes.
2. New State Legislation Regarding Restrictive Covenants
For the first time in 15 years, the Supreme Judicial Court (“SJC”), Massachusetts’ highest court, issued a decision analyzing the enforceability of non-solicitation covenants, the distinction between such covenants in the context of the sale of a business versus employment, and equitable tolling of restrictive covenants. As set forth below, this decision serves as an important reminder to businesses who impose restrictive covenants governed by Massachusetts law.
While the factual background of the case is long and twisty, only a few key details are necessary to rehash here. The defendant Matthew McGovern (“McGovern”) entered into a restrictive covenants agreement with his former co-shareholders of the Prime Motor Group (“Prime”), in exchange for plaintiffs’ agreement to buy out McGovern’s minority share in Prime with no discount. The agreement, which was made a year after McGovern had been terminated as an employee and as part of a resolution of the parties’ dispute concerning McGovern’s alleged violation of an earlier restrictive covenants agreement, prohibited McGovern from hiring, soliciting, or encouraging Prime employees to leave Prime for 18 months. The agreement contained no tolling provision, but provided that plaintiffs would be entitled to injunctive relief if McGovern breached, without needing to prove irreparable harm. …
Continue Reading Massachusetts’ High Court Pumps the Brakes on Equitable Tolling of Restrictive Covenant