The ABCs of Noncompetes in Massachusetts
06.09.09 | Sales Recruiting | Amanda Musto, Marketing Manager at Treeline Incorporated
By Kenneth J. Rossetti, Esq.
Whether you are a candidate for a sales position, or an employer looking to fill a sales role, you will likely become a party to a noncompetition agreement, or a "non-compete,"- particularly since such employment typically furnishes access to the employer's intellectual property or trade secrets.
What is a "non-compete"? In basic terms, a non-compete is a written agreement whereby the employee acknowledges the employer's intellectual property/trade secrets, and the employee agrees, in return for receiving compensation and other benefits of employment, to refrain from working for the employer's competitors over a defined period of time, and in a defined geographic region, if the employment relationship ends for any reason.
In Massachusetts, a state rich with technology firms of all sizes and fields, non-competes are common, as companies invest significant time and money to develop products and services that differentiate themselves from their competition. Sales positions are particularly appropriate for non-competes, as sales professionals, unlike many other employees, they enjoy simultaneous access to the "two keys to the kingdom:" (1) the employer's trade secrets and (2) the employer's clients. While a fluid workforce is inevitable, companies nonetheless wish to minimize the potential for harm, posed by the departure of employees with access to confidential information, by requiring employees to sign non-competes, usually at the start of the parties' relationship but sometimes after the commencement of employment (the preferred practice is to execute a non-compete at the start of employment).
Although non-competes are common in Massachusetts, non-competes will only be enforced by a Massachusetts court if they meet certain criteria. Such agreements must protect a legitimate business interest of the employer (such agreements cannot protect against ordinary competition); they must be reasonable in geographic scope; and they must be reasonable in duration (the period during which the employee must refrain from working for a competitor after the employment relationship ends). The reasonableness of geographic scope and duration are very fact-specific matters and are evaluated under numerous factors, including, but not limited to, the nature of the employee's work and position; the employer's products and services; the nature and location of the market in which the employer competes; the number of the employer's competitors; and the months or years in which the departing employee is commanded to refrain from working for a competitor.
If you are a candidate for a position, be sure to disclose to your prospective employer whether you are subject to a non-compete - and if you are looking to hire someone, be sure to ask your prospective employee whether he or she is a party to a non-compete, and with whom. A candidate's acceptance of a position with a competitor, while the candidate is bound by a non-compete with a previous employer, is problematic for both the candidate and the successor employer, who each may be subject to litigation by the candidate's former employer.
In sum, while non-competes are realities for many sales professionals and the firms that employ them in Massachusetts, non-competes must also meet the specific parameters set forth above in order to be enforceable, and the satisfaction of those criteria turns on numerous factors, such as the market served by the employer, the nature of the employee's position, and length of time under which the non-compete is to be enforced.
Non-competes must be carefully drafted and reviewed in order to be enforceable, and disputes regarding the enforceability of non-competes are frequently litigated, and have been the subject of contentious lawsuits in Massachusetts courts for decades. Therefore, if you are required to sign a non-compete, or if you want to ask a new hire to sign a non-compete, you should seek legal counsel, as there are significant implications for employers and employees alike.
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 non-competes. 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 non-competes, or any other legal matter.