Covenants not to compete are contracts provided to an employee by an employer that are intended to limit and/or restrict an employee from working for competitors after the employment relationship is terminated. They are sometimes given to the employee at the time of the employment offer, but in other situations given to the employee after the employee has already started to work. The employer views these contracts as protecting legitimate business interests. Specifically the employer is trying to protect themselves from former employees, using their knowledge of the company, to take some hard earned business away from them. Of course, the employee often has a different view of the contracts and thinks of them more as a restraint on their freedom to work. Consequently, Massachusetts Courts attempt to balance these legitimate, but sometimes conflicting, interests.
I think the best way to attempt to analyze these conflicting interests is to think of a filter, which the terms of the contract are required to pass through. The filter is composed of “reasonableness,” and each of the terms of the agreement must pass through the filter in order for the courts to enforce the agreement. The terms in most these agreements are “duration,” “scope,” and “location.” The term “duration” is pretty much self-explanatory, and simply means the length of time that the restrictions are in place. Typically these lengths of time are periods between six months and two years, and prevent the employee from working for the competitor for the designated period. In order for the Court to find the duration of the restriction to be enforceable, the Court has to determine that within this specific situation the restriction is “reasonable.” The definition of “reasonable,” however, is clearly a task that keeps attorneys employed and often is hotly contested.
The second concept that has to pass the “reasonable” test is the size of the area the restriction applies to. A number of years ago, I had a case that provides a very simple example of this concept. It was a car dealership case and the restriction within the agreement was 15 miles. The judge was Judge Zobel. He was a colorful man who was known for always keeping fresh flowers on his bench. He initially ruled that the distance of 15 miles was reasonable. He then went back into his chambers and came out with a map that had a legend that measured distance. On the spot, he then determined that the dealership that my client was working at was within the prohibited area. When we left the courtroom 5 minutes later, my client was unemployed. Oh well, you win some and lose some. Of note, with the development of Internet sales this concept of geography has changed dramatically and is interpreted much more broadly than it used to be.
The third term that passes through the “reasonableness” filter is the concept of scope. An example of this is if a salesman works for a company that sells a particular product and leaves to work for a competitor, but in the new job his responsibilities do not include selling that particular product. In this case the restraint may not be enforceable since the company would have a difficult time attempting to show that they were protecting a legitimate business interest since, presumably, the salesman could not use inside information to unfairly compete if he were not selling the particular product.
Over the years, I have often had clients come in and indicate that they had heard that these contracts were not enforceable. Although the burden of proof is definitely on the side of the employer, courts do enforce these agreements if they are drafted using a “reasonable” filter. If you have, or are being asked to sign, a non-compete agreement, it is a good idea to check with an experienced employment attorney before doing so. Remember, the only person who has legal rights is the person who knows what their legal rights are.
Law Office of Stark & Heiner
805 Turnpike St. Suite 101
North Andover, MA 01845