Commercial Litigation Update

Restrictive covenants entered in connection with the sale of a business occupy a different place than ordinary employment noncompetes. In a sale transaction, the buyer is not simply trying to limit a former employee’s next job. The buyer is paying for goodwill, customer relationships, confidential information, and the seller’s promise not to immediately undermine the value of what was sold.

On Monday, March 3, 2025, the Massachusetts Supreme Judicial Court (“SJC”) heard argument in Miele v. Foundation Medicine, Inc., regarding whether the Massachusetts Noncompetition Agreement Act, G. L. c. 149, § 24L (the “MNAA”), applies to a forfeiture-for-solicitation provision contained in a termination agreement. The outcome of this appeal will clarify the bounds of the recently enacted statute and may have a significant impact on the landscape of restrictive covenants in Massachusetts on the whole.

This appeal challenges the Superior Court’s July 2024 ruling that a contract provision requiring Plaintiff-Appellee to forfeit severance benefits upon breach of non-solicitation obligations was subject to, and prohibited by, the MNAA because it does not satisfy the requirements for an enforceable noncompetition agreement under the statute. The MNAA requires valid covenants to be reasonable in scope of proscribed activities in relation to the interests protected, supported by mutually agreed upon consideration, and consonant with public policy. G. L. c. 149, § 24L.

Many employers have granted their white collar workers increased flexibility to work remotely in response to the pandemic. As a result, some employees have moved away from the areas surrounding their offices and into places with lower costs or higher quality of living. In cases where an employee with a non-compete moves to a state such as California, which has a prohibition against any “contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind,” that can present potential problems for a Company. Cal. Bus. & Prof. Code. § 16600.

Our colleagues Janene Marasciullo and Daniel J. Green of Epstein Becker Green have a new post on Trade Secrets & Employee Mobility that will be of interest to our readers: "The Pennsylvania Supreme Court Nixes a No-Poach Agreement Between Business Partners as Overbroad."

The following is an excerpt:

As reported here and here, in December 2019 and January 2020, the United States Department of Justice brought its first criminal charges against employers who entered into “naked” wage fixing agreements and no-poach (e.g., non-solicitation and/or non-hire ...