Material Change In Employment Relationship Leaves Noncompete Agreement Unenforceable

by Lee Gesmer on June 17, 2013

My late May post on Rent-A-PC, Inc. v. Robert March, et al.  discussed a Massachusetts federal district court case in which Judge O’Toole refused to issue a preliminary injunction enforcing noncompete provisions against two former employees of Rent-A-PC because their job responsibilities had substantially changed since their non-compete agreements had been signed.

In a decision issued by a Massachusetts Superior Court Judge in May, the court refused to issue a preliminary injunction on the same grounds. In Intepros v. Athy one defendant, Paul Athy, had advanced from branch manager to regional vice president. Relying on the hoary case of F.A. Bartlett Tree Expert Co. v. Barrington (1968), as well as several more recent cases, the court held that this change in job title responsibilities, as well as changes in pay, constituted a material change rendering the noncompete agreement void and unenforceable.

A second defendant, Anne Marie Canty, had been hired and fired twice, and had signed a noncompete agreement on the first two hires. However, she was not asked to sign a noncompete agreement at the time of her third hire, a fact that left the employer without an enforceable noncompete agreement against her.

Ms. Canty’s case was open and shut: if you fire an employee don’t expect a noncompete provision from that employment to be enforceable if you rehire the employee and don’t get a new agreement.

Mr. Athy’s case is more difficult. Must an employer require an employee to sign a new noncompete agreement (or ratify an existing agreement) on the occasion of every promotion or change in salary? Not only is this an awkward condition to impose on the employer-employee relationship, but lets face it: many employers will forget. To make matters murkier, no court has provided a bright line as to how much an employment relationship must change before a new agreement becomes mandatory. In fact, one Massachusetts judge has ruled that the material change doctrine applies only when the change adversely affects the employee, such as in the case of a demotion or decrease in pay. (Sentient Jet LLC v. Mackenzie, Garsh, J. 2012).

Employers may attempt to use noncompete agreements that specifically anticipate job changes during the course of employment and provide that the non-compete clause will continue regardless of such changes, but no Massachusetts court has ruled on whether such a provision is enforceable.

Unfortunately, for now the material change doctrine seems to be an unavoidable stumbling block for Massachusetts employers.

 

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