Noncompete Agreements

No New Consideration, No Enforceable Noncompete

by Lee Gesmer on March 29, 2006

Noncompete Agreements. Clients frequently present the following issue: we have existing employees who have not signed noncompete agreements. We’d like to ask them to sign them. Any problem with that?

The knowledgeable lawyer then struggles with the following question: does the employee need to be given some consideration for the noncompete to be enforceable? Consideration is not an issue when an employee signs a noncompete at the beginning of employment, since the job itself provides the consideration. But when the employee already has the job, does the employer have to give the employee some new consideration? – a raise, a bonus, a promotion?

There is a line of Massachusetts cases suggesting that continued employment (for an at-will employee) is itself adequate consideration, but the rule is not as clear as most lawyers would like, and many lawyers are forced to equivocate on this issue. And, some states have clearly held that continued employment is not adequate consideration, adding to the uncertainty.… Read the full article

Noncompete Agreements. If I had a dollar for every time a client who had been sued asked me if they could recover attorney’s fees or damages if they won, I’d have, well, probably hundreds of dollars. Even when a lawsuit proves to be frivolous the Massachusetts courts have traditionally been extremely reluctant to turn the tables on a plaintiff and make it pay damages for the harm its suit has caused to the defendant.

Every once in a while, however, a judge shows some courage and punishes a company the judge concludes has brought a frivolous case. In January 2006 Judge Gants, in the Suffolk Business Litigation Session, turned the tables on Brooks Automation, a Massachusetts company with a billion dollar-plus market valuation, ordering it to pay over $600,000 in damages for bringing a frvolous lawsuit against a former employee. After a trial Judge Gants concluded that the suit was devoid of both any reasonable factual support or any arguable basis in law.… Read the full article

Noncompete Agreements. Our firm used to write “year in review” articles [link], and I decided it was time for a reprise. Here is a year-in-review summary of the most significant Massachsetts state court cases from late 2004 through calender year 2005 involving the attempted enforcement of noncompete or nonsolicitation contracts. Rather than getting bogged down in the detailed facts of the cases I’ll provide a quick summary of the key facts and legal issues that led to the outcome in each case. The goal is to get a feel for how judges are approaching these kinds of cases – what works and doesn’t work in the state courts when employers are attempting to enforce noncompete/nonsolicitation agreements against former employees.

L-3 Communications v. Reveal Imaging [link] involved a complex series of corporate sales, the result of which was that the defendant-employees were several corporate acquisitions down the road from the companies with whom they had signed their agreements years earlier.… Read the full article