December 6, 2021

Volume XI, Number 340

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December 03, 2021

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Federal Court Addresses Mass. Non-Compete Law, Speaks to Adequacy of Consideration

The United States District Court for the District of Massachusetts issued an opinion in July authored by Judge Timothy S. Hillman in KPM Analytics North America Corp. v. Blue Sun Scientific, LLC, et al. Members of the employment bar were anticipating judicial interpretation of the Massachusetts Noncompetition Agreement Act, G. L. c. 149, §24L, since it took effect in 2018.

The case, which dealt primarily with allegations of trade secret misappropriation, involved claims by KPM against seven former employees for breach of their employment agreements. Only one of the agreements at issue was governed by Massachusetts law and, thus, was the only one to have been deemed unenforceable on the basis of the statute.

The Massachusetts noncompetition statute establishes eight requirements that non-competition clauses must satisfy to be valid and enforceable. The employment contract at issue in KPM Analytics implicated two such requirements. First, it did not include a clause that expressly stated that the employee had the right to consult with counsel before signing the agreement. Second, the agreement was not “supported by a garden leave clause or other mutually agreed upon consideration between the employer and the employee.”

While Judge Hillman’s discussion of the employment agreement constituted a small portion of the overall opinion, it carries significant implications for Massachusetts employers. The statute’s requirement that non-competition clauses be supported by “other mutually-agreed upon consideration” is not satisfied if said consideration is limited to the underlying employment. Thus, this case signals that courts are likely to employ a strict interpretation of the statutory language in order to give it its intended effect. If nothing else, this opinion makes clear that noncompetition agreements executed at the outset of the employment relationship must be supported either by a garden leave clause or some independent form of consideration to be enforced in Massachusetts courts.

Daniel Curran also contributed to this article.

Copyright ©2021 Nelson Mullins Riley & Scarborough LLPNational Law Review, Volume XI, Number 288
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About this Author

Bret Cohen Employment Attorney Nelson Mullins Law Firm
Partner

Bret Cohen chairs the Labor and Employment Practice. His practice covers a range of industries in the drafting and enforcement of non-compete, confidentiality, and other employment-related agreements throughout the United States. He has also represented individual employees, typically high level executives, in such matters on behalf of the companies who seek to hire them. Mr. 

Cohen’s practice has also regularly involved advising public company executives on terminations and employment issues and providing advice on a range of matters involving...

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