ENFORCEMENT OF NON-COMPETE AGREEMENTS CONTINUE TO BECOME MORE COMPLICATED

By Timothy K. Cutler

 

The Massachusetts trial court recently denied an employer’s application for injunctive relief to enforce a non-compete agreement on the grounds that non-compete agreement may not be enforceable because of a material change in conditions of employment.  The employee had a non-compete with Company A. After entering the non-compete agreement, Company A was purchased by Company B.  After purchasing Company B sought to significantly restructure the employee’s compensation. The employee terminated his employment and took a position with Company B’s competitor.  

Accordingly, Company B sued the employee and sought to enforce the non-compete that the employee had entered into with Company A.  The court found that the change in the employee’s compensation structure was material and thus voided the non-compete.  

When purchasing a business it thus advisable to have all the employees sign new non-compete agreements, particularly if there is a new compensation structure.