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District of Massachusetts indicates that employment alone is not sufficient consideration under the Massachusetts Noncompetition Agreement Act

7/21/21

By: Victoria Fuller and Lori Eller

In KPM Analytics N. Am Corp. v. Blue Sun Sci., LLC, the District of Massachusetts recently provided some much-needed guidance concerning the enforceability of non-compete agreements governed by the Massachusetts Noncompetition Agreement Act, M.G.L. 149, § 24L (“MNAA”). 

There, the employee signed a Non-Competition, Non-Solicitation and Confidentiality Agreement shortly after he commenced employment in March 2019. The agreement stated that the employee agreed to the non-compete “in consideration for his[] employment,” but provided no other consideration for the non-compete, and lacked a garden leave clause.  Interestingly, the agreement contained a provision providing two weeks of severance in the event of a termination without cause, but the severance provision was not tied to the non-compete obligation.

The Court held that the agreement violated the MNAA for two reasons.  First, the agreement failed to expressly state that the employee had the right to consult with counsel prior to signing.  Second, and more importantly, the Court held the non-compete agreement unenforceable because it lacked a garden leave clause or other mutually agreed-upon consideration.  While not specifically stated in the decision, the Court implicitly held that employment alone is not sufficient to satisfy the “other mutually agreed-upon form of consideration” provision of the MNAA.

While KPM Analytics leaves open what exactly satisfies the “other mutually agreed-upon consideration” requirement in the MNAA, employers should take this opportunity to review all existing non-competes, particularly for key employees, to determine whether there could be any dispute as to whether they comply with the strict requirements set forth in MNAA.

For more information, please contact Victoria Fuller at [email protected], or Lori Eller at [email protected].