Massachusetts enacted significant noncompete reform in 2018. Under Massachusetts law, noncompete agreements entered after October 1, 2018, can only be used and enforced if they comply with the standards of the Massachusetts Noncompetition Agreement Act (MNAA).
Unless all the MNAA requirements are met, a noncompete agreement is unenforceable. If the agreement is enforceable and an employee violates it, the employer can move to enforce it. A Massachusetts Superior Court, however, has defined tactics that step over the line of valid enforcement of a noncompete agreement in a recent case.
All noncompete agreements in Massachusetts that were entered into on or after October 1, 2018, are subject to the MNAA. The Act states that a noncompete must meet the following requirements:
- It must be in writing, signed by both the employer and employee, and state that the employee has a right to consult counsel;
- It must be given to a new hire with their formal offer of employment (or at least 10 days before they start), and if the agreement is with an existing employee, it must be given to them at least 10 days before it takes effect;
- The consideration for the agreement must be stated and, if the agreement is entered into with an existing employee, the consideration must be “fair and reasonable;”
- The agreement must be no broader than necessary to protect the legitimate business interests of the employer (which include trade secrets, confidential information, and employer goodwill);
- The restriction on competing employment may not last longer than 12 months from termination of employment;
- It must be reasonable in geographic reach;
- Restricted activities must be reasonable in scope; and
- It must be consistent with public policy.
Additionally, even if the above conditions are met, noncompete agreements aren’t enforceable if employees meet any of the following criteria:
- They’re nonexempt under the Fair Labor Standards Act (FLSA);
- They’re under the age of 18;
- They have been terminated without cause or laid off; and
- They’re undergraduate or graduate students who are not working full time.
However, nonsolicitation and confidentiality agreements—which typically prohibit individuals from trying to poach their former employer’s customers and require them to keep company information confidential—aren’t covered under the MNAA.
A Step Too Far?
Tori Macaroco worked for Vanity Lab as an aesthetician and was subject to a nonsolicitation and noncompete agreement that she entered into after she started her employment. The agreement prevented her from practicing the aesthetician trade entirely (regardless of location) for one year after leaving Vanity Lab.
Macaroco was eventually fired, and the day after her termination, she established her own business performing aesthetician services. One week later, Vanity Lab’s counsel sent her a cease-and-desist letter. The company also sent copies of the letter to her clients and informed them of her allegedly poor performance.
Macaroco, likely sensing that Vanity Lab would file suit against her, proactively filed suit against the company first. She claimed wrongful interference, commercial disparagement, violation of the Massachusetts “Consumer Protection Law,” and intentional infliction of emotional distress.
Overly Aggressive Efforts Backfire
Vanity Lab asked the court to dismiss the case without a trial, citing to its right to enforce the noncompete agreement. When addressing the request, the court was required to view the facts alleged by Macaroco in her complaint as true.
Accordingly, Macaroco only needed to present evidence that made one or more of her claims plausible. In her complaint, she alleged the noncompete wasn’t enforceable because it wasn’t necessary to protect Vanity Lab’s trade secrets or confidential information, was unsigned by the company, and it didn’t give her adequate notice. If any of these claims were true, the noncompete would be unenforceable.
Macaroco also alleged that Vanity Lab crossed a line when it sent the cease-and-desist letter to her clients because it interfered with her business relationships. Finally, she claimed the company was “defaming her in text messages and phone calls.” In particular, she claimed that it texted and called her clients to talk about the quality of her services in a negative light.
Taking Macaroco’s facts as true, the court concluded that she provided enough information to make most of her claims plausible. It concluded that if her allegations were true, it was possible that Vanity Lab had interfered with her business relationships when they allegedly contacted her clients, had defamed her when they sent disparaging text messages, and had otherwise engaged in unfair and deceptive business practices. The court, however, dismissed her emotional distress claims.
Overall, the court didn’t seem happy with Vanity Lab for sending the cease-and-desist letter to Macaroco’s clients and talking poorly about her job performance. When the company involved her clients as third parties to enforce the compete agreement, it went a step too far.
There are ways to try to enforce restrictive covenants that aren’t overreaching. A cease-and-desist letter is a common tactic if less formal communications are ineffective. In this case, however, Vanity Lab allegedly sent a copy of their cease-and-desist letter to their former employee’s new clients and criticized her professional skill and abilities. This step clearly did not sit well with the court and supported Macaroco’s various claims of unlawful harm to her business.
Had Vanity Lab not involved Macaroco’s clients, it may still have lost the battle over the enforceability of the agreement, but it wouldn’t also be defending themselves against potential liability for their own alleged misdeeds.
The lesson for employers? Consult with experienced employment counsel about the enforceability of any noncompete agreement before you take steps to pursue enforcement. In addition, consider incremental enforcement efforts that don’t involve unsolicited performance critiques, and be wary of involving your former employee’s new clients in your efforts.