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Massachusetts Court Upholds Noncompetition Agreement Act Exclusion for Non-Solicitation Agreements
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In a significant ruling for Massachusetts employers, the Supreme Judicial Court (SJC) has reaffirmed that the Massachusetts noncompetition Agreement Act (MNAA) does not apply to non-solicitation agreements, even when those agreements include forfeiture provisions. This decision clarifies the scope of the MNAA and reverses a lower court ruling that had cast doubt on the long-held understanding that non-solicitation agreements are categorically excluded from the Act’s requirements [1].
Understanding the Massachusetts Noncompetition Agreement Act (MNAA)
The MNAA, codified as G. L.c. 149 § 24L (a)-(f), places significant requirements on noncompetition agreements entered into on or after October 1, 2018. These requirements include stipulations regarding notice,consideration,and enforceability,notably concerning specific types of workers and circumstances like termination without cause [3].
According to the MNAA, a “noncompetition agreement” is defined as an agreement between an employer and a current or prospective employee that restricts the employee from engaging in certain competitive activities after the employment relationship has ended. This definition encompasses “forfeiture for competition agreements,” which are agreements that impose adverse financial consequences,such as the forfeiture of bonuses or stock options,if the employee engages in competitive activities.
Did You Know? The MNAA aims to balance the protection of employers’ legitimate business interests with the employee’s ability to seek new employment opportunities.
Key Exclusions from the MNAA
The MNAA explicitly excludes certain types of agreements from its purview. These exclusions include:
- Covenants not to solicit or hire employees of the employer (often referred to as “anti-raiding” provisions).
- Covenants not to solicit or transact business with customers, clients, or vendors of the employer.
As the enactment of the MNAA, it has been widely understood that these exclusions categorically exempt non-solicitation agreements from the statute’s requirements and restrictions on noncompetition agreements.
The Case of Miele v. foundation Medicine, Inc.
the established interpretation of the MNAA was challenged in July 2024 by a trial court judge in the case of Miele v. Foundation Medicine, Inc.. In this case, the plaintiff, Susan Miele, had entered into a non-solicitation agreement with her employer, Foundation Medicine, Inc.,in 2017. This agreement prevented her from soliciting the company’s employees for one year after her departure [2].
In 2020, in connection with her separation from employment, Miele entered into a “transition agreement” with Foundation Medicine. Under this agreement, she would receive transition benefits for remaining in
