Take Care in Drafting: Meschino v. Frazier Industrial Co. Is a Cautionary Tale for Employers

Non disclosure agreement

In Meschino v. Frazier Industrial Co., Civil No. 15-10327-RGS, 2015 WL 7295463 (D. Mass. Nov. 18, 2015), Judge Stearns held that an employment agreement superseded an earlier employment agreement and a separate earlier confidentiality and non-compete agreement. A 2005 employment agreement provided that the employee would be required to execute a separate confidentiality and non-compete agreement. The employee executed both agreements in 2005. Notably, the separate confidentiality and non-compete agreement was not expressly incorporated into the 2005 employment agreement, and the employment agreement did not contain an integration clause indicating that it was the final and complete agreement regarding the terms of employment.

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The House Speaker Proposes New Non-Compete Legislation in Massachusetts

This morning, House Speaker Robert DeLeo announced at a Greater Boston Chamber of Commerce breakfast that the House will be releasing a bill this session that imposes some limitations on non-competes. Although the language of the proposed bill is not yet available, Speaker DeLeo described two key elements:

  • Time Limit: The proposed bill would limit non-competes to 12 months in length.
  • Notice Requirement: The proposed bill would require that employers inform employees in advance that they will be asked to sign a non-compete, and advise them of their right to seek legal counsel.

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Massachusetts Courts Continue to Reject Inevitable Disclosure Doctrine

Judge Janet L. Sanders of the Superior Court’s Business Litigation Session has continued the trend of Massachusetts courts refusing to recognize the inevitable disclosure doctrine.

In The Gillette Company v. Craig Provost et al, Civ. Action No. 15-0149 (Mass. Sup. Dec. 22, 2015), Gillette moved for a preliminary injunction to prevent its former counsel and ShaveLogic’s current general counsel, Chester Cekala, from providing any legal advice regarding Gillette’s patents, not only with respect to patent validity but also on infringement and scope. Although Cekala’s non-compete agreement with Gillette had long expired, Gillette contended that Cekala’s legal advice inevitably disclosed Gillette’s trade secrets to its competitor given his experience with the company.

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Massachusetts Federal Court Reaffirms That Continued Employment Constitutes Sufficient Consideration for Non-Compete

Calendar-ThinkstockPhotos-113517060In American Well Corporation v. Obourn, Civil No. 15-12265-LTS, 2015 WL 7737328 (D. Mass. Dec. 1, 2015), Judge Sorokin of the United States District Court for the District of Massachusetts upheld a non-compete entered into seven months after the employee’s start date. The Court explained that as to whether continued employment constitutes sufficient consideration for a non-compete:

“[T]he SJC has squarely addressed this question. Decades ago, it held that a non-competition agreement signed during employment was not void for lack of consideration because it contained a promise by the plaintiff thereafter to employ the defendant and by the defendant to work for the plaintiff.”

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Protected Occupations: Statutory Exemptions from Non-Competes for Employee Classes

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The states have a rich tradition of passing legislation forbidding or limiting the use of non-compete agreements with identified classes of employees. As you might expect, a number of states forbid or limit the use of non-compete agreements with:

  • Physicians, nurses, psychologists, social workers and other medical professionals
  • Lawyers
  • Individuals working in broadcasting

Public health, public policy and ensuring the free flow of information and ideas motivate the prohibition or limitation on non-compete agreements for these occupations. But what about auto salespeople? Cosmetologists? Secretaries and clerical staff? Or real estate brokers? All of these occupations are examples of exempted or specially protected employee classes. Louisiana prohibits auto dealerships from binding sales staff to non-competition agreements. Vermont protects barbering and cosmetology students from being required to enter a non-competition agreement with the beauty shop that trains them. Workers in purely clerical or secretarial positions in Missouri are not subject to non-competition agreements. Real estate agents in Louisiana may be bound by a non-solicitation agreement with a real estate brokerage only if the covenant is “displayed in bold-faced block lettering of not less than ten-point type” and a three-day rescission period is part of the agreement. Continue Reading

Consistency Is Key: Corporate Enforcement Practices in Non-Competes Critical to Judicial Review

Consistency-is-keyA recent decision from a Wisconsin state court serves as a cautionary tale for employers that do not routinely impose or enforce non-compete restrictions consistent with the employee’s role and potential to harm the business.

In Kohl’s Department Stores Inc. v. Janet Schalk, 2015CV001465 (Wis. Cir. Ct. Aug. 11, 2015), Judge Robert Mawdsley denied Kohl’s request for an injunction preventing its Chief Information Officer, Janet Schalk, from joining Hudson’s Bay Company partly on the grounds that Schalk’s non-compete was overly restrictive in light of Schalk’s role in comparison with the non-competes of other employees.  Kohl’s, relying upon its non-compete contract with Schalk barring her from working in a similar position with a competitive retailer for one year, argued that Schalk should be barred from joining Hudson’s Bay, a Canadian department store company, because Schalk “has the playbook, the crown jewels, our entire strategy in her hands.” Schalk argued that the non-compete was too broad and that Hudson’s Bay was not a competitor given its high-end retailing–featuring Saks Fifth Avenue and Lord & Taylor–compared to Kohl’s mid-tier status. Schalk also contended that Kohl’s overstated her role and knowledge of the company’s strategy. Continue Reading

Pennsylvania Supreme Court Rejects Continued Employment as Sufficient Consideration for Non-Compete

Employment Contract- Crop

The Pennsylvania Supreme Court recently held in Socko v. Mid-Atlantic Systems of CPA, Inc. that a non-compete is enforceable only if a current employee receives new consideration beyond continued employment. The Court held that this is the case even if a non-compete provides that the parties “intend to be legally bound,” which typically obviates the need for consideration under the Pennsylvania Uniform Written Obligations Act (UWOA). After considering the historical background regarding non-competes and general principles of statutory construction, the Court concluded that “a construction of the UWOA which would vitiate the need for new and valuable consideration when entering into an agreement containing a restrictive covenant after the initiation of employment would be unreasonable.”

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Non-Compete Debate Continues in Massachusetts Legislature

Massachusetts State House

The Boston Bar Association recently held its 7th Annual Symposium on Employee Noncompete and Trade Secrets. In addition to practicing attorneys and an MIT-Sloan professor, the panel included three Massachusetts state legislators – Senators Jason Lewis and William Brownsberger, and Representative Lori Ehrlich – who have each authored pending legislation that would, to varying extents, render non-compete agreements unenforceable in the Commonwealth. Continue Reading

They’re Not Dead Yet: Massachusetts Courts Continue to Enforce Non-Competes and Enjoin Defendants in the Right Circumstances

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In Pegasystems Inc. v. Appian Corp., Judge Mitchell Kaplan of the Massachusetts Business Litigation Session enjoined a sales employee from working for a competitor for three months. This recent opinion highlights some common issues in Massachusetts non-compete law and illustrates judges’ broad discretion to fashion relief.

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Can We Still Be Friends? The Uncertain Definition of Non-Solicitation in the Digital Age

Network People

Although last year’s legislative efforts to ban—or limit further—non-competes in Massachusetts failed, proponents have vowed to revive the issue again in 2015-2016. Excluded from those proposed measures, however, has always been any restriction on employers’ use of customer non-solicitation clauses. Should the Legislature ever pass restrictions on non-competes, employers that have not already done so will flock in droves to the use of customer non-solicits, particularly with respect to sales-related employees. This makes the courts’ ongoing struggle to define customer “solicitation” in the digital age of paramount importance.

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