The new noncompete law: compromise happens.

Byline: Russell Beck and Erika Hahn

It's just over a year since the "new" Massachusetts Noncompetition Agreement Act took effect, and it already has had some very tangible, positive effects. However, one aspect of the new law namely, what consideration is required to support a noncompete continues to create significant uncertainty.

A review of preexisting Massachusetts noncompete law provides a useful framework for understanding the new consideration requirements.

Prior to the new law (i.e., before Oct. 1, 2018), noncompetition agreements, like other contracts, had to be supported by consideration. See, e.g., Marine Contractors Co. v. Hurley, 365 Mass. 280, 28486 (1974) (discussing consideration and noting that "consideration is conclusively presumed for a promise under seal"); Cypress Group, Inc. v. Stride & Assocs., Inc., 2004 WL 616302, at *3 (Feb. 12, 2004) (Burnes, J.) ("Any time a restrictive covenant is signed by an employee, the employer must provide some clear additional benefit.").

Consideration can, of course, take many forms. See, e.g., Optos, Inc. v. Topcon Med. Sys., Inc., 777 F. Supp. 2d 217, 233 (D. Mass. 2011) (Casper, J.) ("access to confidential and proprietary information belonging to the company"); Alloy Media, LLC v. Landon, No. 11-4397-BLS, slip op. at 4, 9 (Mass. Super. Ct. April 24, 2012) (Roach, J.) ("Money is not the sine qua non of consideration."); Oxford Global Res., Inc. v. Consolo, 2002 WL 32130445, at *1 (Mass. Super. Ct. May 6, 2002) (Botsford, J.) (stock option agreement and continued employment). Indeed, consideration could be supplied simply by the employee's hiring on an at-will basis. See, e.g., Stone Legal Res. Group, Inc. v. Glebus, 2003 WL 914994, at *5 (Mass. Super. Ct. Dec. 16, 2002) (Burnes, J.).

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Ultimately, the courts will be asked to interpret the noncompete statute's consideration requirements.

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While there was never any real dispute that the start of employment provided the requisite consideration to support a noncompete, courts questioned whether the mere continuation of employment was alone sufficient consideration for a noncompete entered into after employment started.

By about 2009 to 2010, it became generally accepted that the prospect of continued employment was in fact sufficient. See, e.g., Inner-Tite Corp. v. Brozowski, 2010 WL 3038330, at *16 (April 14, 2010) (Kenton-Walker, J.); EMC Corp. v. Donatelli, 2009 WL 1663651 (Mass. Super. Ct. May 4, 2009) (Neel, J.).

Enter the new law:

"The noncompetition agreement shall be supported by a garden leave clause or other mutually-agreed upon consideration between the employer and the employee, provided that such consideration is specified in the noncompetition agreement. To constitute...