Covenant Not-to-Compete in Massachusetts

Massachusetts court has long limited an employer’s right to restrict a former employee from competing against the employer. Court only enforces such a restriction if employer can show “legitimate business interest” to protect itself from unfair competition by the former employee. Employer’s legitimate business interest has to be balanced against employee’s right and freedom to obtain employment in order to make a living.

An employer’s “legitimate business interest” falls into three general categories: (1) trade secrets; (2) confidential business information; and (3) goodwill. It shall be noted that free from ordinary business competition in the industry is not itself a legitimate business interest. I see the covenant more often with high level staff or senior executives rather than regular or lower level employees.

In addition to protect reasonable and legitimate business purpose, the not-to-compete term also needs to be reasonable in scope, time and geographic scope. The reasonableness is defined by case law. A lot of factors are used to assess the situation, such as, nature and financial position of the employer, employee’s job description, employee’s ability and need to make a livelihood.

Employer shall also enter into such a covenant with the employee at the outset of their relationship. It could become problematic when employer rushes to strike such a deal with the employee at the time of employee’s departure.