As a general matter, courts and statutes tend to be more permissive of non-compete agreements in the context of the sale of a business. However, exactly how far does this permissiveness extend? Can companies and workers make their own definition of a business sale to make it more likely that a non-compete agreement will be enforced? A recent case in Massachusetts addressed this issue, cautioning employers against such moves.
Specifically, on June 8, 2022, a Massachusetts Superior Court issued a new decision interpreting the applicability of the Massachusetts Noncompetition Agreement Act (MNAA). In the case, Lighthouse Ins. Agency, Ltd. v. Lambert, the court concluded that an employer cannot circumvent the MNAA by entering into non-competition restriction in the context of the sale of a business by simply making an offer to purchase a current employee’s client relationships.
By way of background, the MNAA applies to all noncompetition agreements entered into after October 1, 2018 and provides that a non-compete entered into with a current employee will be valid and enforceable only if the employee is given notice of the agreement “at least ten business days before the agreement is to be effective,” and only if the agreement is “in writing and signed by both the employer and employee,” is “supported by fair and reasonable consideration independent from the continuation of employment,” and “expressly states that the employee has the right to consult with counsel prior to...
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