New England Biz Law Update
A software company could not enforce language in a former executive’s employment agreement that purported to extend the duration of an anti-raiding provision based on his alleged violation of a non-disparagement clause, a Massachusetts judge has decided.
Defendant Scott Wilson left his employer, plaintiff LogicManager, in August 2021 to go work for a non-competitor. His employment agreement had a provision stating that should he breach any of its restrictive covenants, all such covenants would be extended by a year.
When Wilson allegedly sought to recruit two LogicManager employees to join his new company after the one-year anti-raiding provision expired, LogicManager sued him for breach of contract and Chapter 93A violations.
In doing so, it sought to invoke the extension, claiming it was triggered by negative comments it claimed he posted or caused to be posted about the company on the Glassdoor website in violation of his non-disparagement agreement while the restrictions were still in force.
But Judge Michael D. Ricciuti disagreed, applying reasoning from a 2020 decision, Automile Holdings, LLC v. McGovern.
“Automile suggests that in the employment context, an extension of an otherwise agreed-to time frame for a restrictive covenant must be narrow in scope and carefully tailored to address the harm engendered by a violation,” Ricciuti wrote, dismissing LogicManager’s claims. “[The extension provision], however, is exceedingly broad. It contains no limit on the number of extensions that can be imposed. Further, it permits extension of a restrictive covenant even if it has not been violated for the entirety of the agreed-to one year term [in that it] states that any violation of any of the restrictions … justifies an extension of all of the provisions.”
Michael J. Lambert of Boston, who litigates restrictive covenant disputes. said the ruling is consistent with controlling case law requiring that restrictive covenants be interpreted narrowly.
“In this case, simple clarifying language in the agreement, such as tying the breach of a particular restriction to the extension of that specific restriction, may have led to an entirely different result,” he said.
Chuck Rodman, an employment lawyer in Newton, said the decision serves as a reminder that employers cannot expect broad, sweeping restrictive covenants and remedial extensions of such covenants to be enforced at the expense of a person’s ability to make a living.
“A court will side with an individual’s right to make a living even at the expense of purportedly reasonable restrictive covenants [that are] arguably necessary for the business’s protection,” he said.
