Non-solicitation agreements not covered by noncompete law

In a closely watched decision, the Massachusetts Supreme Judicial Court confirmed that non-solicitation agreements are not governed by the Massachusetts Noncompetition Agreement Act (MNAA) – even when they include a forfeiture provision.

The ruling is a win for employers seeking to enforce restrictive covenants without triggering the MNAA’s stricter requirements.

Case snapshot

When the plaintiff joined Foundation Medicine (FMI) in 2017, she signed a restrictive covenant agreement as a condition of employment.

The agreement contained a non-solicitation clause barring her from recruiting FMI employees for one year after leaving the company.

Upon her departure in 2020, she entered into a transition agreement with a forfeiture clause: if she violated the transition agreement or the restrictive covenant terms, she’d forfeit over $1 million in benefits.

After the plaintiff joined another company, FMI claimed she solicited their employees. They halted payments and demanded the return of previously paid benefits.

The plaintiff challenged FMI’s actions, arguing the forfeiture clause made the agreement subject to and unenforceable under the MNAA. A lower court partially agreed.

Supreme Judicial Court ruling

The Supreme Judicial Court reversed the lower court’s decision, clarifying that the MNAA does not apply to non-solicitation agreements simply because they contain forfeiture clauses. The court emphasized that “forfeiture for competition agreements” are specific to non-competition, not non-solicitation.

Why it matters

This decision reinforces that non-solicitation clauses are distinct from non-competes and don’t trigger the MNAA’s limitations. Employers have more flexibility when crafting and enforcing these provisions.

Employers are advised to review their policies and training procedures as follows:

1. Separate the concepts: Clearly distinguish non-solicitation agreements from non-competes in all employment documents.
2. Train up: Make sure HR and hiring managers understand the legal differences and enforcement standards.
3. Follow MNAA rules where required: If using a non-compete, ensure it meets MNAA requirements, including garden leave or other valid consideration.
4. Stay current: Review agreements regularly with counsel to stay aligned with the latest rulings and enforcement trends.

The bottom line is that Massachusetts employers can continue to rely on non-solicitation agreements without navigating the MNAA’s non-compete restrictions, as long as they draft them carefully.