Employment Law: July 2015 Archives

Avoiding Some of the Uncertainty of Non-Compete Agreements: Fiduciary Duties of Minority Shareholders as a Basis For Enforcing Non-Compete Agreements

Evaluating the enforceability of a non-compete agreement under Massachusetts law involves an inherent degree of uncertainty. This is because courts use subjective standards to determine whether to enforce a non-compete agreement based on whether it is: (1) reasonable in scope, length of time, and geographic area; (2) protective of a legitimate interest of the employer; and (3) supported by adequate consideration. Thus, enforceability depends on the facts of a particular case. Employers can increase the likelihood that a non-compete agreement will be enforced as written by tailoring non-compete agreements based on the guidance of past court decisions. To that end, non-compete agreements should be limited to a duration of no more than 1-2 years. The geographic scope of a non-compete agreement should be limited to the area actually served by the employer or where the employer has specific plans to expand. Non-compete agreements should also be presented to employees before hiring. If the employee is already employed, employers should include some form of additional consideration, such as a raise or one time payment, for added certainty that a non-compete agreement will be enforced as written.

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