Author Archives: Jordan Scott

About Jordan Scott

Mr. Scott was a founding partner of the firm and currently serves as Of Counsel. His practice focuses on employment law, representing both employers and employees, and corporate law, representing businesses from start-ups through established companies.

Sports Bar Liable for Wrongful Death in Patron’s Fall Down Stairs

By on November 3, 2016

The Massachusetts Court of Appeals recently affirmed a lower court ruling that held a sports bar liable for the death of a patron who entered a door marked “Employees Only” and was subsequently killed falling down a flight of stairs, in Bernier, et al. v. Smitty’s Sports Pub, Inc. (MA Appeals Court 14-P-1967). The bar, Smitty’s Sports Pub, Inc. (“Smitty’s”), argued that the deceased, Roger Leger, was a trespasser and thus not subject to a negligence claim. The trial court disagreed.

On the night of the incident, Mr. Leger went to find the bar’s restroom. Three adjacent doors, marked “Gentlemen,” “Ladies,” and “Employees Only” were the same color and similarly marked. The “Employees Only” door opened into an unlit stairwell, with an over two-foot drop to the stairs, and while it was normally locked during business hours, the door was not locked on this particular night. Mr. Leger accidentally used the “Employees Only” door, fell down the stairs, and succumbed to injuries two weeks later.

Mr. Leger’s estate filed a wrongful death lawsuit against Smitty’s. Smitty’s argued that because Mr. Leger had no right to open a door marked “Employee’s Only” and enter the basement area, he was a trespasser and thus not entitled to a duty of reasonable care. The jury ultimately found that Smitty’s was negligent in maintaining the property, and that negligence caused Mr. Leger’s injuries (although the ultimate damage award was reduced by 20%, the amount of negligence the jury attached to Mr. Leger).

The crux of the matter here is that Mr. Luger was lawfully on the premises, and that he accidentally went through a door marked “Employees Only” does not make him a trespasser. Because he was lawfully on the premises, Smitty’s, like any landowner (especially those open to the general public), owed Mr. Luger a duty of care to act reasonably and maintain the property in a reasonably safe condition. At trial, Smitty’s had testified that the unlocked “Employee’s Only” door created a dangerous condition for anybody not knowing what lay on the other side, and that it was foreseeable that a patron may accidentally open that door, given its proximity and similarity in appearance to the restroom doors.

This case contains some important lessons for bar and restaurant owners, and the hospitality industry generally. All patrons are owed a duty of care that the establishment be reasonably free of hazards. Especially where alcohol is served, owners should expect that customers may wander around the premises and may not read every posted sign. Areas that are off-limits to customers should be very clearly noted, if not locked or otherwise physically inaccessible. Smitty’s ran into problems here because a door that should have been locked was not, and that door’s proximity to the restrooms, areas patrons are expected to go, was not reasonable given the hazard behind the door. All business owners should review the layout of their establishments and ensure that patrons may only access areas they are permitted to enter.

Due Diligence in Business Transactions

By on September 22, 2016

Business revolves around transactions. Most transactions occur in the ordinary course of business, such as selling products and services to clients. Some transactions are less common, but may fundamentally alter the business itself:  mergers and acquisitions. A merger is a combination of two or more companies, while an acquisition involves one company buying the stock or assets of one or more other companies. These transaction structures, along with related structures like share exchanges, can provide great opportunities for businesses to consolidate operations, shore up weaknesses, and open new lines of business. The businesses themselves, after agreeing to enter some sort of transaction, are usually eager to hit the ground running. However, the process known as “due diligence” is vitally important for the future of all parties.

Due diligence is the process of exchanging information, often non-public information, in order to understand as much of the other company as possible before consummating the transaction. Any competent transaction lawyer will request a variety of information, and businesses should be prepared to work with their attorneys (and often accountants and chief financial officers) to deliver the requested information and review the same. Although the specific diligence requests can vary from deal to deal, many aspects are similar, and preparing for the process can save all parties time and money. What are some common due diligence topics?

Entity Organization. Most businesses involved in a merger or acquisition are corporations or limited liability companies. Each of these companies is supposed to be properly formed and maintained in its home state, and it is necessary for transaction attorneys to verify that the business does in fact exist. While that may seem silly, for how can an operating business not really “exist,” the legal details do matter and can hold up the deal itself or any business financing. Any corporate clean-ups (such as a company not being in good standing with its home state) should be cleaned up before the transaction.

Authority. All entities are governed by a set of documents that list the individuals or businesses that have control over the company: for corporations, that includes the board of directors and the stockholders, and for limited liability companies, that includes the managers and members. It is very important to make sure that a sufficient number (based on the entity’s organizational documents) have formally authorized the transaction. If that does not happen, then the aggrieved owners may be able to unwind the transaction through a costly and complicated lawsuit.

Titles, Liens. A merger or acquisition is often planned because one company wants access to the products or property of another company. Thus, it is necessary to ensure that the company with the goods has complete ownership of the goods, meaning that they are not subject to a lien or something else that could prevent the acquiring company from actually taking possession of the goods it targeted.

Intellectual Property. Intellectual property is increasingly important in today’s world, and many businesses acquisitions occur merely to acquire patents or technology. Does the company fully own its intellectual property? Are there any outstanding licensing agreements that may affect the transaction? Depending on the deal structure, the brand or technologies of the acquired company may be central to the deal and these questions must be answered as early as possible.

Taxes. Everyone is familiar with the truism that there is no escaping basic tax obligations. Depending on the structure of the transaction, a business may be acquiring both the assets and the liabilities of the other business. The last thing anybody wants to see is a surprise tax bill (or worse, tax lien) because the acquired company failed to meet its IRS obligations.

Litigation. Litigation is a part of life for most businesses. However, litigation can be a costly endeavor that lasts for several years. It is necessary for companies to determine their potential litigation exposure: what lawsuits are ongoing, but also what lawsuits are threatened. Litigation may be of particular concern in the technology sector, as a patent infringement suit can bankrupt some companies. Some lawsuits are also employee based, from nonpayment of wages to discrimination cases. Knowing what is out there is vital to managing risk.

Real Estate. Many commercial leases contain a clause that states the lease cannot be assigned without the landlord’s consent. If the acquiring company intends to run the acquired company as-is, maintaining its current office or facility is important. A merger or acquisition often meets the definition of “assignment,” in a lease, and breaching a commercial lease may trigger substantial penalties. Landlords will often provide their consent, especially if the acquiring company will assume the full lease obligations, but none of that can happen if nobody takes the time to find and review the lease.

The foregoing list is by no means exhaustive, and is intended merely to illustrate some of the matters businesses should be prepared to consider when entering into a substantial transaction like a merger or acquisition. Minimizing and controlling risk is essential to business endeavors, and it is impossible to control what you do not know. Any Massachusetts business contemplating a merger or acquisition should consult with a qualified business transaction attorney to ensure that the business is properly protected.

Federal Judge Allows Tort Claims Over Rescinded Job Offer to Proceed

By on August 10, 2016

A federal court judge has allowed a plaintiff to proceed with claims against a Massachusetts company that rescinded a job offer shortly after the plaintiff left his prior job. The defendant, Loomis, Sayles & Co., is an international investment firm that had intended to launch a new hedge fund. Over a course of six months, the defendant recruited plaintiff Vishal Bhammer, then employed by a different financial services firm in Hong Kong, to join the new fund.

During the recruitment process, the defendant allegedly informed Mr. Bhammer that the new fund was an opportunity that warranted leaving his current job and relocating his family to Singapore. The defendant allegedly emphasized that the fund had an “appropriate and well-defined investment process, strategy, and philosophy.” Several of the defendant’s employees allegedly made similar statements to Mr. Bhammer via Skype video calls, conference calls and in-person meetings. In early June, 2015, the defendant allegedly told Mr. Bhammer that he should not delay in giving notice of his resignation to his current employer. Mr. Bhammer’s resignation became effective on July 5, 2015. On July 16, 2015, the defendant informed Mr. Bhammer that it had decided to abandon the new hedge fund, and thus Mr. Bhammer’s job no longer existed. The defendant allegedly told Mr. Bhammer that the fund was abandoned in part because the defendant did not approve of the Fund’s strategy and its odds of success were too low.

Mr. Bhammer filed suit on December 23, 2015, alleging three claims: misrepresentation (intentional and negligent), tortious nondisclosure, and tortious interference. Shortly thereafter, the defendant moved to dismiss all counts, and the Court denied the motion. The defendant moved to dismiss the misrepresentation claim on several grounds, including that the complaint did not meet the strict specificity requirements of the Federal Rules of Civil Procedure.  The Court disagreed, finding that the complaint contains several allegations that the defendant intended to move forward with the new fund, was committed to the fund, and that there was no reason Mr. Bhammer should delay in moving his family to Singapore. The defendant also argued that such statements are not actionable fact statements, but instead merely opinions. The Court acknowledged that the distinction between opinion and fact is “often blurry,” and that the overall circumstances must be evaluated to determine the true meaning of the language used. While the defendant’s representation of the fund’s investment strategy was “appropriate and well-defined” could be considered an opinion, those words imply that the defendant believed the strategy was appropriate and well-defined, implying that it was an opinion grounded in fact. The Court found that the facts alleged covered both intentional misrepresentation and negligent misrepresentation (the claims are similar but negligent misrepresentation requires a less demanding standard).

“Tortious nondisclosure,” perhaps the most interesting claim due to its rare appearance, is a tort arising out of a duty to disclose. It is distinct from misrepresentation in that it covers what a party does not say. The Court found that the facts alleged in the complaint represented, at a minimum, circumstances in which the defendant had a duty to disclosure matters necessary to prevent its partial statement of fact from being misleading. In other words, if Mr. Bhammer’s allegations are true, then the defendant had an obligation to disclose its true belief regarding the hedge fund.

The third claim, “tortious interference,” requires a plaintiff to prove that it had an advantageous relationship with a third party (including an employment relationship), the defendant knowingly induced a breaking of the relationship, the interference was improper in motive or means, and the plaintiff suffered harm. The parties here dispute whether the defendant’s conduct was must be directed at a third party, or whether conduct directed at the plaintiff is sufficient. All of the defendant’s conduct was directed at Mr. Bhammer, not at his then-current employer. The Court stated that recent Massachusetts cases do not require the defendant to have induced the employer to break the relationship. Put differently, preventing the plaintiff from performing its own end of the contract is apparently sufficient under Massachusetts law, and this claim was also allowed to proceed to the next stage of litigation.

One lesson from this case is that employers should recruit new employees with care, particularly when such employees are leaving current jobs for a new opportunity. As the Court noted, the distinction between fact and opinion is often blurrier than one might think, and thus employers must ensure that their recruiters and senior staff avoid over-promising. Concerned parties should contact a Massachusetts employment attorney to review the recruitment process.

Massachusetts Enacts Equal Pay Law

By on August 3, 2016

On August 1, 2016, Massachusetts governor Charlie Baker signed the equal pay law, a law that has been working through the legislature since 1998. The law takes effect on July 1, 2018.  The law bars discrimination on the basis of gender in the payment of wages, including benefits and other compensation, for “comparable work.”  The statute defines comparable work to mean work that requires substantially similar “skill, effort and responsibility” and is performed under similar working conditions. The law allows variation in wages based on:

  • seniority;
  • merit;
  • productivity as measured by quantity or quality of sales or production;
  • geographic location;
  • education, training, or experience reasonably related to the job; or
  • regular travel.

The law provides several direct remedies for violations with a three-year statute of limitations.  Aggrieved employees can bring a lawsuit on behalf of themselves and similar situated employees, and recover the amount of wages underpaid, as well as an additional amount of wages underpaid as liquidated damages (amounting to double damages), plus reasonable attorney’s fees.  Employers also face liability for retaliation under the law.

An employee’s previous wage or salary history may not be used as a defense, but the law does provide employers with one affirmative defense:  if, within the prior three years and before a lawsuit is brought, employers complete a good faith self-evaluation of its pay practices and demonstrate that reasonable progress has been made towards eliminating pay differentials based on gender, liability under this law can be avoided. Employers may design their own self-evaluations, if they are reasonable in detail and scope in light of the employer’s size.

Finally, this law makes illegal some common practices.  Employers may not bar employees from discussing their own wages or the wages of fellow employees.  Further, employers may not screen job applicants based on salary history or even ask about prior wages or salary history.  However, prospective employees may provide written authorization for a prospective employer to confirm prior wages, but only after the prospective employer makes an employment offer.

The attorney general is empowered to bring its own lawsuit based on equal pay violations and may issue regulations interpreting this law, which can include templates for employer self-evaluations.  Although gender discrimination has long been illegal in Massachusetts, this law provides employees with new avenues for relief and places additional restrictions on employers. Employers should consult with Massachusetts employment attorneys to confirm that hiring practices will comply with the law and to ensure that potential liability is limited through self-evaluations.

Defend Trade Secrets Act – Employment Implications

By on June 2, 2016

President Obama recently signed the Defend Trade Secrets Act (“DTSA”), which provides a federal private right of action for the misappropriation of trade secrets. Previously, trade secret claims were handled only at the state level. The DTSA does not preempt state law, but instead provides another avenue for recovery. Trade secret owners may pursue federal claims including property seizure (to prevent dissemination of trade secrets), injunctive relief, and damages for actual loss and unjust enrichment. Property seizure is not lightly granted, and the DTSA provides a detailed framework for when and how property may be seized. Further, if the trade secret is willfully and maliciously misappropriated, courts may award double damages and attorney’s fees.

In the employment context, employees are immune from liability under the DTSA (and arguably state laws as well given the DTSA’s specific wording) for disclosing trade secrets that are made in confidence to a government official or attorney for the purpose of reporting or investigating a violation of law. Employees are permitted to use trade secret information in a lawsuit alleging retaliation by an employer for reporting a trade secret violation, as long as any court document containing trade secrets is filed under seal.

Although the DTSA provides a powerful cause of action for employers, the DTSA also contains some employee protections. Employers must now provide notice to employees of the immunities contained in the DTSA in agreements with employees (such as nondisclosure agreements), which may be handled by including a cross-reference to a company policy containing notice of the immunity. Failure to provide such notice prevents employers from receiving multiple damages or attorney’s fees under the DTSA. While injunctions are available under the DTSA, any injunction may prevent actual or threatened misappropriation but must not prevent the employee from entering into an employment relationship or conflict with state laws concerning the restraint of trade.

In sum, employers may now bring a civil action against employees who misappropriate trade secrets that can lead to damages and injunctive relief including seizure. However, to receive the full benefits of the DTSA, employers must update their nondisclosure and similar agreements to inform employees of the immunities available under the DTSA.  The DTSA’s effect on the technology, biotechnology and pharmaceutical industries almost certainly will be far-reaching.  As a result, the DTSA is of particular importance to businesses in greater Boston, Cambridge and other emerging technical hubs in Masshachusetts and throughout New England.  Both employers and employees should contact a Massachusetts employment attorney to update their agreements and confirm their duties.

An Overview of Massachusetts Non-Solicitation Agreements

By on May 18, 2016

Non-competition agreements (“non-competes”) often contain clauses referred to as “non-solicitations.” These provisions are sometimes viewed as synonymous to a non-competition clause but there are important distinctions between the two. Massachusetts courts use a similar analysis on the two types of provisions, non-solicitation provisions serve a different function. The usual purpose of a non-solicitation is to prevent a former employee from stealing clients, prospective clients or other employees from their former employer.  As such a non-solicitation contrasts with a non-compete which ordinarily intends to bar a former employee from directly competing with the former employer in subsequent employment.

The basic non-solicitation clause is simple, usually stating that the employee agrees not to solicit certain categories of individuals for some period of time.  As with non-competes, non-solicitations will be enforced when they are supported by valid consideration and are generally reasonable to protect a legitimate business interest.  Protecting employer good will towards employees and/or customers qualifies as a legitimate business interest. Businesses have an interest in protecting the customer relationships developed by employees during employment, which also relates to an employer’s legitimate interest in protecting customer good will.  While non-competes require a narrowly tailored provision to be enforceable, Massachusetts courts will often enforce non-solicitations for longer periods than non-competes, as a non-solicitation is less of a burden on an employee who is still otherwise able to work. 

Standard non-solicitation language is relatively straightforward.  It can be surprisingly difficult, however, to determine when a solicitation has occurred, and Massachusetts courts have not yet worked out all of the details.   For instance, if a former employee subject to a non-solicitation is directly contacted by a client of the former employer, has the employee breached the non-solicitation merely by receiving the business? As with many legal questions, the short answer is that it depends.

Massachusetts courts have observed that the line between solicitation and acceptance of business is a hazy one. Thus far, the courts have not drawn a bright line legal distinction between circumstances when the client makes first contact with the former employee, and when the employee makes first contact with the client. Instead, courts look to the facts of the case to determine whether the former employee made an improper solicitation. Further complicating the analysis, while a former employee may be barred from soliciting, the employee’s new employer is under no such restriction and neither are the customers in question because those parties are not subject to the non-solicitation agreement entered into by the employee and former employer.  Nevertheless, the employee and new employer should tread carefully to ensure that the employee and new employer’s actions do not yield other causes of action for the aggrieved former employer, such as an unfair business practice claim for behavior that may not strictly run afoul of the non-solicitation provision.

Judicial analysis of non-solicitations recognizes that the context of the particular industry is important. When the individual subject to a non-solicitation is selling fungible, off-the-shelf goods, initial contact with prohibited parties is likely quite important, as there is probably little to differentiate the sellers.  Where a complex transaction is involved and products are highly customized, prohibited contact may be less important to securing a sale. Further distinction can be drawn between an overt direct solicitation, and a more subtle indirect solicitation. Directly inviting an employee or customer to engage with a new company would clearly breach a non-solicitation, but more subtle “nudge-nudge wink-wink” approaches can be equally damaging.   The courts will look at the overall context of the business relationship and the agreement at issue to resolve whether particular conduct breaches the non-solicitation agreement.  Given the fact specific nature of the inquiry, it can be a difficult question to determine in any particular instance whether contact with a client is prohibited by the non-solicitation.  

Non-solicitation agreements are another powerful tool for employers to protect legitimate business interests.  Like non-competes, non-solicitations must be drafted and implemented carefully to be enforceable and useful. Massachusetts courts will engage in a fact-intensive analysis to determine whether a non-solicitation is valid and under what circumstances the provision has been breached. Both employers and employees should consult with an experienced Massachusetts employment attorney to determine their rights and obligations with respect to any particular non-solicitation provision.

Copying Employer Data Ruled Not a Material Breach of Employment Contract

By on March 29, 2016

A recent Massachusetts Supreme Judicial Court case, EventMonitor, Inc. v. Anthony Leness, narrowly interpreted a common employment contract provision. Leness was an executive at EventMonitor. The parties signed an employment agreement, which provided the manner in which EventMonitor could terminate Leness’s employment. The agreement provided a  for-cause termination provision, permitting termination if Leness engaged in fraud or “defalcation” (misappropriation) of EventMonitor’s funds or other assets. The employment agreement also included a nondisclosure provision, requiring Leness to avoid disclosure of any of EventMonitor’s proprietary information and to return all such information if his employment terminated.

After six years of employment, the relationship between Leness and EventMonitor soured, and EventMonitor terminated Leness without cause. Shortly thereafter, EventMonitor learned that Leness had bought a one-year subscription to an on-line data storage service, and used this service to copy all of EventMonitor’s files that were on the computer. These files included proprietary information. After learning that Leness copied such information, EventMonitor retroactively changed Leness’s termination to be “for cause,” which allowed EventMonitor to suspend severance payments owed to Leness.

EventMonitor sued Leness for breach of contract, and Leness asserted several counterclaims, arguing that EventMonitor had no valid reason to consider Leness’s termination “for cause” and cease making severance payments. After a bench trial, the judge found that Leness had not materially breached the employment contract, and thus could not have been fired for cause. The judge found for EventMonitor on other counts, and both parties appealed.

The Supreme Judicial Court upheld the ruling. The court explained that a contract breach is a material breach when it involves “an essential and inducing feature of the contract.” Although Leness’s copying and failure to return EventMonitor’s proprietary information was a breach of the employment contract, the breach was not material because there was no evidence that Leness used the proprietary information for any purpose or disclosed the information to anyone. The court accepted the trial judge’s finding that the essential purpose of the relevant section of the employment contract was to protect the confidentiality of EventMonitor’s proprietary information, and as there was no evidence that EventMonitor’s information was disclosed to any third parties, Leness’s contract breaches were not material.

This ruling may be surprising to some observers because Massachusetts courts are ordinarily very protective of a business’s confidential information, and there was no dispute that Leness retained copies of such information. However, the plain language of Leness’s employment contract indicated that EventMonitor wanted to prevent the disclosure of such information. Because such information was not actually disclosed, EventMonitor’s interests, as stated in its contract, were protected. This ruling is instructive for employers.  Employment contracts should expressly state that the return of all company information is considered a material part of the agreement, and further that any severance packages are conditioned on not only the nondisclosure of proprietary information, but also on its full return, in order to ensure their enforceability. Concerned companies should contact a Massachusetts employment lawyer for a review of their contracts.

Summary Judgment Considerations in Discrimination Cases

By on March 11, 2016

Massachusetts law prohibits employment discrimination based on race, among other things. It is often difficult for plaintiffs to produce direct evidence of discrimination (i.e., the “smoking gun”), so Massachusetts law allows plaintiffs to prove discriminatory intent by producing evidence showing an employer’s adverse employment decision was merely a pretext. In a very recent opinion, Bulwer v. Mount Auburn Hospital et al., the Massachusetts Supreme Judicial Court clarified the burdens of proof faced by each party after a motion for summary judgment. A summary judgment motion is granted when the moving party shows there is no genuine issue of disputed fact, and thus the moving party is entitled to a judgment as a matter of law, avoiding the need for a trial.

The plaintiff in Bulwer is a black man of African descent, pursuing a license to practice medicine. Mr. Bulwer earned a medical degree abroad, and to practice medicine in the United States he needed to complete a residency program that he began at Mount Auburn Hospital. During Mr. Bulwer’s first year of residency, he received several opposing reviews, some deeply critical and others quite favorable. After receiving such reviews, Mount Auburn Hospital terminated his employment, and he filed suit thereafter, alleging, among other things, employment discrimination. After discovery, the defendants moved for summary judgment. The Superior Court judge allowed the motion.

Per the seminal 1973 Supreme Court decision, McDonnell Douglas Corp. v. Green, Massachusetts courts employ a three-stage, burden-shifting paradigm:

“In the first stage [of this paradigm], the plaintiff has the burden to show. . . a prima facie case of discrimination.  To do so, a plaintiff must provide “evidence that: (1) he [or she] is a member of a class protected by G. L. c. 151B; (2) he [or she] performed his [or her] job at an acceptable level; [and] (3) he [or she] was terminated.” “In the second stage, the employer can rebut the presumption created by the prima facie case by articulating a legitimate, nondiscriminatory reason for its [employment] decision.” In the third stage, the burden of production shifts back to the plaintiff employee, requiring the employee to provide evidence that “the employer’s articulated justification [for the termination] is not true but a pretext.”” (citations and footnotes omitted).

Here, the defendants argued that at the third stage of inquiry, the plaintiff had to present evidence that the defendant’s reasons for termination constituted a pretext hiding a discriminatory purpose. The Court disagreed, finding that Massachusetts law does not require so great a burden at this stage, which would be akin to requiring the plaintiff to produce direct evidence of discriminatory animus. To survive a summary judgment motion, the plaintiff must present evidence from which a reasonable jury could infer that the defendants’ stated reasons for its action were not the real reasons. If the plaintiff can do so, the case should proceed to trial, at which time a jury can decide if a defendant’s reason for an action is false, and if so, if that falsity is in fact hiding a discriminatory motive. Here, Mr. Bulwer produced “five categories” of evidence from which a jury might infer that the defendants’ stated reasons for terminating the plaintiff’s employment were a pretext. That was sufficient, as the purpose of a summary judgment motion is neither resolving issues of material fact nor weighing the credibility of the evidence.

This is an important clarification. If the defendants’ argument carried the day, plaintiffs would have greater difficulty even getting to a trial, given the scarcity of direct evidence in these sorts of cases. The court went on to remind the litigants that at the summary judgment phase, the burden of persuasion rests with the moving party, in this case the defendants. The plaintiff has an obligation to produce evidence, and ultimately bears the burden of persuasion at trial. However, summary judgment is not trial. Summary judgment is an important tool in litigation, but in preparing to file such a motion, parties must be cognizant of each party’s obligations. Competent Massachusetts employment lawyers can evaluate the evidence to determine if summary judgment is appropriate.

Massachusetts Noncompetition Agreements: Consideration

By on March 1, 2016

We have discussed the basics of non-competition agreements (“non-competes”) in Massachusetts, particularly the need to have reasonable restrictions supporting a “legitimate business interest.” Non-competes often include additional restrictions, such as non-solicitation and nondisclosure clauses. Beyond that, non-competes usually contain several provisions commonly found in legal documents. This post is the first in a series covering terms commonly found in non-competes.


Every contract must include “consideration,” and non-competes are no exception. “Consideration” is the benefit that each side receives from a contract. Without valid consideration for each party to a contract, the contract will not be enforceable. In the employment context, it is very common for employers to have employees sign non-competes when they are hired. In Massachusetts, a job offer is valid consideration for an employee entering a non-compete agreement: the employee receives a job offer, while the employer receives the employee’s willingness to agree not to compete with the employer. Thus, employers are wise to have employees sign any restrictive contracts when the employee is hired.

However, sometimes non-competes are not signed when the employee is hired. If employment has already begun, an employer has two options. One option is use “continued employment” as consideration. The Massachusetts Appeals Court has held that continued employment is valid consideration (Wilkinson v. QCC, Inc., 53 Mass. App. Ct. 1109 (2001)), which is consistent with other jurisdictions, but the Supreme Judicial Court has not addressed the issue. For any employers concerned that a future court may find continued employment to be insufficient (and to oppose an employee’s argument that the agreement was only signed under duress), employers should consider offering additional consideration: a raise, a promotion, a bonus, more vacation time, and the like, along with continued employment.   

Although consideration often seems like an obvious part of any contract, it is vitally important. Any effective litigator will pick apart a contract to argue that adequate consideration was not provided, rendering the contract unenforceable. Consideration should be specifically discussed in the contract and actually provided to the employee (in other words, do not promise what you cannot deliver).

Material Change

While a job offer is valid consideration, if the employee’s job substantially changes, the non-compete may not be valid. This is based on a legal concept called “material change.” The argument is that if the employee’s new job is so different from the job that they were hired to do (and the job that served as consideration to sign the non-compete), consideration is no longer present and thus the non-compete is unenforceable. Massachusetts courts are divided on the issue, with some holding that only a reduction in the employee’s pay is a sufficient change to void the non-compete. Other courts have found that if an employee is promoted and given new responsibilities, a non-compete signed when first employed is likely unenforceable. As is often the case, the enforceability of a non-compete can be a fact-intensive endeavor. Both employers and employees should consult with an experienced Massachusetts employment attorney to determine their rights and options.

Protecting Confidential Business Information

By on January 19, 2016

While the Massachusetts legislature continues to debate whether to ban “non-competition agreements,” support for the protection of trade secrets and confidential information remains strong. Although the Commonwealth has not adopted a version of the Uniform Trade Secrets Act, Massachusetts protects trade secrets in several overlapping ways: state law provides that the theft of a trade secret can lead to double damages for the aggrieved party; the Massachusetts Consumer Protection Act allows for the recovery of double or triple damages and attorney’s fees for misappropriating trade secrets; courts will enforce contracts requiring employees to maintain the confidentiality of secret information learned on the job; and courts will grant injunctions barring the improper use of confidential information in certain circumstances. However, just because a business states that information is confidential does not mean that a court will agree. Massachusetts uses a six-factor test to determine whether information is confidential:

(1) the extent to which the information is known outside of the business;

(2) the extent to which it is known by employees and others involved in the business;

(3) the extent of measures taken by the employer to guard the secrecy of the information;

(4) the value of the information to the employer and to his competitors;

(5) the amount of effort or money expended by the employer in developing the information; and

(6) the ease or difficulty with which the information could be properly acquired or duplicated by others.

Examples of trade secrets can include manufacturing processes, price lists, financial information, sales strategies, and product development plans. The six-factor test emphasizes that the information has to be a secret, and the business had to make a genuine effort to maintain its secrecy. The business does not ordinarily need to employ heroic measure to maintain secrecy, using armed guards and bank vaults. While appropriate efforts to maintain secrecy are a fact-based determination, businesses will often use non-disclosure agreements signed by employees, limit the internal disclosure of information to an as-needed basis, and ensure that no information is made publicly available (such as via the business’s website).

Businesses concerned about preserving information secrecy, or aware of a confidentiality breach, should contact a Massachusetts business attorney to ensure their interests are protected.