High court considers whether non‑solicit forfeiture is governed by Massachusetts Noncompetition Agreement Act

The Supreme Judicial Court heard argument in JC-13697 on whether an employee non‑solicitation clause coupled with a forfeiture of separation benefits is covered by the Massachusetts Noncompetition Agreement Act or remains governed by ordinary common‑law restrictions.

The question matters because the Act imposes procedural and substantive limits on certain noncompetition agreements (for example, notice and timing requirements) that do not, on their face, extend to covenants titled or framed as non‑solicitation agreements. If the court finds the forfeiture provision brings the agreement within the Act, the agreement could be subject to statutory restrictions and remedies; if not, the covenant would be evaluated under Massachusetts common law for restrictive covenants.

Don Mertnight, counsel for Foundation Medicine, told the court that “The Massachusetts Noncompetition Agreement Act was never intended to and, in fact, does not apply to employee non solicitation provisions such as the [one] at issue in this case.” Mertnight argued the statute expressly excludes employee non‑solicit provisions from the Act’s definition of a “noncompetition agreement,” and that exclusions mean the covenant should be judged under common‑law reasonableness principles (limited in scope, tailored to protect legitimate business interests, and consonant with public policy).

Jeffrey Rosen, arguing for the appellee identified in the transcript as Ms. Miele, countered that the transition agreement at issue contained a forfeiture‑for‑competition clause and that the manner in which the employer seeks to enforce the restriction (that is, by reclaiming money or accelerated compensation) brings the entire agreement within the Act. Rosen said: “The statute is very clear that covenants not to solicit are not included. Ms. Miele is challenging a different covenant. It is the covenant to forfeit money, which brings her within a different part of the statute.”

According to the record cited at argument, the employee originally signed a non‑solicitation clause in 2017 (before the Act’s effective date), and later affirmed that clause in a 2020 separation or transition agreement that was signed after the Act’s October 1, 2018 effective date. The covenant at issue barred the employee from soliciting or facilitating the hire of Foundation Medicine employees for one year; the separation arrangement at issue included roughly $1,500,000 in accelerated/separation payments and accelerated stock‑option vesting that the employer seeks to recover if the covenant was violated.

The parties and several justices discussed related doctrinal points the court developed in earlier decisions cited at argument — including Cheney, Pettingill, Cummings (Cummings Properties), Pierce, Kroger and Coolidge — which the parties said inform how the statute should be read with respect to “forfeiture for competition” clauses and the “manner of enforcement.” Rosen cited those precedents to argue the legislature used “forfeiture for competition” language with knowledge of the court’s prior decisions.

Justices pressed both sides on practical and doctrinal consequences. One justice asked whether the fact that the employee worked as an HR executive—whose job duties include recruiting—affects how the covenant should be viewed; the court also questioned whether a severability clause in the transition agreement (which states that unenforceable provisions do not void the entire agreement) undercuts the appellee’s position that the whole agreement is regulated because it contains a forfeiture clause. Mertnight acknowledged those are factual and common‑law questions that a trial court or jury would resolve if the appellate court rules that the Act does not apply.

If the high court reverses the superior court’s decision that the agreement falls within the statute, the matter would return to the trial court for further proceedings—potentially a jury determination on breach and damages; if the court affirms, statutory requirements and remedies would govern enforceability and any recovery the employer seeks.

The court heard argument but did not announce a decision at the hearing.