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Recent Federal Court Decision Addresses Massachusetts Non-Compete Act

Friday, November 12, 2021
Recent Federal Court Decision Addresses Massachusetts Non-Compete Act

By Hannah Schindler Spinelli and Scott M. Zanolli

The 2018 enactment of the Massachusetts Noncompetition Agreement Act, G.L. c. 149, § 24L (the “Act”), changed the Massachusetts noncompete landscape by setting forth certain specific minimum conditions which must be included in any noncompete agreement in order for the agreement to be deemed valid and enforceable. One such requirement mandates that every noncompete agreement be supported by a “garden leave clause or other mutually-agreed upon consideration between the employer and the employee, provided that such consideration is specified in the noncompetition agreement.”

The Act defines “garden leave” as post-separation compensation paid to the former employee on a pro rata basis in the amount of fifty (50%) percent of the former employee’s highest annualized base salary over the 2 years preceding the employee’s termination. The Act requires “garden leave” payments to continue for the entire duration of the restricted period set forth in the noncompete agreement.

Many Massachusetts employers are simply not positioned to provide post-termination pay to their former employees. Thus, many employers choose to seek shelter in the portion of the Act that allows them to come to terms with their employees on “other mutually-agreed upon consideration” to support their proposed noncompetition agreements. However, Massachusetts Courts have yet to interpret the meaning of “other mutually-agreed upon consideration,” and employers have been largely left to guess as to what may constitute sufficient consideration to satisfy this portion of the Act.

A recent decision from the U.S. District Court for the District of Massachusetts shed new light on what may not qualify as “other mutually-agreed upon consideration” sufficient to satisfy the “garden leave” clause of the Act. In KPM Analytics North America Corporation v. Blue Sun Scientific, LLC, et al., 2021 U.S. Dist. LEXIS 132167, *96-97 (D. Mass. 2021), the Court held that a noncompetition agreement which did not contain a “garden leave” clause or specifically articulate the “other mutually-agreed upon consideration between the employer and employee” violated the Act and was not legally binding on the employee. The implication of this decision is that the employment relationship on its own does not constitute sufficient “mutually-agreed upon consideration” to establish an enforceable noncompete agreement under the Act.

While the Federal Court’s decision is not binding on state courts, it holds persuasive authority and provides some insight on how Massachusetts courts may approach this issue in the future. It will take Massachusetts courts time to outline the minimum boundaries of what may constitute “other mutually agreed-upon consideration,” but employers are on notice that it must be more than employment and should be stated clearly in the agreement.

A noncompete agreement is merely one of a variety of restrictive covenants that an employer may use to protect its business interests. Non-solicitation clauses, forfeiture clauses, and, in the medical and dental context, agreements not to treat, are examples of other types of restrictive covenants that employers may enlist which do not fall under the strict new guidelines of the Act. Employers should consult with legal counsel to discuss the best ways to utilize these tools within the context of their specific business and industry.

Pierce & Mandell, P.C.’s experienced employment and health law attorneys routinely assist clients with drafting and negotiating restrictive covenants and represent both employers and employees in litigation concerning noncompete agreements or other restrictive covenants post-termination.

If you have any questions about how this developing area of law impacts your business or employment relationship, please contact Bill Mandell, Esq. at bill@piercemandell.com, Hannah Schindler Spinelli, Esq. at hannah@piercemandell.com, or Scott Zanolli, Esq. at scott@piercemandell.com for more information.

Bill Mandell Serves on the Faculty of the Annual MCLE Hospital & Health Law Conference

Monday, November 01, 2021
Bill Mandell Serves on the Faculty of the Annual MCLE Hospital & Health Law Conference

Pierce & Mandell, P.C. Health Law Practice Area Leader, Bill Mandell, once again served on the faculty of MCLE’s Annual Hospital & Health Law Conference on October 22, 2021. He was the co-presenter on Representing Physician & Other Health Care Providers. Bill has served on the faculty of the annual conference on Massachusetts health law every year since 2003. The presentation can be access at https://www.mcle.org/product/catalog/code/2220201WVD.

Bill is also the co-author of the Chapter on "Representing Physicians and Other Practitioners” in the accompanying MCLE publication, Massachusetts Health and Hospital Law Manual, 2020 updated edition.

This publication can be found at https://www.mcle.org/product/catalog/code/2050182B00.

When is an Employer Liable for its Employee’s Conduct?

Monday, November 01, 2021

By: Mollie R. Sullivan

Pierce & Mandell’s - Mollie R. Sullivan

Respondeat Superior, a Latin phrase which directly translates to “let the master answer,” refers to the theory that an employer should be held liable for its employee’s conduct. This theory is important in personal injury actions because bringing claims against a tortfeasor’s employer allows for recovery from additional insurance coverage, with typically larger policies. Thus, a plaintiff will want to bring such claims against an employer when possible.

But when is an employer liable for its employee’s conduct? Under the doctrine of vicarious liability, an employer is liable for the torts of its employees committed within the scope of employment. Dias v. Brigham Med. Assoc., Inc., 438 Mass. 317, 319-320 (2002). In Massachusetts, the conduct of an agent or employee is within the scope of employment if: 1) it is of the kind he is employed to perform; 2) it occurs substantially within the authorized time and space limits; and, 3) it is motivated, at least in part, by a purpose to serve the employer. Wang Laboratories, Inc. v. Business Incentives, Inc., 398 Mass. 854, 859-860 (1986).

The third factor, whether the employee’s conduct is motivated by a purpose to serve its employer, is typically the most contested factor of the scope of employment inquiry. A recent Massachusetts decision from the Supreme Judicial Court examined whether a police officer was acting within the scope of his employment when the officer struck and injured a fellow officer with his personal vehicle during a paid lunch break from a mandatory firearms training program. Russell Berry vs. Commerce Insurance Company, Supreme Judicial Court, No. SJC-13089, slip op. (Oct. 25, 2021).

In that case, the SJC’s determination that the tortfeasor officer was not acting within the scope of his employment turned on the question of whether the officer’s conduct was motivated, at least in part, to serve his employer. Id. at *13. Ultimately, the SJC determined that the officer’s unsafe driving (he admitted that he was driving too fast prior to striking the victim officer) did not fall within the scope of his employment because the egregious nature of the officer’s misconduct had no employment-based purpose and did not further the interests of his employer, the town. Id. However, this can be contrasted by other cases in which the SJC held that an employee’s tortious conduct was performed at least in part, to further his employer’s interests. See Orasz v. Colonial Tavern, Inc., 362 Mass. 881 (1972) (assault on patron by employee was committed “to maintain order and decorum,” which ultimately was “for the purpose of accomplishing the work of the defendant” employer); Suckney v. Bert P. Williams, Inc., 355 Mass. 62, 64 (1968) (battery was in response to event which interfered with employee’s ability to perform work for employer).

Determining whether an employee is acting within the scope of employment at the time of his tortious conduct is typically a fact-intensive inquiry. Pierce & Mandell’s experienced litigation attorneys can assist in both the prosecution and defense of such claims.

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