Yet another Massachusetts Superior Court judge has issued a decision addressing whether a change in an employee’s job precluded enforcement of a previously-signed noncompete. (See here and here for previous discussions of this issue.) In an order issued last March (but only recently made public by Massachusetts Lawyers Weekly (login required), Superior Court Judge E. Susan Garsh rejected the “material change” arguments made by the defendant sales employees and issued a preliminary injunction enforcing their non-competition restrictions. The judge’s order, in Sentient Jet LLC v. Mackenzie et al., was issued from the bench during a hearing; no written decision has been issued.
In the Sentient Jet case, the defendant sales employees asserted that changes in their jobs after they signed their noncompetes, including implementation of a more generous compensation plan and promotions for two of them, undermined enforcement of their noncompetes based on the "material doctrine" recognized in previous decisions. In her ruling, Judge Garsh specifically distinguished the facts before her from Judge Lauriat’s decision earlier this year in Grace Hunt IT Solutions, LLC v. SIS Software, LLC, which my colleague Brian Bialas discussed here. Specifically, Judge Garsh made two findings that she believed undercut the defendants’ arguments that material changes in their jobs voided their noncompetes. First, she stated that there was no evidence that the employer ever acted in a way that suggested that there was a new set of terms of employment that required new agreements: “[t]here’s no evidence that any of these people were asked for a second time to sign a covenant not to compete.” Second, she stated that “none of them suffered a loss of income.” She therefore found the situation distinguishable from a situation – as in the Grace Hunt case – “where a covenant not to compete is sought to be enforced after dropping someone’s . . . base salary by twenty percent and making it unlikely they’d ever be able to make it up.” She also rejected as speculative the defendants’ concerns that the company was going to be acquired and that their jobs would change as a result.
Based on Judge Garsh’s conception of the material change defense, it appears that there has to be evidence of a material detriment experienced by the employee, possibly coupled with some evidence that the employer itself regarded the change as necessitating a new agreement. Whether both of these circumstances need to present is unclear.
This is an issue of Massachusetts noncompete law particularly ripe for clarification by an appellate court. Unfortunately, appellate decisions in this area are few and far between.