Earlier this month, Judge Dennis J. Curran of the Massachusetts Superior Court decided that a noncompete clause in an employment agreement that had, by its terms, expired after the employee turned 65 could not be enforced even though the employee continued to work for the employer before moving to another company. The agreement explicitly stated that it terminated when the employee turned 65, and the noncompete clause in it stated that the employee could not compete with the employer within a 50 mile radius of the employer for two-and-a-half years “after the final termination of this Agreement.” So Judge Curran reasoned that the agreement ended when the employee turned 65, and the noncompete clause started to run at that point and ended when the employee was 67 and a half, even though the employee continued to work on an hourly basis for the employer for the next 14 years until he was 79. The employer could not enforce the noncompete clause because it expired 11 years ago.
But the employee did not get off scot free. Judge Curran concluded that the parties still had to go to trial on the employer’s claims that (1) the employee disclosed the employer’s confidential client list to his new employer; and (2) the employee derogated the good will of the employer, in violation of his implied promise not to do so when he sold his stock in the employer back to the employer when he turned 65. The idea behind (2) is that when a partner sells his interest in a company back to the company, that partner is effectively selling his business such that the company buyer is also receiving a promise from the partner seller that the partner will not steal his clients away from the company, because to do so would depreciate the client good will that the company bought from the partner.
So the lesson in this case is that employers should be careful when they draft employment agreements with noncompete clauses. If it is possible that an employee will remain working at an employer even after that employee’s employment agreement expires, then the employer should make sure that the employment agreement explicitly states that any noncompete clause starts to run when the employee’s employment, not just employment agreement, terminates.
Interesting that they still had to go to trial over this. Very good information. Thanks for sharing!