Job Changes and Restrictive Covenants

A Company hires an employee and has a well-drafted, enforceable written agreement containing confidentiality provisions, non-solicitation clauses, and non-compete obligations (so-called “Restrictive Covenants”). The employee stays with the Company for years, receives various promotions and then decides to leave and go to a competitor. The Company is disappointed but comforted by the written employment contract containing those Restrictive Covenants. Or so it thought. It turns out that the Company overlooked the law in Massachusetts that if an employee’s employment status “changes materially,” there is a substantial risk that those Restrictive Covenants are no longer enforceable. Instead, Massachusetts law requires that new Restrictive Covenants must be signed when certain material changes occur such as a promotion to a new position, a significant pay raise, or assignment of additional job responsibilities. The takeaway: employers should review existing agreements on an annual basis to determine whether the employee’s status has changed sufficiently to warrant the re-signing of any agreement containing restrictive Covenants.


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