A recent Massachusetts case shed light on some practical aspects of enforcing and challenging a non-compete agreement. Businesses in the state seeking to enforce one of these provisions in their employment contract should take note.
Business Seeks to Enforce an Unenforceable Non-Compete
The case is Macaroco v. Vanity Lab, LLC. It is still in its early stages – the Bristol Superior Court has only just ruled on Vanity Lab's motion to dismiss – but some significant damage has already been done to the defendant's case.
The facts are straightforward. Vanity Lab hired Macaroco. Two months later, Macaroco had to sign a contract that included a non-solicitation agreement, a confidentiality or non-disclosure agreement, and a one-year non-compete agreement. Importantly, Vanity Lab never signed the agreement, and no additional consideration or garden leave clause was provided to Macaroco for her agreeing to them – just her continued employment, which is no longer sufficient.
For these numerous reasons, under the Massachusetts Noncompetition Agreement Act (M.G.L. c. 149, § 24L) the agreement would not be enforceable.
When Vanity Lab terminated Macaroco – apparently without cause, something else that would make the agreement unenforceable – she struck out on her own, providing the same services that she had provided to Vanity Lab. Within a week, Vanity Lab had sent her a cease and desist letter to enforce the unenforceable non-compete provision and, allegedly, contacted other parties interested in her services to inform them that she was subject to a non-compete clause.
Aggressive Move Exposes Business to Significant Liability
Macaroco took the offensive, filing a lawsuit and demanding a preliminary injunction to keep Vanity Lab from enforcing any of the restrictive covenants against her.
She also claimed that Vanity Lab's decision to reach out to third parties regarding the non-compete provision amounted to both trade libel and to tortious interference of a contract. Both of these allegations, if proven, would expose Vanity Lab to damages for the financial harm that its communications to others had caused.
But that was not it. Macaroco also filed a Chapter 93A complaint, arguing that the cease and desist letter was an unfair business practice because it was meant to intimidate her into closing her business and was knowingly based on an unenforceable contract. If proven, this allegation alone could subject Vanity Lab to treble damages.
When Vanity Lab filed a motion to dismiss these allegations, the Bristol County Superior Court denied it and let the case proceed.
Business Lawyers at the Katz Law Group on How to Enforce Non-Compete Agreements in Massachusetts
The case is an excellent example of how businesses who did not adequately prepare for problems yesterday can struggle to enforce their rights and pursue their interests both today and tomorrow. Businesses who do not properly draft non-compete clauses can find themselves powerless to prevent a former employee from becoming a current competitor. Businesses who try to resort to intimidation to make up for prior shortcomings run the risk of being called to task and facing significant legal liability.
The business and contract lawyers at the Katz Law Group serve businesses throughout Massachusetts, including in Middlesex County and Norfolk County as well as the cities of Worcester, Framingham, and Marlborough. Call them at (508) 480-8202 or contact them online.