I’ve often written about how easy it can be for an employer to lose the ability to enforce an employee noncompete provision. In recent years the courts have come down hard on employers who materially change an employee’s job responsibilities but fail to require the employee to enter into a new contract, holding in many cases that a noncompete provision in the old contract does not survive the job change. (For example, see Rent-A-PC Fails to Enforce Restrictive Covenants Against Former Employees).
However, there is an even more fundamental mistake employers can make, as illustrated in the decision in Meschino v. Frazier Industrial Co. (D. Mass. November 18, 2015). In this case the employee entered into an agreement in 2005 which contained a covenant not to compete and a confidentiality provision. The employee then signed a new employment agreement in 2012, but the 2012 agreement did not include these terms or refer back to the 2005 agreement. As the court noted, the 2012 agreement “states on its face that it contains ‘the terms of [the employee’s] employment’ without any reservation or reference to any other document or agreement.”
That, so far as Massachusetts Federal District Court Judge Stearns was concerned, was the end of the matter. The employer may have intended to preserve the 2005 noncompete provision in the 2012 contract (as it claimed), but the 2012 agreement contained not even the hint of such an intention.
Employers and employees have a lot at stake when it comes to noncompete and confidentiality agreements, and failing to consult a qualified lawyer to make sure that these terms remain in effect (or, in the case of an employee, to know when they may not be enforceable) can be a costly mistake, as Frazier learned in this case.