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Massachusetts Federal Court Reaffirms That Continued Employment Constitutes Sufficient Consideration for Non-Compete

Calendar-ThinkstockPhotos-113517060In American Well Corporation v. Obourn, Civil No. 15-12265-LTS, 2015 WL 7737328 (D. Mass. Dec. 1, 2015), Judge Sorokin of the United States District Court for the District of Massachusetts upheld a non-compete entered into seven months after the employee’s start date. The Court explained that as to whether continued employment constitutes sufficient consideration for a non-compete:

“[T]he SJC has squarely addressed this question. Decades ago, it held that a non-competition agreement signed during employment was not void for lack of consideration because it contained a promise by the plaintiff thereafter to employ the defendant and by the defendant to work for the plaintiff.”

However, even though this summary of the case law seems clear, the court felt compelled to offer further justification for upholding the non-compete. For example, Judge Sorokin emphasized that the procedural posture was on a motion to dismiss, indicating that perhaps on an employer’s motion for preliminary injunction, the outcome might be different. Judge Sorokin also noted that Obourn received consideration not only in the form of continued employment, but also confidential company information.

As prior posts have discussed, a number of states have recently weighed in on continued employment as consideration for a non-compete. Although Massachusetts courts more often than not express concerns with continued employment, Massachusetts law remains that it constitutes sufficient consideration. Even so, employers should continue to put emphasis on other forms of consideration—including access to confidential information.

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In the rapidly changing business world, protecting a company's human capital and proprietary information is critical to maintaining a competitive edge. On this blog, Nutter's experienced Business Litigation and Labor, Employment & Benefits attorneys offer news and insights on all aspects of restrictive covenants and trade secrets—from analyzing a rapidly evolving body of case law, to summarizing new legislation and legislative efforts, to providing other need-to-know updates and more.

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