Enforcing noncompetition agreements and other restrictions on post-employment activities is always a challenge in Massachusetts courts. Among the various issues employers must consider before attempting to do so is one that is often overlooked – the question whether a valid and enforceable contract even exists.
The general rule has long been that older contracts are eviscerated by new ones covering the same subject matter. This is true in noncompetition situations as elsewhere and can become an issue when an employee is promoted or otherwise enters a new employment agreement. Unless a previously signed restrictive covenant is expressly referenced or restated in the new contract, it may be null and void. This principle was recently restated in a U.S. District Court case, where a 2005 noncompetition agreement was nullified by a 2012 employment contract.
Best practices in the noncompetition area demand diligence on this and related issues. Whether or not a new writing is created for an employee – remember, even oral contracts can be enforced in this area if real job changes occur – companies that may wish to enforce restrictive covenants against former employees should institute a regular review program. Each time an employee is promoted or gets substantive new duties, a new noncompetition form should be executed. The same makes sense after the simple passage of time, which can bring smaller, incremental changes that might threaten an employer’s ability to enforce older covenants.