Massachusetts Non-Compete Choice of Law

The employee, Timothy Day, had argued that, despite a choice of law contractual provision that provides that Delaware law is applicable, Massachusetts law is enforceable and NuVasive`s claims for breach of contract and unauthorized interference must be dismissed. Day argued that Massachusetts` standard choice of law rule (which was intended to govern the law of the state chosen in a generally applicable choice of law clause) was not applicable in his case, in part because of an exception to the choice of law rule, where the chosen state – in this case Delaware – had no material relationship with the parties or the transaction and there was no other reasonable basis for choosing the parties. Day was a resident of Massachusetts and covered territory in Massachusetts and Rhode Island while working for NuVasive. The law also invalidates non-compete obligations if the employer dismisses the employee without giving reasons or involves him in a dismissal. Currently, the law does not define the term “cause,” leaving employers open to the question of whether an employer can apply a non-compete clause against an employee it dismisses for poor performance or misconduct. For example, the dismissal of an employee for wilful misconduct or gross negligence is likely to be a “cause”, but what about an employee who is dismissed for repeated failure to meet performance expectations or under a progressive disciplinary policy? Another unanswered question is whether employers can define “cause” in the non-compete agreement, so there is certainty in this question. The legal definition of “cause” is likely to be the subject of litigation as employers seek to enforce non-compete obligations against employees who have been involuntarily dismissed. A Brief History of Non-Competition Laws in Massachusetts, BostInno.com, April 10, 2014 Describes the history of non-compete obligations from 1711 to 2014 If there is a dispute over the validity of the agreement, the dispute must be brought to the county where the employee resides or, if the parties agree, to Suffolk County. If the dispute is brought to Suffolk County, the Supreme Court has exclusive jurisdiction over the matter (which raises the question of whether a lawsuit can be brought in federal court or referred to a federal court). There are no jurisdictional restrictions if the case is filed in another county. In addition, the law requires that Massachusetts law be applied to employees who reside or are employed in Massachusetts at the time of the employee`s termination. In this regard, employers will not be able to use a choice of law provision to circumvent the requirements of the law.

Whether a court complies with a choice of law provision in a contract is a question of fact. However, NuVasive clarifies three points regarding choice of law provisions in employment contracts: The law applies to non-compete obligations and defines a “non-compete agreement” as follows: Accordingly, employers should carefully consider any restrictive agreement they enter into and determine whether the facts underlying the agreement are sufficiently related to the State chosen for the choice of law. See Conflict of Laws Reformulation (second) § 187 (prohibition on applying a choice of law provision if “the selected State has no material relationship with the parties or the transaction and there is no other reasonable basis for the choice of the parties”). For example, employers drafting restrictive agreements with choice of law provisions should consider where the employer has its head office and principal place of business, where the employee will provide services to the business, and where the parties negotiated and signed the agreement. Although not approached by the NuVasive or Cabela courts, employers in multiple states may also consider additional interests that support their choice of a single-state law to govern their agreements with employees, as the application of single-state law to the entire workforce is detrimental to the employer`s interests in administrative convenience, Consistency and, ultimately, fairness to employees in the management of the workplace. Admittedly, these interests seem to respond to the need for a reformulation for an “adequate basis for the choice of the parties”. Despite the strength of these arguments, employers should be aware that while the employer may indicate a sufficient relationship with the chosen State to justify the application of the choice of law provision and other reasonable interests, courts may hold that public policy considerations justify non-compliance with these provisions. While many of the provisions of the Act reflect best practices with respect to enforceable non-compete obligations, some of the requirements – particularly with respect to the consideration required to support non-compete obligations – will now require employers to assess their overall non-compete strategy, update their non-compete agreements, and adapt their human resources processes to ensure the compliance with the Act.

Until this law, non-compete obligations were analyzed under Massachusetts common law, and courts generally applied them if they were narrowly tailored to protect an employer`s legitimate business interests. However, what a court would consider to be “narrowly suited” or a “legitimate business interest” was not always easy to foresee. This has led to considerable uncertainty as to the enforceability of a non-compete obligation in a particular case. While common law principles will continue to apply in many respects, the law adds additional certainty to the analysis of the applicability of non-compete obligations. At the same time, the law introduces new concepts that it does not specifically define or otherwise leave open to interpretation, and it will require courts to further develop the non-compete obligation to provide more certainty. Two recent District Court decisions highlight the difficulties faced by employers when trying to enforce restrictive agreements based on the law contractually chosen by the parties. In NuVasive v. Day, 954 F.3d 439 (1st Cir.

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