Wednesday, September 12, 2012

Material Change in Employment Terms Voids a Non-Compete



           In Grace Hunt IT Solutions, LLC v. SIS Software, LLC, 29 Mass. L. Rep. 460, 2012 WL 1088825, 2012 Mass. Super. LEXIS 40 (Mass. Super. Feb. 14, 2012), the Court denied the plaintiff-employer’s motion for a preliminary injunction against former employees and their new employer for allegedly violating their non-compete agreements.  In denying the motion, the Court held that material changes in the employees’ terms of employment had voided their non-competes.  While the Court found that an asset purchase, in and of itself, did not void the non-competes, it did hold that changed terms of employment for the employees after the acquisition transaction were material and voided their non-competes.  The new entity, the plaintiff in this litigation, decreased the employees’ salaries by twenty percent even though it put in place a bonus program that it contended would adequately substitute for the salary decrease – a contention that the employees disputed.  Finally, of significance to the Court was the fact that the new company requested that the employees sign new non-competes, a request rejected by the employees.  

This decision showcases a recent renewal of interest in the material change doctrine, which was first articulated in Massachusetts in F.A. Bartlett Tree Experts v. Barrington, 233 N.E.2d 756 (Mass. 1968), but has come into increasing use recently.  As in Grace Hunt, in Protégé Software Servs., Inc. v. Colameta, 30 Mass. L. Rep. 127, 2012 Mass. Super. LEXIS 190 (Mass. Super. July 16, 2012), Judge Maynard M. Kirpalani found that a material change in defendant’s compensation had voided his non-compete agreement.  While both Grace Hunt and Protégé Software dealt with adverse changes, the court in Grace Hunt noted that “it is the existence of a material change in the relationship that voids the prior non-compete agreement, not the nature of that change[,]” suggesting that even advantageous changes, if material, could necessitate a new non-compete agreement.  The application of the “material change” doctrine to beneficial, as opposed to adverse, changes remains an area of controversy.  In a bench ruling in Sentient Jet LLC v. Mackenzie Judge Susan Garsh reportedly refused to endorse the notion that a positive change in the terms and conditions of employment can trigger the “material change” doctrine.  See Daniel S. Tarlow, The Material Change Doctrine and Its Implication for Non-Competes, Prince Lobel Client Alert (Aug. 10, 2012) (available at http://www.princelobel.com/news-publications-285.html) (discussing a ruling in Sentient Jet LLC v. Mackenzie).  

The “material change” doctrine is based on the premise that “far reaching changes [to an employment relationship] strongly suggest that the parties had abandoned their old arrangement and had entered into a new relationship.”  Iron Mt. Info. Mgmt. v. Taddeo, 455 F. Supp. 2d 124, 132 (E.D.N.Y. 2006) (applying Massachusetts law); See also F.A. Bartlett Tree Experts, 233 N.E.2d 756.  For other cases discussing the material change doctrine, See AFC Cable Sys. Inc. v. Clisham, 62 F. Supp. 2d 167 (D. Mass. 1999) (“each time an employee’s employment relationship with the employer changes materially such that they have entered into a new employment relationship, a restrictive covenant must be signed.”); Lycos, Inc. v. Jackson, 18 Mass. L. Rep. 256, 2004 Mass. Super. LEXIS 348 (Mass. Super. Aug. 24, 2004) (defendant-former employee failed to sign a letter which referenced a previously-signed non-compete agreement upon her promotion – the Court found that the promotion was a “material change” and refused to enforce the non-compete); See also TEKSystems, Inc. v. Fletcher, No. 10-1145, 2011 U.S. Dist. LEXIS 22227 (D. Md. Mar. 2, 2011) (refusing to enforce non-compete against employee who had been transferred to employer’s subsidiary); AFC Cable Sys. v. Clisham, 62 F. Supp. 2d 167 (D. Mass. 1999) (refusing to enforce non-compete against employee who had subsequently been promoted to sales manager).  However, the change must be material.  See Zambelli Fireworks Mfg. Co., Inc. v. Wood, 592 F.3d 412 (3d Cir. 2010) (in the context of determining the enforceability of a covenant not to compete after a stock sale the Court held that “[a] change in corporate culture alone cannot invalidate a legally binding contract.” )  

In the same vein, in Marso v. Bradford Soap Int’l, Inc., C.A. No. PB 07-6054, 2010 R.I. Super. LEXIS 96 (R.I. Super. Ct. June 25, 2010), the Rhode Island Superior Court endorsed the view in F.A. Bartlett that when parties enter into “far reaching changes in an employment agreement” it “strongly suggest[s] that the parties have abandoned their old arrangement and have entered into a new relationship.”  While Bradford did not address non-compete agreements in particular, and while the court, relying on the intent of the parties not to change their relationship, ultimately found the contract which was at issue to be enforceable, Bradford nevertheless illustrates the growing prevalence of this legal theory. 

For further information and discussion on this subject, see the following materials:

·        Daniel S. Tarlow, The Material Change Doctrine and Its Implication for Non-Competes, Prince Lobel Client Alert (Aug. 10, 2012) (available at http://www.princelobel.com/news-publications-285.html)
·        Lee Gesmer, Noncompete Unenforceable Where Employer Changed Terms of Employment, Massachusetts Law Blog (Sept. 2, 2012) (available at: http://masslawblog.com/noncompete-agreements/noncompete-unenforceable-where-employer-changed-terms-of-employment/)
·        Richard Glovsky, Labor: Employers Beware, InsideCounsel (June 25, 2012) (available at: www.insidecounsel.com/2012/06/25/labor-employers-beware)
·        Brian P. Bialas, If the Terms of Employment Change, Employees May Need to Sign New Non-Competition Agreements, Massachusetts Noncompete Law (March 15, 2012) (available at: http://www.massachusettsnoncompetelaw.com/2012/03/articles/noncompetes/if-the-terms-of-employment-change-employees-may-need-to-sign-new-noncompetition-agreements/)
·        David E. Frank, Judge Refuses to Negate Non-Competition Clause, New England In-House (June 11, 2012) (available at: http://newenglandinhouse.com/2012/06/11/judge-refuses-to-negate-non-competition-clause/)
 

Please be sure to visit our website at http://RobertBFitzpatrick.com

11 comments:

mmjiaxin said...

michael jordan shoes
fitflops clearance
longchamp outlet
huarache shoes
michael kors outlet
kobe shoes for sale online
http://www.tiffanyand.co.uk
nike zoom
michael kors handbags outlet
tiffany & co
gg

Unknown said...

zzzzz2018.7.13
huaraches
jordans
kate spade outlet online
true religion outlet
ray ban sunglasses
christian louboutin outlet
hugo boss sale
off-white clothing
fitflops sale clearance
ugg boots on sale 70% off

5689 said...

zzzzz2018.8.11
ralph lauren outlet
cheap jordans
ecco outlet
ferragamo outlet
ugg boots clearance
cheap jordans
yeezy boost 350 v2
nike blazer pas cher
football pas cher
coach outlet

5200 said...

0822jejeasics baskets running homme Cette action vise basket nike aire presto femme à éviter le terme au cours de la nouvelle loi sur le contrat de travail: - 1. air jordan 3 pas cher homme Depuis la fin 2007 et le début de l'année 2008, de asics entretien chaussures nombreux rapports indiquent que les fabricants chinois investis à Hong Kong, nike air max thea w chaussures noir à Taïwan et en Corée du Sud ferment leurs usines en Chine en jogging nike homme bleu marine raison de l'augmentation du coût de la main-d'œuvre. Ces types chaussure nike roshe run pas cher femme de chaussures sont généralement créés correctement associés à un design moderne ainsi que des systèmes asics femme chausport experts.

office.com/setup said...

Thank you so much ROBERT B. FITZPATRICK for the blog. I really like your work. your blog is truly appreciable.

Jones Morris said...

Positive site, where did u come up with the information on this posting? I'm pleased I discovered it though, ill be checking back soon to find out what additional posts you include. Unfair Dismissal

Unknown said...

"chinelo slide da melissa
nike les halles
outlet nike floresta
sandália rasteira bottero
tende doccia milano amazon
tenis all star feminino branco couro
venda de cortina
nike air force modelo agotado
camisa ponte preta aranha
nike color block hoodie
sandalias courofeito a mao
damen lack schnürer
nike dual fusion tr iii
nike sb air max bruin vapor
nike t shirt tumblr
cappello fisi kappa tazza
adidas stabil x junior
brassiere garcon
nike sb zoom mogan mid 2 6.0
combinar vestido lentejuelas
jersey rombos hm
adidas boost 350 black
smartphone kleine abmessungen amazon
shirt mit schnürung am ausschnitt
schubkarre gestell amazon
skechers shoes for men online
leggings mit spitzenabschluss
spielzeug nach altersgruppen amazon
s oliver catie bell bottom
kugelbahn ab 12 monate amazon
beutel zipper amazon
hosen bei peek cloppenburg
nike jogginghose dunkelgrau damen
nike anzug nba rot
rückgaberecht adidas
nike air max blancas mujer baratas"

qwe said...

chaussure de basketball nike zoom kobe 12 femme
abrigos de pelo mujer lefties
nike air max blancas mujer baratas
panini fußball sticker 2016 amazon
nike air jordan sale deutschland
hoodie pepe jeans cyan
zapatillas bimba y lola outlet
chaqueta adidas trefoil delantero
Supeme Hoodie
sandalia rafaela melo
kimono long femme grande taille
skechers twinkle toes light up boots
chanel hosenträger kaufen
maillot de bain push up pour homme
shirt mit schnürung am ausschnitt
vestito da elsa disney
tabouret de bar vintage cuir
moleton nike preço
zalando nike zoom fly
carrinho com bebe conforto travel system

mcafee.com activate said...

Thank you for sharing this post

Anonymous said...

hbomax.com/tvsignin - HBO Max is the newly released app, where you can watch endless content. This video-streaming services supports downloads for offline viewing, so that you can stream anywhere.

Find the Best Technical Support
Cricut.com/setup
Turbotax.ca/download

theetesm said...

replica designer backpacks r28 z1w10u6n28 luxury replica bags g74 q8s99s0n41 7a replica bags wholesale z76 g3n41s4i80