The Massachusetts trial court recently denied an employer’s application for injunctive relief to enforce a non-compete agreement on the grounds that non-compete agreement may not be enforceable because of a material change in conditions of employment. The employee had a non-compete with Company A. After entering the non-compete agreement, Company A was purchased by Company B. After purchasing Company B sought to significantly restructure the employee’s compensation. The employee terminated his employment and took a position with Company B’s competitor.
Accordingly, Company B sued the employee and sought to enforce the non-compete that the employee had entered into with Company A. The court found that the change in the employee’s compensation structure was material and thus voided the non-compete.
When purchasing a business it thus advisable to have all the employees sign new non-compete agreements, particularly if there is a new compensation structure.