Although the Massachusetts Noncompetition Agreement Act expressly excludes nonsolicitation agreements from its definition of “noncompetition agreements,” the Massachusetts Supreme Judicial Court (SJC) recently responded to a reported question asking if that exclusion applies when coupling a nonsolicitation agreement with a forfeiture clause triggered by nonsolicitation violations. In a win for the employer in Miele v. Foundation Medicine, Inc., SJC-13697 (Slip Op. June 13, 2025), the SJC concluded that any forfeiture clause triggered by the employee through breach of the nonsolicitation agreement was not subject to the Act. The SJC found that it was error for the trial court to enter judgment for the employee on the employer’s breach of contract counterclaim on the basis of the Act and remanded with instructions to reverse.
In the underlying Superior Court action, plaintiff Susan Miele brought a lawsuit against former employer Foundation Medicine, Inc. (FMI) after FMI halted payments owed to Miele under the Transition Agreement that governed her separation from the company. FMI claimed that Miele had breached a nonsolicitation agreement incorporated into the Transition Agreement by recruiting FMI employees to her new employer within the one-year time period of her nonsolicitation agreement. The Transition Agreement contained a forfeiture clause that stated that if Miele committed a breach of any agreement with FMI, transition benefits would be forfeited. FMI brought a counterclaim against Miele for breach of contract, asserting that Miele had violated the terms of the nonsolicitation agreement and Transition Agreement, and accordingly, it was not obligated to pay benefits and was entitled to recover past disbursements. Miele moved for judgment on the pleadings, arguing that the provisions that FMI relied upon in its breach of contract claim were unenforceable under the Act. The trial court agreed with Miele that FMI could not enforce the forfeiture provision because nonsolicitation agreements are excluded from the Act only if they do not impose forfeiture for breach.
In general, the Act sets forth the requirements for a noncompetition agreement to be enforceable. As an example, the Act exempts certain groups of employees from enforceable noncompetition agreements, provides additional protections to employees subject to the agreements, and limits post-employment restrictions. In particular, the Act is concerned with “non-competition agreements,” a statutory definition that expressly excludes nonsolicitation agreements. The SJC was asked to consider if a nonsolicitation agreement, notwithstanding that exclusion, was still subject to the Act when its violation triggers a forfeiture clause. Miele argued that a noncompetition agreement may nevertheless still constitute a “forfeiture for competition agreement” under the Act; FMI contended that the exclusion of nonsolicitation agreements from the definition of “noncompetition agreements” reflected legislative intent to similarly exclude them from the definition of “forfeiture for competition” agreements described in the statute.
Per the SJC, combining a nonsolicitation agreement with a forfeiture clause does not affect the exclusionary language of the Act. According to the Court, “a nonsolicitation covenant remains just that – regardless of whether the remedy for breach includes forfeiture of benefits.” The SJC found that Miele’s reading of the Act would improperly expand the scope of forfeiture of competition agreements and provide a “back door” for inclusion of nonsolicitation that would render the statute contradictory. Consequently, the forfeiture of benefits triggered solely by the breach of that covenant does not bring it within the scope of the Act. Practically, this means that any employee protections within the Act are not available to Miele with respect to FMI’s allegations of violations of the nonsolicitation agreement that triggered a forfeiture of transition benefits. In sum, the SJC’s decision holds that a former employee may not rely upon the Act to categorically protect against claims by the employer for forfeiture of benefits as the result of violations of a nonsolicitation agreement.
