‘Material change’ in employee's job over time can be risky for MA noncompete

For businesses whose bottom lines depend on research, innovation, and being the first to market, noncompetition agreements are an indispensable component of the onboarding process. But as a new hire becomes a long-term employee, an aging noncompete becomes vulnerable to a little-known legal principle called the “material change” doctrine, especially if the employee has moved up in the ranks, taken on new roles or responsibilities, and received pay raises. The doctrine has been on the books in Massachusetts for more than 50 years, but a recent decision out of the superior court serves as a timely reminder for employers about the importance of revisiting—and even re-executing—their noncompete agreements with key personnel when the terms or conditions of their jobs change in a material way.

IT professional solicits his employer’s clients

In August 2015, Sean Donahue was hired by Now Business Intelligence, Inc. (NBI) as a project manager. At the time, he disclosed he owned his own company, Modern Edge Consulting, but he also signed a noncompetition agreement that prohibited him from soliciting NBI’s clients during his employment and for one year afterward.

Initially, Donahue was assigned to work onsite at NBI client Raytheon. When that assignment ended, he was asked to take on nonbillable work, including attending “pitch” meetings with clients, but his title and compensation didn’t change and he wasn’t asked to signed a new noncompete.