By Gregory S. Bombard
On June 9, 2017, the Business Litigation Session (BLS) of the Massachusetts Superior Court issued a decision about the extraterritorial application of California’s public policy against non-competition agreements (Full text of the decision: Oxford Global Resources, LLC v. Jeremy Hernandez). The plaintiff, Oxford, is a recruiting and staffing company headquartered in Massachusetts. It hired the defendant to work as an entry-level “account manager” in an office in California. As a condition of his employment, the employee signed a “protective covenants agreement” that included non-solicitation, non-competition, and confidentiality provisions. This agreement contained a Massachusetts choice-of-law provision and a Massachusetts choice-of-venue provision.
The employee eventually quit to work for a competitor in California. Oxford filed suit against him in the BLS in Massachusetts, alleging violations of his non-competition and non-solicitation agreements. The employee moved to dismiss on the ground of forum non conveniens. The motion judge ruled that the court first had to address which state’s law governed the contract. The court held that the choice-of-law provision was unenforceable as a contract of adhesion because it was “apparent” that the employee “had neither the opportunity nor the bargaining power to negotiate” the choice-of-law provision in his contract. After voiding the choice-of-law provision, the Court ruled California had the most significant relationship to the dispute and therefore ruled that California law would apply. The court went on to rule that the forum selection clause was unenforceable for many of the same reasons. The court reasoned that the private and public interests weighed in favor of a California forum and that the evidence, witnesses, and events giving rise to the suit were all located in California and therefore dismissed the suit on forum non-conveniens grounds.
The result of the Court’s analysis was the Massachusetts Superior Court refusing to enforce a non-competition covenant in the employment agreement of a Massachusetts company, primarily because the entry-level employee lived and worked in California.
For more information, contact Gregory S. Bombard, a member of the Duane Morris Non-Compete and Trade Secrets Practice.