Key points:
- Massachusetts SJC rules the Noncompetition Agreement Act doesn't apply to forfeitures tied to nonsolicitation clauses.
- The decision favors Foundation Medicine in its severance dispute with former employee Susan Miele.
- The ruling reinforces employers’ ability to enforce forfeiture clauses in restrictive covenants.
The Massachusetts Supreme Judicial Court has ruled that forfeiture clauses triggered by a breach of a nonsolicitation agreement do not fall under the Massachusetts Noncompetition Agreement Act, providing clarity on the enforceability of post-employment restrictions. In a unanimous decision, the court reversed a lower court’s ruling in a dispute between Foundation Medicine Inc. and its former employee, Susan Miele.
Writing for the court, Justice Serge Georges Jr. emphasized that the statute “expressly excludes” nonsolicitation agreements from its scope, even when those agreements include forfeiture provisions. “There is no justification for treating a nonsolicitation covenant differently simply because it includes a forfeiture mechanism,” he wrote.
Miele had argued that the forfeiture of severance benefits rendered the agreement a de facto noncompete, thus triggering protections under the act. But the court rejected that interpretation, holding that such a reading would expand the law’s scope contrary to its plain language. “Solicitation cannot be reintroduced through the back door of ‘competitive activities’ without rendering the statute internally contradictory,” Georges wrote.
The dispute began after Foundation Medicine ceased severance payments to Miele, alleging she violated a 2017 nonsolicitation clause and a 2021 transition agreement by recruiting former colleagues to a new employer. The Suffolk County Superior Court had sided with Miele, ruling that the forfeiture provision was unenforceable under the state’s noncompete statute.
Foundation Medicine successfully sought direct appellate review. The court’s reversal now permits employers in Massachusetts to enforce forfeitures related to breaches of nonsolicitation agreements—so long as those provisions are not structured as noncompetition clauses.
Dawn Mertineit of Seyfarth Shaw, counsel for Foundation Medicine, said the decision restores legal balance in favor of employers: “The opinion defined the scope of the statute and brought the balance back.” Mertineit’s team is preparing for a jury trial against Miele in January.
Miele’s attorney, Jeffrey M. Rosin of O’Hagan Meyer, said the ruling was only on a threshold issue and that further legal arguments remain. “She will continue to pursue” her claims, he told Law.com, arguing that the forfeiture provision may still violate Massachusetts common law.
