In a June 2025 opinion, the Massachusetts Supreme Judicial Court (SJC) clarified that the Massachusetts Noncompetition Agreement Act’s scope does not extend to a forfeiture clause tied to the breach of a nonsolicitation agreement.
Case Overview: Miele v. Foundation Medicine, Inc.
An employee was bound by an agreement not to solicit employees of Foundation Medicine. The employee later affirmed her nonsolicitation obligations in a separation agreement, which provided that the employee’s severance benefits would be forfeited in the event she breached her contractual obligations.
Foundation Medicine subsequently ceased paying severance benefits based on its claim that the employee had violated her nonsolicitation agreement. The employee filed suit and alleged that the forfeiture provision ran afoul of the Massachusetts Noncompetition Act, which places strict limitations on the use of noncompetition agreements, which, in turn, are defined to include “forfeiture for competition agreements.”
The trial court agreed with the employee’s position that the Massachusetts Noncompetition Act prohibited the forfeiture clause and ruled in favor of the employee on a motion for judgment on the pleadings.
SJC Opinion
In Miele, the SJC overturned the lower court’s decision based on a reading of plain statutory language. The Court ruled that under the Noncompetition Act, “(1) noncompetition agreements do not include nonsolicitation agreements, and (2) forfeiture for competition agreements are a subset of noncompetition agreements.” Therefore, according to the SJC, “[i]t follows, by necessary implication, that forfeiture for competition agreements also exclude nonsolicitation agreements. To conclude otherwise would contradict the statute’s express exclusion of non solicitation agreements from the broader category of noncompetition agreements.”
The SJC drew a distinction between the nature of the underlying agreement and the remedy for a violation, noting that pairing a nonsolicitation agreement with a forfeiture clause does not convert it to a noncompetition agreement. “A non solicitation covenant remains just that – regardless of whether the remedy for breach involves forfeiture of benefits. Because the act expressly excludes non solicitation covenants, and the forfeiture at issue is triggered solely by breach of such a covenant, the act does not apply.”
Key Consideration for Massachusetts Employers
The Miele decision clarifies that employers in Massachusetts may utilize nonsolicitation agreements without worrying that a forfeiture remedy may bring the agreement within the Massachusetts Noncompetition Act’s purview.