Who’s Exempt?

Are noncompetes legal? YES!! (I’m asked that question way too often.)

Of course, the answer needs clarification. There are limits on the use of noncompetes. In addition to the standard requirements (noncompetes must be reasonable in time, space, and scope, and narrowly tailored to achieve a legitimate business purpose), there are wholesale exemptions from noncompetes for certain industries. While the exemption for people in the financial services industry who are subject to FINRA is a nationwide exemption, the rest are state-based.

In Massachusetts, exemptions exist for the following: physicians, nurses, psychiatrists, social workers, broadcasters, and, yes, attorneys. If your company is subject to the laws of another state, beware – many states do not recognize all of these exemptions.

To be clear, the exemptions are specific in defining from what the individual is exempt. For example, forfeiture agreements are treated differently from traditional noncompetes. The Supreme Judicial Court in 2008 made that quite clear (see Pierce v. Morrison Mahoney LLP, 452 Mass. 718 (2008)) when it enforced a forfeiture agreement against departing lawyers, costing them over $1,000,000 in lost profits.

So, what about in-house counsel? Sorry, that one, I’m keeping to myself!  🙂