I am in the final stages of updating my book, Negotiating, Drafting, and Enforcing Noncompetition Agreements and Related Restrictive Covenants (5th ed. 2015), and as part of that process, I fleshed out an issue that I thought might make sense to address here as well, i.e., how to interpret the provision in the Massachusetts Noncompetition Agreement Act that “[a] noncompetition agreement [entered into on or after October 1, 2018] shall not be enforceable against . . . employees that have been terminated without cause or laid off . . . .” G.L. c. 149, § 24L(c).
The problem is that “without cause” is not defined in the statute. Worse, its meaning – particularly when juxtaposed against the category of “laid-off” workers – is unclear.
So, where to start?
When a term is not defined in a statute, the courts “may rely on the interpretation given to the same language in other legislation . . . or on the well settled common law meanings of words . . . .” Com. v. Gustafsson, 370 Mass. 181, 187 (1976); Commonwealth v. Baker, 368 Mass. 58, 69 (1975). Here, there are both common law definitions of similar terms and interpretations of similar statutory terms — and they all point to the same (broad) definition.
Specifically, while neither “cause” nor “without cause” is defined by common law, “just cause,” “good cause,” and similar terms are:
Massachusetts courts have consistently defined good cause (occasionally referred to as “just” or “due” cause) as the existence of either “(1) a reasonable basis for employer dissatisfaction with a new employee, entertained in good faith, for reasons such as lack of capacity or diligence, failure to conform to usual standards of conduct, or other culpable or inappropriate behavior, or (2) grounds for discharge reasonably related, in the employer’s honest judgment, to the needs of [its] business. Discharge for a ‘[good] cause’ is to be contrasted with discharge on unreasonable grounds or arbitrarily, capriciously, or in bad faith.” G & M Employment Serv., Inc. v. Commonwealth, 358 Mass. 430, 435, 265 N.E.2d 476 (1970), appeal dismissed sub nom. G & M Employment Serv., Inc. v. Department of Labor & Indus., 402 U.S. 968, 91 S.Ct. 1662, 29 L.Ed.2d 133 (1971). See Klein v. President & Fellows of Harvard College, 25 Mass. App. Ct. 204, 208, 517 N.E.2d 167 (1987); Goldhor v. Hampshire College, 25 Mass. App. Ct. 716, 723, 521 N.E.2d 1381 (1988). See also Losacco v. F.D. Rich Constr. Co., 992 F.2d 382, 384–385 (1st Cir.), cert. denied, 510 U.S. 923, 114 S.Ct. 324, 126 L.Ed.2d 270 (1993); Hammond v. T.J. Litle & Co., 82 F.3d 1166, 1176 (1st Cir.1996). Honest judgment is assessed in the context of “the general principles that an employer is entitled to be motivated by and to serve its own legitimate business interests; that an employer must have wide latitude in deciding whom it will employ in the face of the uncertainties of the business world; and that an employer needs flexibility in the face of changing circumstances. We recognize the employer’s need for a large amount of control over its work force.” Fortune v. National Cash Register Co., 373 Mass. at 101–102, 364 N.E.2d 1251. See Siles v. Travenol Labs., Inc., 13 Mass. App. Ct. 354, 359, 433 N.E.2d 103 (1982).
York v. Zurich Scudder Investments, Inc., 66 Mass. App. Ct. 610, 616-17 (2006).
Accordingly, under the common law, “just cause” (presumably requiring something more than, or at least the same as, mere “cause”) is broad enough to cover termination of an employee for virtually any reason, either related to the employee’s general performance or conduct, or related to just the result of the business’s needs. And, as the SJC observed, “[d]ischarge for a ‘just cause’ is to be contrasted with discharge on unreasonable grounds or arbitrarily, capriciously, or in bad faith . . . .” Goldhor v. Hampshire College, 25 Mass. App. Ct. 716, 723 (1988); see also Gram v. Liberty Mut. Ins. Co., 384 Mass. 659, 659, 666-71 (1981) (evaluating the absence of “good cause” when assessing rights for recovery for “discharge without cause”).
Such a definition would be consistent with the SJC’s interpretation of “cause” under G.L. c. 30, § 9 (permitting public officials to be removed “for cause”). Specifically, interpreting “cause” under that section, the SJC rejected plaintiff’s proffered definition of cause, meaning “misfeasance, malfeasance, or wilful [sic] neglect of duty” in favor of a broader definition that could be satisfied by “a general finding of poor performance that includes, among other things, neglect of duty, incompetence, inefficiency, or poor supervision.” Flomenbaum v. Com., 451 Mass. 740, 745 (2008).
In support of that decision, the court explained as follows:
We conclude that the standard by which “cause” is measured in this case is the one traditionally offered as a legitimate reason for an employee’s discharge: to name a few examples, any “grounds for discharge reasonably related, in the employer’s honest judgment, to the needs of his business,” Amoco Oil Co. v. Dickson, 378 Mass. 44, 48, 389 N.E.2d 406 (1979), quoting G & M Employment Serv., Inc. v. Commonwealth, 358 Mass. 430, 435, 265 N.E.2d 476 (1970); a dispute over policy “about which there may be an honest difference of opinion,” Rinaldo v. School Comm. of Revere, 294 Mass. 167, 169, 1 N.E.2d 37 (1936); or, in the case of a public official, the Governor’s “conclusion that the interests of the public require the removal of the public officer,” Murphy v. Casey, 300 Mass. 232, 236, 15 N.E.2d 268 (1938); or “less than complete confidence” in a public official’s “competency and efficiency.” McSweeney v. Town Manager of Lexington, 379 Mass. 794, 798, 401 N.E.2d 113 (1980).
Id. at 746.
While the existing common law definition and the interpretation of “cause” under G.L. c. 30, § 9, certainly provide a plausible meaning for “cause” in G.L. c. 149, 24L(c), another possible interpretation is that “cause” was intended to take on a more colloquial meaning, such as when an employee engages in some type of wrongful conduct. Or, it could have some entirely different meaning. Relatedly, it could be that the parties are permitted to define its meaning in their contract.
For now, with no reported judicial decision (much less a controlling decision) interpreting “without cause” under the MNAA, the proper interpretation remains uncertain.
To address the uncertainty, Massachusetts State Senator Bruce Tarr introduced a bill in 2019 (S.1117, “An Act relative to clarifying legislative intent regarding the non-competition law”) to lay the issue to rest. The bill proposes to amend section 24L(c)(iii) of the MNAA “by adding, after the words ‘terminated without cause’, the following:- ‘as defined by the parties in the noncompete agreement’.” If that bill (or something similar) were to pass, the parties would be free to define the meaning, though a court could still (in theory at least) reject an overreachingly broad definition.
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Thank you to Erika Hahn, Jillian Carson, and Nicole Daly for their assistance with the research into this issue.
Photo credit: Image by Gerd Altmann from Pixabay.