No-recruit agreements: not just about trade secrets, confidential information, and goodwill… maybe

Since October 1, 2018, the legitimate business interests that can be protected by an employee noncompete in Massachusetts are limited to trade secrets, other confidential information, and goodwill.1 That is a statutory limitation. See Massachusetts Noncompetition Agreement Act (“MNAA”), G.L. c. 149, § 24L (b)(iii).

This limitation does not, however, apply to most other types of restrictive covenants. See G.L. c. 149, § 24L(a).

Accordingly, to determine what legitimate business interests can (and cannot) be protected by other restrictive covenants, we need to look to preexisting common law.

The answer, however, is not as clear as it may seem.

Much like the Ohio Court of Common Pleas observed in 1952 in Arthur Murray Dance Studios of Cleveland, Inc. v. Witter, “This is not one of those questions on which the legal researcher cannot find enough to quench his thirst. To the contrary there is so much authority it drowns him. It is a sea — vast and vacillating, overlapping and bewildering. One can fish out of it any kind of strange support for anything, if he lives so long.” And, while that observation was specific to noncompete law, it applies with equal force to other restrictive covenants as well, including no-recruit agreements (also known as “no-raid” agreements).

Take for example three recent cases in Massachusetts concerning no-recruit agreements.

Those cases, in order of when they were decided, are Automile Holdings, LLC v. McGovern (decided January 14, 2020),  Robert Half International, Inc. v. Simon (decided just two weeks later, on January 28, 2020), and Thermal Engineering International (USA) Inc. v. Lanaville (decided just last week, on December 8, 2022).

Automile Holdings, LLC v. McGovern Limits Protectable Interests, Sort Of 

In Automile Holdings, LLC v. McGovern, the Massachusetts Supreme Judicial Court examined a no-recruit agreement arising in the context of the sale of a business, and found the agreement to be enforceable.

The court began its analysis as follows:

In the employer-employee context, the legitimate business interests that may be protected [by a restrictive covenant] consist of trade secrets, confidential information, and good will. By contrast, in the buyer-seller context, restrictions are not rendered unenforceable merely because they protect an interest we might not recognize in any employment setting.

(Citations and internal quotation marks omitted.)

However, in language that seems to apply regardless of the context in which the no-recruit arises, the court next explained that inside information about an employer’s workforce is confidential information that can support the enforcement of a no-recruit agreement. Specifically, the noted that, “[f]ar from stifling ordinary competition, the [no-recruit] permitted [the defendant (who was a former employee/owner of the company)] to compete so long as he did not use his inside knowledge to raid [the company’s] key employees.” This is a significant point that is not always so readily accepted by other courts.

From there, the court reasoned as follows:

As an executive and part owner, [defendant] was familiar with [the company’s] employee workforce and was well placed to identify key employees integral to the company’s success. For those employees he wished to poach, he could use his inside knowledge of the company, including its salary structure and internal management dynamics, to successfully solicit them. For example, the record reflects that [defendant] was aware of, and perhaps dictated, [one of his former colleague’s] starting salary at [the company]. Armed with information about [the company’s] employees’ existing compensation plans, [defendant] could tailor any solicitation offer to provide more competitive benefits than [the company]. He was also aware of the particular strengths, experience, and training of different . . . employees. The [no-recruit] was thus formulated to ensure that [defendant’s] competing business did not gain an unfair advantage by using this inside information, in combination with [defendant’s] position as a competitor, to raid [the company].

Thus, while seeming to limit the legitimate business interests protectable by a no-recruit agreement, the decision simultaneously seems to suggest that a no-recruit can be enforced to protect “inside knowledge” of an employer’s workforce, which is likely to be present in many of these cases.

Robert Half International, Inc. v. Simon Reads Automile Narrowly

Two weeks later, the Business Litigation Session (the “BLS”) of the Massachusetts Superior Court denied a preliminary injunction motion seeking to enforce a no-recruit agreement in Robert Half International, Inc. v. Simon, 2020 WL 1218988.

Citing to Automile, the BLS first stated that “[a]n anti-raiding covenant in an employment agreement is . . . enforceable only to the extent necessary to protect a legitimate business interest in trade secrets, other confidential information, or goodwill.”

Going further, the court also cited to the Supreme Court of Wisconsin’s decision in Manitowoc Co., Inc. v. Lanning, for the proposition that there is “no legitimate interest in forestalling recruitment of other employees.” To the extent that this pronouncement sweeps as broadly at it seems, it would also seem to conflict at some level with the SJC’s more nuanced perspective reflected in its Automile decision.

Nevertheless, the BLS ultimately seemed to rely more on Automile, than Manitowoc, insofar as it determined that the plaintiff had not “demonstrated that the anti-raiding enforcement protects against the misuse of confidential information or the loss of goodwill.”2

There was, however, no specific discussion about whether the defendant had any inside knowledge about plaintiff’s workforce or how it would have been able to use such information.

Thermal Engineering International (USA) Inc. v. Lanaville Takes A More Expansive View Of Legitimate Business Interests

In the latest of the trio of cases, Thermal Engineering International (USA) Inc. v. Lanaville, 2022 WL 17541938 (decided just last week, on December 8, 2022), the United States District Court for the District of Massachusetts issued a decision distinguishing Robert Half.

Declining to follow the Robert Half decision, the court first observed that “[t]he Massachusetts Superior Court . . . cites to a Wisconsin Supreme Court case which relied upon the interpretation of a Wisconsin statute evincing ‘a strong public policy against enforcement of trade restraints which are determined to be unreasonable upon all employees.’ Manitowoc Co. v. Lanning, 379 Wis. 2d 189, 204 n.18, 906 N.W.2d 130, 137 n.18 (Wis. 2018) (citation omitted).”

The court then rejects that approach in favor of a line of District Court cases finding broader protectable interests supporting no-recruit agreements, as follows:

Thermal Engineering also disputes that Lanaville’s recitation of legitimate business interests fully defines the interests an employer is permitted to protect in the context of an employer-employee restrictive covenant. Thermal Engineering cites a decision from within this district in which the court held that employers have an interest “in preserving the talent and goodwill of their employees”. Seniorlink Inc. v. Landry, No. 19-CV-11248, 2021 WL 3932309, at *8 (D. Mass. Sept. 2, 2021) (quoting Advanced Micro Devices, Inc. v. Feldstein, No. 13-CV-40007, 2013 WL 10944934, at *11 (D. Mass. May 15, 2013)). Such an interest includes “ensuring [current employees] are not influenced to leave by former employees.” Id.

Although neither of the cases cited by the parties is binding authority upon this Court, Seniorlink is persuasive and analogous to the facts of the pending case. In Seniorlink, the relevant provisions of the agreement at issue were substantially similar to the disputed terms of the [no-recruit agreement]. See Seniorlink, 2021 WL 3932309, at *2 (quoting the operative portion of the disputed non-solicitation agreement). . . . Thus, the Court finds that the [no-recruit] here protects a legitimate business interest.

Accordingly, the court did not confine the legitimate business interests that would support enforcement of a no-recruit to the protection of trade secrets, other confidential information, and goodwill.3


Despite over 200 years of case law and extensive developments over recent years, the law of restrictive covenants still remains very unsettled.


*Thank you to Peggy_Marco for the image.


[1] Noncompetes can, in some states, protect additional business interests, while, in other states, they can protect only trade secrets. See our 50-state noncompete chart. In addition, noncompetes in Massachusetts that arise in the context of the sale of a business can protect additional business interests as well.

[2] The court also noted that plaintiff had “not shown that it paid [defendants] extra consideration for agreeing to the anti-raiding provision.”  This point is interesting in that it arguably suggests that had the restriction would have been enforceable had it been unequivocally paid for. If that is not the takeaway, then it is unclear why the payment would have been raised at all, given Massachusetts law on consideration — which was not altered by the Massachusetts Noncompetition Agreement Act (the “MNAA”). Specifically, while noncompetes now must be supported by “mutually agreed-upon consideration,” which must be “fair and reasonable” if given during employment (G.L. c. 149, § 24(L)(b)(ii) and (b)(vii)), no such requirement preexisted the statute — for noncompetes or any other restrictive covenants. See, e.g., Stone Legal Research Grp., Inc. v. Glebus, No. 02-5136, 2003 WL 914994, at *5 (Mass. Super. Ct. Dec. 16, 2002) (Burnes, J.) (consideration is provided by employment); NetScout Sys., Inc. v. Hohenstein, No. 1784CV00373BLS2, 2017 WL 1555399, at *4 (Mass. Super. Ct. Feb. 15, 2017), reconsidered on other grounds, 2017 WL 1654852 (Mass. Super. Ct. Feb. 23, 2017) (Salinger, J.) (“Continued at-will employment is sufficient consideration to support a non-compete agreement in Massachusetts, just as it is sufficient consideration to support other contractual terms.” (collecting cases)).

[3] The court also distinguishes Robert Half on the payment issue, noting that the defendant received “severance payments and other benefits in consideration for his compliance with the [no-recruit] and other aspects of the Separation Agreement.” As noted above, however, consideration is typically a very easy element to satisfy, even without severance payments or other benefits.