This decision (and it’s a good one) comes from the great state of Massachusetts. The court’s decision in Grace Hunt IT Solutions, LLC v. SIS Software, LLC, et al., should be followed by every judge in the country.
Plaintiff Grace Hunt IT Solutions, LLC (“Grace Hunt”) provides software management consulting services. Pursuant to an Asset Purchase Agreement, Grace Hunt became the successor and assignee of Grace Hunt, LLC, of which defendants John Joyce, George Olsen, and Robert Remick were all employees. Pursuant to the purchase, defendants became employees of Grace Hunt. Joyce and Olsen had previously signed non-compete agreements with Grace Hunt, LLC.
After the purchase, Grace Hunt sent the individual defendants offer letters outlining the terms of their employment, each of which included a provision stating that they would be required to sign a new non-compete agreement. They were also told that the Grace Hunt planned to implement a different compensation structure and change eligibility for fringe benefits.
Here is where things get interesting!
After the purchase, another consulting companay (SIS Software, LLC) contacted Joyce about opening a Boston office for SIS. Knowing that his buddies Olsen and Remick were unhappy at Grace Hunt, Joyce forwarded them SIS’s contact information. Ultimately, SIS made all three employment offers and they all resigned from Grace Hunt. Each defendant informed certain clients that they were leaving Grace Hunt, though they claim that they did not encourage clients to switch consultants. However, Grace Hunt alleged that several of its clients moved their business to SIS.
Grace Hunt filed a breach of contract claim against all defendants alleging that, while still employed by plaintiff and shortly thereafter, the defendants communicated with and solicited its clients on behalf of SIS. Additionally, Grace Gunt sought to enforce the defendants’ original non-compete agreements against them.
The court ruled in favor of the employees. The court found the original non-compete agreements sought to protect a legitimate business interest (customer goodwill), but they were nonetheless unenforceable because, under Massachusetts law, non-compete agreements are voided by “material changes” in employment relationships between employees and employers.
The court concluded that defendant Remick could not be bound by the terms of the non-compete agreement because he never signed any employment or non-compete agreement with Grace Hunt, LLC. As to Joyce and Olsen, sufficient evidence suggested that the change in their compensation plan was significant.
I wish all judges (at leaset those in Virginia) would follow this rationale.