Labor & Employment Law Daily Wrap Up, CONTRACT CLAIMS—Mass. Sup. Ct.: Forfeiture clause in nonsolicitation agreement was not ‘forfeiture for competition agreement’, (Jun 20, 2025)

By Ronald Miller, J.D.

There is no justification for treating a non-solicitation covenant differently simply because it includes a forfeiture mechanism.

The Massachusetts Noncompetition Agreement Act, does not apply to a non-solicitation agreement incorporated into a termination agreement if the termination agreement includes a forfeiture provision in the event that the employee breaches the non-solicitation agreement, ruled the Massachusetts Supreme Court. The Act expressly excludes non-solicitation covenants, and the forfeiture at issue is triggered solely by breach of such a covenant. A forfeiture clause triggered by a breach of a non-solicitation agreement does not constitute a “forfeiture for competition agreement” within the meaning of the Act (Miele v. Foundation Medicine, Inc., No. SJC-13697 (Mass. Sup. Ct. Jun. 13, 2025)).

Restrictive covenant agreement. The employee was hired by the employer in 2017. As a condition of employment, she signed a restrictive covenant agreement that included a non-solicitation provision barring the employee—during her employment and for one year thereafter—from directly or indirectly soliciting, or attempting to persuade any other employee from leaving the employer.

Transition agreement. In 2020, the employee and the employer executed a “transition agreement” in connection with her separation from the company. The agreement expressly incorporated the restrictive covenant agreement by reference. In exchange for certain transition benefits, the transition agreement included a forfeiture clause providing that, if the employee committed a breach of that agreement or any other agreement with the employer, any unpaid benefits would be forfeited and any previously paid benefits “must be immediately repaid” to the employer. The employer ultimately paid the employee $1.2 million in transition benefits.

Forfeiture. In 2021, following her departure from the employer, the employee joined a competitor. The employer alleges that during the one-year period following her departure, the employee subsequently recruited several employees to work at the competitor. The employer notified the employee that she had breached the transition agreement, ceased further payments and demanded repayment of benefits already disbursed. The employee refused to comply with that demand.

Lawsuit. Thereafter, the employee sued the employer alleging that it had breached the transition agreement by withholding her transition benefits. The employer counterclaimed asserting that the employee violated both the transition agreement and the restrictive covenant agreement and sought a judgment declaring that it was not obligated to pay her any remaining transition benefits.

The employee moved for judgment on the pleadings, arguing that the provisions underlying the employer’s counterclaims were unenforceable under the Massachusetts Noncompetition Agreement Act, G. L. c. 149, § 24L. A trial court ruled that the employer could not enforce the forfeiture provision of the transition agreement. However, the trial court concluded that the employer was not precluded from asserting the employee’s breach of the restrictive covenant agreement as a defense to her breach of contract claim or from seeking damages for that alleged breach.

Although the act expressly excludes non-solicitation agreements from its scope, the trial court concluded that the transition agreement qualified as a “forfeiture for competition agreement” and was therefore subject to the act. The trial court reasoned that the agreement imposed adverse financial consequences on the employee based on her solicitation of former colleagues to join her at the competitor.

Noncompetition agreement. The Massachusetts Noncompetition Agreement Act defines a “noncompetition agreement” as an agreement between an employer and an employee that prohibits the employee from engaging in specified competitive activities after the employment relationship has ended. A “forfeiture for competition agreement” is one that imposes financial consequences on a former employee for engaging in competitive activities. The act expressly includes forfeiture for competition agreements within the definition of noncompetition agreements but excludes “covenants not to solicit or hire employees of the employer.”

Forfeiture for competition agreement. On appeal, the parties disputed whether a non-solicitation agreement, although expressly excluded from the statutory definition of a “noncompetition agreement,” may nevertheless constitute a “forfeiture for competition agreement” under the act when its violation triggers a forfeiture clause. The employer argued that the exclusion of non-solicitation agreements from the definition of noncompetition agreements reflects an intent to similarly exclude them from the definition of forfeiture for competition agreements. On the other hand, the employee contended that her alleged solicitation constituted a “competitive activity” within the meaning of the statutory definition of a forfeiture for competition agreement.

Under the plain language of the Massachusetts Noncompetition Agreement Act, (1) noncompetition agreements do not include non-solicitation agreements, and (2) forfeiture for competition agreements are a subset of noncompetition agreements. Thus, it followed that forfeiture for competition agreements also exclude non-solicitation agreements.

Although the agreement here involved a non-solicitation provision coupled with a forfeiture clause, the inclusion of the latter does not alter the court’s analysis. That is, there is no justification for treating a non-solicitation covenant differently simply because it includes a forfeiture mechanism.

Accordingly, the matter was remanded to the trial court with instructions to reverse the order partially granting an employee’s motion for judgment on the pleadings.

The case is No. SJC-13697.

Judge: Georges, S.

Attorneys: Dawn Mertineit (Seyfarth Shaw) for Foundation Medicine, Inc. Jeffrey M. Rosin (O’Hagan Meyer) for Susan Miele.

Companies: Foundation Medicine, Inc.

Cases: ContractClaims StateLawClaims PensionBenefitPlans MassachusettsNews