Restrictive Covenants And Forfeiture Provisions After MIELE V. Foundation Medicine, Inc.
By Vicki Fuller and Victoria Ranieri
This summer, the Massachusetts Supreme Judicial Court (“SJC”) offered new guidance on what types of competitive activity are prohibited by noncompetition agreements and how those agreements are enforced. By definition, a non-solicitation agreement is not a noncompetition agreement subject to the requirements of the Massachusetts Noncompetition Agreement Act, (the “MNAA”). But what if a separation agreement states that an employee forfeits benefits if she violates a non-solicitation agreement, would the MNAA apply? The Supreme Judicial Court reviewed this question in Miele v. Foundation Medicine, Inc., 496 Mass. 171 (2025), concluding that it does not. Miele teaches that a forfeiture provision does not convert an otherwise excluded agreement into a noncompetition agreement subject to the MNAA.
The Massachusetts Noncompetition Agreement Act
On October 1, 2018, after nearly a decade of debate, the MNAA was signed into law, setting forth the requirements for noncompetition agreements to be valid and enforceable. The MNAA bans employers from enforcing noncompetition agreements against certain categories of employees and implements substantive and procedural legal protections for employees who may be subject to these agreements. G.L. c. 149, § 24L(b).
The MNAA defines a “noncompetition agreement”—as an agreement between an employer and an employee (or, in some cases, a prospective employer and employee) under which the employee agrees that “he or she will not engage in certain specified activities competitive with his or her employer.” G.L. c. 149, § 24L(a).
Next, the MNAA tells us what a noncompetition agreement is not. Not all restrictive covenants are noncompetition agreements, and a number of restrictive covenants are specifically excluded from the definition, including—importantly for Miele—non-solicitation agreements. Id.
The MNAA’s definition of noncompetition agreements expressly includes “forfeiture for competition” agreements and excludes general forfeiture agreements. So what is the difference? The prerequisite of competition. Under a general forfeiture agreement, an employee forfeits benefits by ceasing employment. Under a forfeiture for competition agreement, an employee only forfeits benefits after termination by competing with the employer. A general forfeiture agreement imposes “adverse financial consequences on a former employee as a result of the termination of an employment relationship, regardless of whether the employee engages in competitive activities” following the termination. Id. A forfeiture for competition agreement, in contrast, “by its terms or through the manner in which it is enforced imposes adverse financial consequences on a former employee as a result of the termination of the employment relationship if the employee engages in competitive activities.” Id.
The MNAA makes this distinction for one simple reason. If noncompetition agreements were subject to the MNAA, but forfeiture for competition agreements were not, then employers could avoid the requirements of the MNAA simply by using a forfeiture for competition provision in a restrictive covenant as a proxy for a noncompetition agreement. In fact, the SJC spotted this loophole almost fifty years ago in Cheney v. Automatic Sprinkler Corp., 377 Mass. 141 (1979). The SJC in Miele was concerned that if forfeiture for competition agreements were not subject to the same scrutiny as noncompetition agreements, “overreaching” employers would be tempted to avoid scrutiny by using forfeiture for competition agreements rather than adhering to the prohibitions and requirements for noncompetition agreements as currently set forth in the MNAA. Id. To close this loophole, the MNAA’s drafters included forfeiture for competition agreements within the MNAA’s definition of noncompetition agreement. Brief for Russell Beck as Amicus Curiae, Miele v. Foundation Medicine, Inc., 496 Mass. 171 (2025) (No. SJC-13697).
The MNAA’s drafters were also mindful of an additional avenue for an “overreaching” employer to avoid the MNAA’s requirements using forfeiture agreements—selective enforcement. Id. By enforcing forfeiture agreements solely against competing employees, an employer could achieve the desired result of quashing competition while avoiding the requirements of the MNAA. To prevent this, the MNAA’s definition of forfeiture by competition agreement includes the phrase “through the manner in which it is enforced.” Id. As a result, if an employer selectively enforces a forfeiture agreement in a way that results in employees forfeiting benefits only where they have engaged in competition, then it becomes, by definition, a forfeiture by competition agreement that falls squarely within the MNAA’s scope. Put simply, to be a true forfeiture agreement exempt from the requirements of the MNAA, the agreement must be enforced against all employees equally, and not just those who go on to compete with the employer.
Miele v. Foundation Medicine, Inc.
With this backdrop, we examine Miele. As the Court heard, when Foundation Medicine, Inc. (“FMI”) hired Susan Miele in 2017, she signed a non-solicitation agreement. Miele, at 172. She agreed that, if she left, she would not solicit, entice, or attempt to persuade employees of FMI to leave FMI for any reason. Three years later, when she left FMI, she signed a separation agreement, which included the non-solicitation agreement. Id. The separation agreement, however, went a step further, stating that if Miele violated the non-solicitation agreement, she would forfeit her termination benefits. Id. According to FMI, Miele did exactly that and asked three of her former colleagues to join her new employer. Id. at 173. As a result, FMI stopped paying Miele termination benefits. Miele sued and FMI counterclaimed, each citing a breach of the separation agreement by the other. Miele moved for judgment on the pleadings, arguing that the forfeiture for solicitation provision was subject to the MNAA. FMI opposed, arguing that non-solicitation agreements are not subject to the MNAA. The trial court sided with Miele, but the Supreme Judicial Court reversed, holding that a non-solicitation agreement is not a noncompetition agreement, even when it includes a forfeiture provision.
In its decision, the Court was guided by the plain language of the statute. In particular, the Court noted two elements of the MNAA’s definition of noncompetition agreements. First, noncompetition agreements do not include non-solicitation agreements. Id. at 174. And second, forfeiture for competition agreements are included within, or, as the Court explained it, are “a subset of,” noncompetition agreements. Id. Since non-solicitation agreements are not included in the definition of noncompetition agreements, the Court held that it necessarily follows that non-solicitation agreements are not included within the definition of forfeiture for competition agreements, even when they contain a forfeiture for solicitation provision. Id. at 175. The Court found support in the legislative history, confirming the drafters’ intent to include forfeiture for competition agreements within the definition of noncompetition agreements to address the concerns raised in Cheney at 147 n.7. Id. at 176.
Finally, the Court rejected Miele’s invitation to interpret the phrase “competitive activities” within the definition of forfeiture by competition agreement more broadly than the phrase “certain specified activities competitive with [the employer]” in the definition of noncompetition agreement. While Miele argued that “competitive activities” could include solicitation activities even though the phrase “certain specified activities competitive with” did not, the Court found that this interpretation would make the statute internally inconsistent. Id. at 176-177.
Conclusion
Miele’s holding gives employers and employees clarification and guidance as to which restrictive covenants are, and are not, governed by the MNAA. It clarifies that the use of a forfeiture provision (other than a forfeiture for competition provision) does not create a back door through which restrictive covenants that are otherwise excluded from the MNAA may come within its scope. The holding is important because employers commonly include many of these provisions–including nondisclosure, confidentiality, garden leave, no-rehire, and, of course, non-solicitation provisions–in separation agreements.
However, a word of caution. Miele does not stand for the proposition that all forfeiture provisions are lawful. Employers should still tread carefully when considering using forfeiture provisions and ensure doing so does not run afoul of other potentially applicable employment laws, such as the Massachusetts Wage Act.
Victoria Fuller is a Partner and Co-Chair of the Labor and Employment Practice Group. She practices out of White and Williams’ Boston office and is admitted in Massachusetts and New Hampshire. Victoria has almost 20 years of experience as a civil litigator, and regularly defends small, mid-size and large employers before state and federal agencies, as well as in state and federal court. She also counsels employers on a variety of employment issues including hiring and termination, accommodations, and wage and hour issues, among others.
Victoria Ranieri is an Associate in the Commercial Litigation Department at White and Williams, based in the firm’s Boston office. She is a member of the Labor and Employment, Higher Education, and Insurance Coverage and Bad Faith practice groups. Victoria regularly defends businesses and educational institutions in proceedings before the Massachusetts Commission Against Discrimination and EEOC, as well as in state and federal courts. She also counsels employers on a wide range of workplace issues including development of policies and procedures, employee discipline and termination, and accommodation requests.
