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July 3, 2025
In case you missed it, the Supreme Judicial Court of Massachusetts recently held that the Massachusetts Noncompetition Agreement Act (G.L. c. 149 § 24L) (the “Act”) does not apply to a non-solicitation agreement that is incorporated into a separation agreement when the separation agreement includes a forfeiture provision in the event that the employee breaches the non-solicitation agreement. Miele v. Foundation Medicine, Inc., 496 Mass. 171 (June 13, 2025).
Key Facts of the Case
Foundation Medicine, Inc. (Foundation) hired Susan Miele in 2017. Miele signed a restrictive covenant agreement that included a non-solicitation provision. That provision barred Miele, during her employment and for one year thereafter, from directly or indirectly soliciting, enticing, or attempting to persuade any other employee or consultant of Foundation to leave the services of Foundation for any reason or otherwise participating in or facilitating his or her hire by Miele’s subsequent employer.
In 2020, Miele and Foundation executed a Transition Agreement when Miele separated from the company. The Transition Agreement incorporated the non-solicitation provision and included a forfeiture clause for any breach (i.e., Miele would forfeit the transition benefits if she violated the non-solicit). Foundation paid Miele approximately $1.2 million in transition benefits.
In 2021, Miele joined Ginkgo Bioworks and allegedly recruited several Foundation employees to work with her, in violation of her non-solicitation provision with Foundation. As a result, Foundation stopped paying Miele’s transition benefits and demanded repayment of the amounts already paid to her based on the forfeiture clause. Miele refused to comply.
Procedural History of the Case
Miele sued Foundation for withholding her transition benefits. Foundation asserted a counterclaim against Miele for breach of contract, alleging that Miele violated the Transition Agreement and the restrictive covenant agreement (the non-solicit of employees). Foundation sought a judgment declaring that it was not obligated to pay Miele any remaining transition benefits.
Foundation argued that the Act expressly provides that it does not apply to non-solicitation agreements (the Act expressly states that “Noncompetition agreements… do not include … covenants not to solicit or hire employees…”). Miele argued that forfeiture of her transition benefits brought the non-solicitation agreement within the scope of the Act (the Act also expressly states in the same sentence that “[n]oncompetition agreements include forfeiture for competition agreements…”).
The trial court granted relief, in relevant part, to Miele, holding that Foundation could not enforce the forfeiture clause of the Transition Agreement. The court concluded that the Transition Agreement qualified as a “forfeiture for competition agreement” and was therefore subject to the Act because it imposed “adverse financial consequences on Miele” (i.e., forfeiture of transition benefits) based on her solicitation of Foundation employees to join Ginkgo.
Foundation appealed.
The Ruling of the Massachusetts Supreme Judicial Court
On appeal, the parties, of course, disputed whether a non-solicitation provision, which is expressly excluded from the statutory definition of a “noncompetition agreement” under the Act constituted a “forfeiture for competition agreement,” which the Act expressly included.
The Massachusetts Supreme Judicial Court looked at the plain language and the legislative intent of the Act. The plain language of the Act excludes non-solicitation agreements from the definition of noncompetition agreement and states that forfeiture for competition agreements are a subset of noncompetition agreements. See G. L. c. 149, § 24L(a). Therefore, by necessary implication, forfeiture for competition agreements must also exclude non-solicitation agreements from the reach of the Act. The Court found no justification for treating a non-solicitation agreement differently merely because it includes a mechanism for forfeiture.
The Court concluded that Miele’s arguments were fatally flawed because they would expand the scope of forfeiture for competition agreements to include non-solicitation agreements even though the Act clearly excluded them.
Takeaways
The Court’s decision clarifies that forfeiture clauses are enforceable mechanisms for non-solicitation agreements.
Employers with employees in Massachusetts: Review your restrictive covenant and separation agreement templates in light of this decision to determine whether you can implement forfeiture clauses to better protect your legitimate business interests.
The author of this article, Patricia Tsipras, is a member of the Bar of Pennsylvania. This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice in Pennsylvania, Massachusetts, or any other jurisdiction, nor does it establish an attorney-client relationship with any reader of the article where one does not exist. Always consult an attorney with specific legal issues.
