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A Lesson in the Increasingly Popular Restrictive Covenant, the “No Fly Zone”

The term “No Fly Zone” is a military term that designates a prohibited airspace.

The “No Fly Zone” is a term that is now applied to restricted covenants in employment contracts. It is more restrictive than a traditional non-solicitation provision, but not quite as onerous as a non-compete agreement. Job applicants who are considering employment offers need to recognize how a “No Fly Zone” clause can negatively impact the individual’s future career opportunities.

A “No Fly Zone” clause prevents the employee, upon departing the employer, from accepting business from the employer’s customers or clients, even if the employee did not directly or indirectly solicit the customer of client.

Due to the significant changes that impacted noncompete agreements in Massachusetts in October 2018, many companies no longer use noncompete agreements to protect the company’s business interests.

The author or this blog article predicts that there will be an up tick in the number of Massachusetts companies that use “No Fly Zone” clauses because these clauses are not covered by the 2018 legislative changes, but do provide a heavier level of protection than traditional non-solicitation agreements, which are essentially designed to prevent poaching of employees and/or clients.

There is not a lot of guidance on how Massachusetts’ judges will interpret these clauses, but there is one important case from 2016 in which a federal district judge ruled that a “No Fly Zone” clause was unreasonable and therefore unenforceable. For further information, readers can search for the case: 178 Lowell Street Operating Co., LLC v Nichols, 152 F.Supp. 3d 47 (D. Mass. 2016).

The following hypothetical illustrates the basis for the author’s assumption that Massachusetts judges will view “No Fly Zone” clauses with a critical eye:

  1. Jane Doe accepts an offer as an outside sales rep with the ABC Company and as part of the onboarding process, she signs a “No Fly Zone” agreement;
  1. A few years later, Ms. Doe accepts a position as an outside sales rep with the XYZ Company, which is a competitor of the ABC Company;
  1. John Smith, a customer, bought ABC Company products through Jane Doe. When he learns that Ms. Doe is no longer employed by the ABC Company, he discovers on Linked In that she has joined the XYZ Company. Mr. Smith decides that he wants to do business with Ms. Doe at the XYZ Company, and
  1. The ABC Company brings a legal action based upon the “No Fly Zone” agreement to prevent Ms. Doe at the XYZ Company from accepting Mr. Smith’s decision.

Question:

If Jane Doe signed the “No Fly Zone” agreement, why should a judge rule against the ABC Company and rule that the agreement is unenforceable?

Answer:

Because enforcing the agreement would be unfair to the customer, John Smith. Why should John Smith, a third party, be stuck with an agreement that he not only did not sign, but didn’t know existed? It would be unfair to prevent Mr. Smith from doing business with the XYZ Company.

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