October 2025
Massachusetts court holds parent company cannot enforce noncompete against its subsidiary’s employee
On October 7, 2025, the Massachusetts Superior Court denied an employer and its parent entity’s request for an injunction to enforce non-compete provisions contained in equity grant agreements that were entered into with and signed by the parent company, but not the employing entity, and that prohibited the employee from competing with the parent. The decision reaffirmed the court’s earlier decision holding that non-compete agreements entered into between a parent and an employee of its subsidiary are not enforceable under the Massachusetts Noncompetition Agreement Act of 2018 (“MNAA”).
Amongst other things, the MNAA requires that a non-compete agreement be “signed by both the employer and employee.” In its earlier decision, the court determined that a parent or grandparent company of an employer entity is not an “employer” for purposes of the MNAA, and, therefore, the non-competes contained in the employee’s equity agreements were unenforceable under the law. The court rejected arguments by the employing entity and its parent that “some managerial control” by the parent entity could confer employer status upon it.
The court also emphasized that the MNAA requires non-compete agreements to be executed by the “employer” to provide clarity and procedural protections for employees, as well as “concrete evidence” that the employer and employee entered into a binding non-compete agreement “to assume the reciprocal obligations under the [MNAA].” Allowing parent entities to enforce non-competes would “frustrate” the purposes of the MNAA, as it could “(1) impose liability on those entities for garden leave … and/or (2) more significantly, allow the ‘employer’ to invoke the much broader business interests of parents, subsidiaries and/or affiliates to enforce more onerous restrictions on the ex-employee.” The court clarified, however, that “to make the noncompetition agreements enforceable, such contracts need merely be amended to include the actual employer as a party and signatory thereto.”
S&K Take: The October decision underscores that courts will interpret the provisions of the MNAA strictly: non-compete agreements must be executed by the actual employing entity to be enforceable under Massachusetts law. Nevertheless, while the court suggested that adding the “actual employer” as a signatory could cure enforceability, its reasoning indicates that restrictions must still align with the employer’s own business interests—not the broader interests of its parents or affiliates.
Palantir sues to enforce restrictive covenants against departing employees over competing AI startup launch
Palantir sued two former senior employees in the Southern District of New York for allegedly stealing trade secrets to secretly help launch a directly competitive AI-integration startup firm in violation of their contractual post-employment noncompetition, confidentiality, and return of property obligations to Palantir. According to the complaint, the two individuals had access to Palantir’s core “source code, internal healthcare demonstration workspace, deployed customer workflows, and proprietary customer engagement strategies,” which comprised its most valuable trade secrets, confidential information, and customer relationships. In support of its claims, Palantir alleges that both employees purposefully concealed their post-departure roles, declined to sign separation agreements which would have required them to reaffirm contractual obligations and to represent they were complying with such obligations, and, in the case of one employee, downloaded internal demonstration and deployment strategy materials just before resigning and accessed them on a personal device. The complaint asserts breach of contract claims and seeks injunctive relief to prevent ongoing competition and use of confidential materials.
S&K Take: Palantir’s complaint follows a recently settled lawsuit against two other former employees accused of misappropriating trade secrets to launch another competing startup. This case may have implications for how and to what extent companies in the tech industry can protect their intellectual property, particularly as the AI space continues to grow and develop.
New Jersey federal court finds NJLAD and CEPA protections do not extend to out-of-state employment
In Khartchenko v. the American Oncologic Hospital Inc. et al., a New Jersey federal court denied a former employee’s request to amend her complaint to include additional allegations that would permit her to assert claims against her Pennsylvania-based employer under the New Jersey Law Against Discrimination (“NJLAD”) and the New Jersey Conscientious Employee Protection Act (“CEPA”). The court had previously dismissed the plaintiff’s complaint, finding the New Jersey laws inapplicable because her employment was based in Pennsylvania, even though she was permitted to work remotely from New Jersey.
The court reiterated that the NJLAD and CEPA only apply where New Jersey is the employee’s place of employment or the employee has “non-trivial employment responsibilities” in the state. “New” allegations that the employer conducted business in New Jersey through the plaintiff, and because it occasionally partnered with New Jersey hospitals and served New Jersey patients, were insufficient to establish that the defendants targeted New Jersey in any special way or conducted business there so as to subject it to New Jersey law. The court found dispositive that the Pennsylvania office hired plaintiff and issued her paystubs and tax returns, and that all relevant communications between the plaintiff and the employer occurred with Pennsylvania-based employees. The court further noted that the plaintiff’s work from home arrangement was for her own convenience and not for the employer’s benefit.
S&K Take: The extent to which a state’s laws may protect remote employees who work in state for out-of-state companies or out-of-state employees who work for in-state companies have become increasingly important as workforces continue to expand across the country (and globe) and remote work arrangements persist. While the court did not find New Jersey’s employment protections extended to the employee, employers should be mindful that both the employee’s physical location and the employee’s reporting location may trigger state law coverage.
