In a recent case in Massachusetts, a Superior Court Judge denied a former employer’s motion for a restraining order in a case alleging a violation of a non-compete agreement and granted the cross motion of the former employee and current employer to compel arbitration even though the current employer was not a party to the arbitration clause which was included in the former employee’s Employment Agreement.
In Tibco Software, Inc. v Zephyr Health, Inc. and Kevin Willoe, Civil Action No 2015-844-BLS1 (Mass. Superior Court March 31, 2015), Plaintiff Tibco Software, Inc. (“Tibco”) filed a motion for a restraining order and expedited discovery alleging that co-defendant Kevin Willoe (‘Willoe”) breached the non-compete clause in his Employment Agreement with Tibco by working for a competitor, co-defendant Zephyr Health, Inc. (“Zephyr”) shortly after he quit. Article IX of the Employment Agreement provided that the claims alleged in the Complaint were subject to arbitration. Even though Zephyr was not a party to the Employment Agreement, both defendants moved to compel arbitration and to stay the action pending the outcome of the arbitration.
What is interesting about this case is that the Court was willing to defer the matter to arbitration even though Tibco sought emergency relief to enforce the non-compete clause and even though Zephyr was not a signatory to the arbitration clause in Willoe’s Employment Agreement. Relying on the representation of counsel for both defendants that the rules governing the arbitration authorized the arbitrator to issue preliminary injunctive relief, the Court left the question of such emergency relief to the arbitrator.
In granting the defendants’ request to stay the case pending the outcome of the arbitration, the Court cautioned the parties that if “there is any delay in the selection of the arbitrator[s], the plaintiff may request an emergency hearing on its motion for a preliminary injunction, such orders, if entered, to be in force only until the arbitrator[s] is selected.”
It is important to note that the Court limited its ruling to situations in which the former employer’s claims arose directly from the restrictions specifically contained in his Employment Agreement. This approach, adopted by the Court, has been described as “the narrow view.” Other courts, primarily in the federal sector, have adopted the “broad view” in which a non-signatory to such agreements may compel arbitration where “the issues the non-signatory is seeking to resolve in arbitration are intertwined with the agreement…” See Vassalluzzo v. Ernst & Young LLP, No. 06-4215-BLS2, 2007 WL 2076471 (Mass. Super. Ct. June 21, 2007).
Regardless of whether a court relies on this broad view or the more narrow view taken in Tibco, it is important to consider the ability of a non-signatory to an employment agreement to avoid emergency relief by moving to enforce an arbitration clause contained in the agreement. This becomes one of the many important factors an employer must consider in deciding whether or not to include an arbitration provision in an employment agreement at all or at least to carve out such disputes which seek emergency relief from the courts.