PR High Court Clarifies Approach to Enforcing Assigned Non-Competes + Exclusivity Provisions in Independent Contractor Relationships

Takeaways

• In MCG Therapy Group, LLC v. Maestre Rivera, the Puerto Rico Supreme Court ruled contractual non-compete provisions may remain enforceable following a valid assignment when a contractor’s consent to an assignment is express or implied through conduct.
• Exclusivity provisions restricting an independent contractor from providing services to third parties during the contract term are valid under Puerto Rico law.
• Restrictive covenants involving independent contractors are enforceable if they are reasonable and protect legitimate business interests.

Related link

• MCG Therapy Group, LLC v. Maestre Rivera

Article

In a significant decision for businesses operating in Puerto Rico, the Puerto Rico Supreme Court held in MCG Therapy Group, LLC v. Maestre Rivera, 2026 TSPR 56 (May 28, 2026), that a contractual non-compete provision may continue to be enforceable following a valid assignment of a contract, including in the context of an independent contractor relationship.

The court also recognized the validity of contract assignments under Puerto Rico law and clarified the standards governing the enforceability of non-compete agreements outside the traditional employer-employee context.

Additionally, the court reaffirmed that parties may validly agree to exclusivity provisions preventing a professional from providing services to third parties during the term of a professional services agreement.

Background

The case arose from a professional services agreement between a psychological services provider and an independent contractor psychologist. The agreement included a one-year non-compete provision prohibiting the independent contractor from providing services to the same students through another entity or directly through the Puerto Rico Department of Education for a specified period following termination of the relationship.

After the original contracting entity transferred its operations and contracts to another company, the contractor continued providing services under the new arrangement without objecting to the transition.

Later, the contractor allegedly began providing the same services independently and servicing the same population covered by the agreement. The successor company sought to enforce the non-compete provision and recover damages.

The lower courts dismissed the non-compete claim, concluding that the successor entity could not enforce the restriction because it had not entered into a separate written agreement with the contractor. The Puerto Rico Supreme Court reversed.

The Supreme Court’s Holding

The court held that:

1. Puerto Rico law recognizes the validity of contract assignments

The court formally recognized the validity of contract assignments under Puerto Rico law and explained that a valid assignment places the assignee in the same legal position previously occupied by the assignor. Accordingly, a non-compete clause may be transferred through a valid contract assignment.

Rejecting the lower courts’ approach, the court held that the non-compete provisions in an assigned contract are transferred. The court declined to impose a requirement that a new written restrictive covenant be executed every time a contract is assigned.

2. Consent to a contract assignment may be express or implied

The court explained that the consent of the party remaining in the contract may be express or implied. Significantly, it recognized that a contractor’s continued performance under the assigned contract, after receiving notice of the assignment and without objection, may constitute implied consent to the assignment.

3. Non-compete agreements with independent contractors are not per se invalid

The court held that such provisions may be enforceable when they protect legitimate business interests and impose reasonable restrictions as to time, scope, and affected activities. Restrictive covenants are not limited to traditional employment relationships.

4. Exclusivity provisions during the contract term are valid

Of particular importance, the court reaffirmed that parties may validly agree to an exclusivity provision that prevents a professional from providing services to third parties during the term of a professional services agreement. The court recognized that, although professionals generally perform services independently and without subordination, exclusivity obligations during the life of the agreement are permissible under Puerto Rico law.

What You Should Know

This decision provides important guidance for businesses that engage independent contractors, consultants, and professional service providers.

First, restrictive covenants do not necessarily become unenforceable due to business restructurings, asset transfers, acquisition, or contract assignments. Under appropriate circumstances, the successor entity may step into the shoes of the original contracting party and enforce contractual protections negotiated by its predecessor.

Second, the court’s recognition of implied consent highlights the importance of documenting assignments and maintaining records of continued performance after notice.

Third, exclusivity provisions remain a valuable tool. Post-termination restrictions often receive more attention, but in-term exclusivity can provide meaningful protection by limiting competing services during the relationship.

Finally, businesses should ensure that restrictive covenants are narrowly tailored. As the court emphasized, restrictions that are unreasonable in duration, scope, or effect may remain vulnerable to judicial scrutiny.

* * *

This decision provides meaningful clarity on how Puerto Rico courts will approach restrictive covenants in evolving commercial relationships, particularly those involving independent contractors and contract assignments. It underscores the importance of carefully structuring agreements with clear assignment provisions and enforceable post-termination obligations.

Businesses should review their agreements and transaction documents to ensure that assignment and restrictive covenant provisions are properly drafted and enforceable.

Jackson Lewis attorneys are available to answer your questions about restrictive covenants and preventing unfair competition.