How enforceable is a non-compete clause?

[Don Plumley]

Originally Posted by 911Rob

On top of that, they don't provide you with a copy of a document that they expect to uphold in the court of law; sorry, that ain't gonna fly either. Full disclosure means providing copies to ALL parties that sign.

Of course you are correct, employees should be given a copy of whatever they are asked to sign. However, Rick had a copy, he just does not have it now.

[911Rob]

Thanks Don.
Sorry for the foreigner input BS.
Here a "Notary of Public" must explain the document to you before you sign; then they Notarize the signature including receiving ID that proves it you signing. We use it alot for such legal docs.

When I had several Gov't contracts going, I would have to get everything notarized, so my wife was a notary for a few years, fwiw.

Is there really that much difference in our Countries? Someone can sign a piece of paper and not be explained what they signed?

Anyway, thanks again.

[Don Plumley]

Originally Posted by 911Rob

Someone can sign a piece of paper and not be explained what they signed?

It's almost a given in the US. All of those home loans in default...9 in 10 never read the contracts nor had any idea what they signed. And this helps to keep lawyers in clover.

The US legal system is the oddity in the world. A system ripe for tort reform, etc.

[Laneco]

Rick,

Go to HR and get a copy of your non-compete clause. Have legal counsel review it with you. Non-competes vary from well written and quite binding to being useful only to line the bottom of the bird cage.

Non-compete clauses vary sharply depending on your location. Some states flat out forbid them, most states structure them with care. In the latter case, they are "generally" required to be signed BEFORE you are hired, often as much as two weeks to allow you to have legal counsel review them. They are often invalid if they are signed after you've been hired (hey, what choice did you have then)? Some states allow them to fail based on a single item and other states allow a "pencilling" effect for failed items. In the former, one thing done wrong negates the employer's entire ability to enforce the non-compete. In the latter, the employer may do something wrong and only part of the non-compete will be valid.

Also, they are, again generally, only valid when they put a restriction on the time or the location of your non-compete. For example, they specifically say you may not contact a current customer for 5 years, or anyone within a certain geographical area.

Those who have brought specific skills TO the job are always in a stronger position with a non-compete. The deeper you move into the intellectual propety arena, the more specifically that the non-competes/non-disclosures must be written. After all, they were making a living with that skill set prior to employment and it is reasonable they will make a living after the current employment doing the same work. An example of this is my hazardous materials training. I was brought into my prior work place because of this training. I gained no other training in this area from the previous employer, having brought the entire skill set with me. When I left, they threatened me with a non-compete agreement (that was signed AFTER I was working for them and had quit my former job). I told them that the contract was invalid the day they had me sign it. They reviewed it and found out I was right.

They cannot take from you your ability to make a living. But when written properly, they can and do restrict for whom, where and for what period of time you may not compete. They can collect advances, certain types of compensation, moving costs, etc., if written properly.

Again Rick, please have legal counsel review. Many of these are nothing but a silly intimidation tactic, but just in case your's is legit...

angela

[KaptKaos]

My understanding is that enforceability varies by state, and by the terms of the agreement.

If they let you go and offer a severance package, that package may include non-compete language. That may be binding because you are creating a new agreement where they are paying you for the non-compete. Make sure you have an atty review any severance agreement.

I am not an attorney nor do I play one on TV. This should not be construed as legal advice, but as entertainment. YMMV

[Rick Lee]

Wow! What a response. Thanks guys. A few facts about my situation.

I don't know for a fact that I ever signed a non-compete. I can't recall. But I was just on the phone with a former co-worker (who recently left for a job that paid twice what she made at my company) and she said she did sign a non-compete at my company. Her current job is selling adv. for a well-known magazine, which is not competing with our business. Thing is, my company is based in NY, I belong to the DC office, but am physically located in AZ. There is only one other employee from my company in all of AZ.

Also, my company did not pay a DIME for my move to AZ. I even took a vacation day to drive out here when I moved. About the only expense they've incurred as a result is having to mail things to me once in a while and a bigger phone bill. My wife quit her well-paying job in DC to come here with nothing lined up in AZ. So I'd say we bore the brunt of the sacrifice to get me into this company's western territory, where they have no one else working.

And that leads to another issue. At the time I signed all the HR paperwork, I had no assigned territory, but was told it would be in the DC area and some states in the southeast, which it eventually was. I worked in the DC office for about 13 mos. before moving. Then I gave up almost all those accounts and am now responsible for everything from TX and west of it. So it's a pretty vast territory in a pretty specialized field with only a small handfull of competitors. My company has the bulk of the markershare, but the smaller guys are very well entrenched in the western U.S., which is one reason I haven't been setting the world on fire with sales since moving out here. On the east coast, we are definitely king.

At this point, I don't even know how to approach a competitor. I certainly can't just call up or email them my resume. Seeing where I work on my resume would set off alarm bells and get people talking. My company did hire a guy from a competitor about a year ago, but I don't know him and can't go ask him about this stuff.

[Rick Lee]

And I'm pretty sure I'd get no severance. If they laid me off, maybe. But they're gonna make this a performance-based termination and I'll probably be the first sales person they ever fired for that reason. It's a weird place and things are a changin' here. Obviously, I'd me more inclined to abide by a non-compete if it came attached to a generous severance package. But I only have two years with this company. Problem is that they bought out the company I worked at for five years before, but just after I had left to work for a friend for six mos. When I came back after the acquisition, I lost all my seniority from the first place. All my co-workers from there were grandfathered in their seniority. Otherwise, I'd be one of the longest serving account managers there.

How ironic that the guy who runs the counterpart division of our biggest competitor was fired by my company about four years ago. Two years after that he surfaced at our competitor, so I believe his non-compete had expired by then.

[Rick Lee]

Got a copy of the form. Found it on our internal HR page. The relevant paragraph goes like this:

Further, I agree that for a period of one (1) year after the termination of my employment by XXXX for any reason, I will not solicit, or direct others to solicit, electronic distribution of news releases and news information or other activities of XXXX in competition with XXXX's customers or prospective customers with whom I had contact, or whom I gained knowledge of, while in the employ of XXXX.

Looks like I'm SOL as far as working for a competitor, eh? The only out I see is that the first paragraph says this agreement is made between XXXX and lists its NYC address and them my name. I have never been to our NYC office, never had anything to do with them. There is no mention of geographic location anywhere else in the agreement. Am I subject to the law in NYC, DC, AZ or wherever my next employer is based?

[Don Plumley]

IIRC, for employment matters you are subject to the laws of the State in which you work. I presume your employer withholds state income tax for AZ. Your physical presence in NYC is of no matter.

It's very generic language and very broad. If it does not have geographic limitations, I would imagine it's difficult to enforce. However, as I said earlier, being difficult to enforce and being a hindrance to being employed are different matters.

If you want to work for a competitor and you are a good sales guy, it is probable they will have their counsel review the agreement and make a business decision about the agreement. That's what I've done in the past.

Certainly if you are terminated or laid off your right to earn a living is of significant merit. If you voluntarily leave their employment for a competitor then they have a stronger case.

I'm not an attorney, and suggest you have one review your agreement depending on what action you intend to take.

[Porsche-O-Phile]

Lawyer up. I would.

[masraum]

I suspect you'd be fine if you left to a competitor unless you managed to steal a bunch of your current accounts. Then they might get persnickity. Even then, if they are trying to cut costs, and they don't have much business out west anyway, they may be less likely to spend much money trying to enforce that agreement. You say that you're the only guy they've got out there anyway.

And I have no special legal knowledge, there's absolutely nothing to back up what I've said.

[Porsche-O-Phile]

Just another thought - are you sure a competitor would want to potentially open themselves up to accusations of corporate espionage and whatever else by taking you on?

Also (something to consider) if your current company is as dysfunctional and poorly managed as I've been led to believe, why would they (prospective new company) really need to pick your brain for your current company's sales strategies, etc? It sounds like they're doing a pretty good job right now kicking your current employer's ass even without those things or resorting to those sorts of tactics. Would they really need to? Is it worth it to them?

Just wondering... I'm sure you could bring a lot to the table as far as your experience in the field and client base/contacts but I just honestly wonder if they might view your recent experience with a direct competitor as a negative thing - especially if they're aware of the fact that you've got a non-compete issue ("if this guy signed a non-compete and is now beating our door down, how loyal is he going to be to US?") Of course the flipside of that is - you can always ask, "how ethical are these guys if they know all this and still want to take me onboard knowing all this?" So maybe the risk on both sides cancels out.

Maybe better off looking at a different company that sells slightly different product so you're not in direct competition? It'd solve all these potential concerns and the non-compete issue at the same time - of course you have to find one that's hiring these days too...

I feel for ya' man.

[Laneco]

Rick,
I was perusing the internet *note: I am not an attorney, but someone did leave the light on for me once at a motel 6*

http://www.law.com/jsp/ihc/PubArticleIHC.jsp?id=1137578709925

Arizona is a "blue-pencil" state that allows certain portions of non-compete agreements to be struck while upholding others. They seem to take dim view of very broad agreements that block large geographical regions and those that are otherwise excessively restrictive to the severed employee finding gainful work.

Lawyer up buddy, but you will probably come out of this OK if you're careful.

angela

[Jim Richards]

How enforceable is a non-compete clause?

--------------------------------------------------------------------------------

If I'm:

A) fired
B) laid off
C) quit just before they fire me

IMO, the only case where you have to be concerned is if you're laid off with a severence package that is contingent upon you not going to a competitor, or if you line up a job with a competitor while you're still with your present employer. They cannot keep you from earning a living after they take your job/income away from you. What court would support them?

[Rick Lee]

The more I think about this and also talk with my dad, who's been in this spot and did get scooped up by a competitor, the more I think I need to wait until I'm canned before even approaching a competitor. I hate the thought of not having a plan or a job waiting for me before I lose this one. When I got laid off in 2001, I saw it coming, had been searching and was offered a much better job on the day before I was laid off. I'd like to have things that organized now, but it's unlikely.

Yes, I read about AZ being a blue pencil state last night. Obviously, I wouldn't want things to get that far. FWIW, the lawyer who I believe wrote that non-compete was canned in November. I wonder if the company will come to regret not redoing all the docs she composed.

I don't know that there's any loyalty issue once I'm unemployed. We all gotta look out for #1. I am sort of the point person on my team for how to steal business from the competition, so I'm sure I'm known to the competition and that they'd have some interested in talking with me. I think I'll just have to wait a few more weeks before approaching them. If my company gives me a severance package, I'd be surprised and overjoyed.

[jriera]

Not a lawyer ... as you know...

Non-compete agreements are enforceable as any other agreement, remember the recent case of IBM vs. Apple regarding Mark Papermaster.

I have signed my fair share of non-compete, most recent case after being 'downsized' from my previous company, the first thing my new company wanted to know was what non-compete clauses I had in place. I had to go to HR to my previous company and get the non-compete agreement I signed 17 years ago, it was very similar to yours.

The respect of non-compete SHOULD be very high on your new company.

After all if an agreement that you signed, no different than a mortgage loan ... or are we practicing double standards ....

[Rick Lee]

Originally Posted by jriera

After all if an agreement that you signed, no different than a mortgage loan ... or are we practicing double standards ....

Well, I didn't ever have to buy a house, but I do have to work. It's not like new hires have any clout for baragaining their way out of signing a non-compete. It's pretty much "sign or don't work here". But I work in a field with a small number of competitors and I would not be able to stay in this line of work at all, unless I could afford to take a year off, which I very much cannot. I think my company's non-compete exists mostly to keep competitors from hiring us, not keeping "company trade secrets". It's not like we don't all know everything about our competitors. We have entire databases on our competitors and our clients always share info with all of us on the other guys.

[Jim Richards]

Originally Posted by jriera

Not a lawyer ... as you know...

Non-compete agreements are enforceable as any other agreement, remember the recent case of IBM vs. Apple regarding Mark Papermaster.

I have signed my fair share of non-compete, most recent case after being 'downsized' from my previous company, the first thing my new company wanted to know was what non-compete clauses I had in place. I had to go to HR to my previous company and get the non-compete agreement I signed 17 years ago, it was very similar to yours.

The respect of non-compete SHOULD be very high on your new company.

After all if an agreement that you signed, no different than a mortgage loan ... or are we practicing double standards ....

Jordi, are you talking about non-compete or non-disclosure? I can see honoring a non-disclosure from previous companies, as they need to protect proprietary information from their competitors. But a non-compete clause for someone the company jettisoned for their benefit makes no sense. It's like saying to an employee, you can work for me in this industry, or for no one...choose. I think this is unenforceable, unless one is still being paid by the former employer in the form of a severence package. Disclaimer: Since I'm not a lawyer, my comments are just my opinions, and not legal advice.

[Rick Lee]

Originally Posted by Jim Richards

It's like saying to an employee, you can work for me in this industry, or for no one...choose.

No, it's like saying you can't work for us or anyone else in the industry and you cannot choose.

[the]

Originally Posted by 911Rob

Thanks Don.
Sorry for the foreigner input BS.
Here a "Notary of Public" must explain the document to you before you sign; then they Notarize the signature including receiving ID that proves it you signing. We use it alot for such legal docs.

When I had several Gov't contracts going, I would have to get everything notarized, so my wife was a notary for a few years, fwiw.

Is there really that much difference in our Countries? Someone can sign a piece of paper and not be explained what they signed?

Anyway, thanks again.

Whether the contract was notarized is of no legal importance in this case.

The legal doctrine of duress also has no bearing.