How enforceable is a non-compete clause?
 

If I'm:

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

Obvioulsy, it would look suspicious for me to call my HR dept. now and ask for a copy of the non-compete I signed years ago and which I didn't keep for myself. My days at my current job are numbered. I am in a real dilemma if they don't fire me in a month, as they've said they likely will. If they don't, then I'll be doubly in fear for my job every day and obviously pounding the pavement for a new one. I've heard non-competes are seldom enforced if someone is let go. But what if I jump ship first because they've given me a heads up that it's coming?

I don't much want to work for any of my competitors, as I've been pretty good at stealing their customers and making the case for why my company is better. But it seems to me some of those guys might be very interested in picking my brain. And after my last trip to LA, I am more convinced than ever that the competition is much better positioned there than we are. Join them? Get sued? Make enemies of my former co-workers?

Logic (which has no application in law) tells me that you would probably be in a better position going to a competitor if you were fired, in regards to the non-compete clause.

Well, if I keep my job long enough to find my next one, I'm pretty sure I could get myself fired very easily. But talking to the competitors is very risky behavior.

Hey Rick,
Sorry for your situation buddy, that's too bad.
Doesn't sound like it would hold up to me?
1. They "made" you sign it as a condition of employment (duress)
2. They failed to provide you with a copy of what you signed, having it notarized explaining the proper legal implications

Go 4 it.

In most instances, non-competes are difficult to enforce. That being said, customer lists, pricing, contracts, cost data and other similar sales information is intellectual property and using them can trigger an injunction quicker than you can say, "attorney".

In general, people have a right to make a living, which makes non-competes hard to enforce. However, if you are given any type of severance, they typically come combined with a specific non-compete for length of time the severance represents in terms of your standard compensation.

Specific non-completes: named accounts, geographies, etc. are easier to enforce. For example, if your non-compete says you can't for 24 months call on customers in the Phoenix area, you can then make a living by calling on customers in Tucson.

The bigger challenge is a new employer may not want to hire someone with a non-compete just for the hassle factor. Even if non-enforceable, it at minimum involves letters between corporate counsel and at worst involves the threat of trial.

Of course, not keeping copies of legal documents you sign is not the swiftest move.

Sorry to hear about your job situation.

lol, stick with the construction stuff, not legal advice.

I have signed a few noncompete's. One included that I couldnt work for a competitor in the same territory that I was currently in. I did end up going to a competitor and no one asked what territory I was looking after. Another stipulated that you cant call your existing customers for a definded period of time (cant remember the exact details). You have to get a hold of that document to see the exact clauses in it. With all that said, they cant prevent you from making a living. If you have X number of years in an industry they cant just say that you cant work in that industry.

You wont make enemies if they were good friends to start with. If they wernt friends then who cares? I worked for a guy who went to another company to be a sales manager. One month I killed him taking one of his best customers, closed another deal that originated with him and kept a customer selling directly against one of his guys. We kept in contact and still had lunch together for quite some time (have since lost touch)

I think the only way a non-compete clause is enforceable is if they pay you for the time that you can't compete, otherwise they're depriving you of a right to make a living. Not a lawyer though.

Not in California, probably not the US. Basically everyone is an "at will" employee (unless you have an employment contract, negotiated labor agreement, etc.). You don't have to sign anything, you can just not accept the employment. And standard employment documentation does not need to be notarized nor explained beyond what the document says. Every HR person or hiring manager should be coached to encourage the employee to seek their own legal counsel if they want an opinion. However, refusing to sign means you are willing to quit. I've had more than my share of cranky engineers not wanting to sign IP and confidentiality agreements.

And the key of "at will" employment means that severance is not a legal obligation of the employer. Nor is notice by the employee. However, it is common practice for employees to give reasonable notice of their intent to leave the employer as it is common practice for employers to pay a couple weeks pay "in lieu of notice" when they terminate someone.

IMO, it doesn't look suspicious to ask HR for a copy of the policy. You can tell them you've heard that you're probably going to be let go, soon. Your copy of your contract is in storage in VA because of your move, so it's not so easy for you to dig it out and look up the specifics. After all, it's not like you moved cross-country expecting to leave this job and have to find another. But, because you obviously have a skillset in a certain field and may continue work in that general area, you'd like to know what you're allowed to do and what you're not allowed to do if/when you get the axe. Doesn't sound suspicious to me, but maybe I'm naive.

Will your soon-to-be-former employer have the resources to enforce a non-compete?

Non competes are pretty much impossible to enforce. HOWEVER that doesn't mean they can't make your life miserable. I can't imagine in this enviroment that anyone is enforcing them..
What do you sell again ?
I would worry about your short time in the territory since they just moved you out there right ?? They COULD POSSIBLY go after the moving costs if you quit

That is one way to ensure that a non-compete is enforceable - pay for time (not a lawyer though, but have signed and initiated many non-competes for ee's).

However, named accounts and specific territories/regions are much easier to enforce, depending up specific States employment law.

Another thought Rick,, does your current employer know of your attraction to guns ?? LOL

Also, note that the ability to enforce (the enforceability of?) non-compete clauses varies from state-to-state. At least it does in the world of medicine. VA law and AZ law may be different than whatever advice we're giving you, here. And, at least in contracts that I've gone through in my personal jobsearches, non-competes would have varied depending on whether I would hypothetically get released by the employer (fired), versus were I the one to be initiating the split (quit).

I generally agree - talk to HR and ask for a copy of your paperwork - it's your right. However, the only issue is a smart HR person (depending on the size of the organization and the level of the HR contact) will probably send a note to your manager. This puts you on the radar as someone that a) is ready to be laid off; b) is thinking of quitting; c) is being approached by a competitor.

While you might not want that attention, it would be a lot smarter for you to know if your non-compete is an issue or a non-issue before hunting for a job.

There are a lot of factors involved in a non compete. State, job, filed of work, circumstances behind the change, etc. But generally speaking they are difficult to enforce. However, they they can be very costly to defend. As don Plumley stated you "have a right to earn a living" that is key. The more specialized your field is the narrower your options the more difficult it is for your ex employer to enforce unless they paid for your education. The hair cuttery who sends a girl to school is going to have an easier time defending their non compete against a girl going to a shop down the street than say a bio self educated neurosurgeon. That being said I would advise do not quit. It Will be easier to defend if you are fired than if you quit. I wouldn't worry about asking for a copy of your non compete it really isn't going to make a difference in the long run. In this economy I think any judge worth their weight (which isn't saying much I hate all lawyers) Willl understand anyone trying to make ends meet. That is a very different scenario form say two years ago when people were looking to make as much as possible.

WHAT are you talking about? This is getting to be a tough crowd lately at PPOT? Maybe I should start a thread stating that I'm going bankrupt and I'm gonna screw over everyone that I owe money too. You know, to make some friends around here? Jeesh.

I've "taught" more lawyers about contract law than they've ever advised me about. I know I might come across as an arrogant prick sometimes (Ha); OK, most of the time, but my posts are sincerely to help or assist, not to attack or judge. I'm just an old fart that has done alot of shat in his life, if you dont want to listen to my point of view, dont. Take some guys point that is offering his 'theory' then.

1. First point. The employer offers you a job, but in order for you to get the job you have to sign their documents without legal representation or at the very least having them properly notarized, whereby somebody with a background in legal documents explains them properly to you before you sign. Simply signing a document in front of Mrs. HR doesn't cut it imo. If you needed the job badly, you would sign anything they put in front of you, just get me the frickin pay cheque already. A lawyer can argue this easily in either Country. 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. Period.

2. Pretty much explained in 1, but my second point is that when you sign a document that is expected to be held up in the court of law, that can have legal and binding implications on your person, then those documents must be executed properly either with legal representation or at the very least with a notary that explains the document to you, before you sign. Without this you can legally take recourse that you did not know what you were signing OR the HR gal didn't explain it that way OR the HR girls said this/that. This won't hold up in court either.

Sorry if my first post was too brief to understand, but I assumed Rick would get some legal advice anyway. Good Luck Rick, I hope you get an opportunity to move on soon.

"a notary that explains the document to you, before you sign"

Minor point Rob - in the US a Notary does not do anything but certify that the person signing the document has proof of identification that they are in fact, that person. They don't read the documents, they don't explain them - they just witness the signature.

Here's the ultimate practical consideration. Let's assume that you are right on "signing under duress" or your second point. You will need a lawsuit and probably a trial to prove that point. The reality is you or your new employer will need to be willing to foot the bill to file the suit to find that the non-compete was not enforceable. If I were a hiring employer, this new employee would have to be a real superstar to warrant that potential expense. Which in the financial services industries they are, so they do get litigated. But for average sales guys, not usually.

What's dangerous about this situation for Rick, given your advice, is for him to seek employment with a competitor without knowing the terms of the non-compete, but simply assuming it is unenforceable. His former employer files suit against Rick and his new employer, and his new employer cans him for not disclosing this agreement. Sure, in the long run Rick could win the lawsuit, but he'd be out of work in the interim leaving practical matters such as food and shelter hostage to principle.

dp

But, hey, as long as you have principle, what more do you need?

Better to know what the rules are, before the SHTF, as opposed to finding them out the hard way after the fact.

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.

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.

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.

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

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

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.

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.

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?

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.

Lawyer up. I would.

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. :D

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.

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

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?

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.

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 ....

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.

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. :)

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

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

The legal doctrine of duress also has no bearing.