I need some simple legal advise - regarding my non-compete agreement with employer

[Tidybuoy]

Hi,

I have an attorney and will be getting advice but I am checking for other opinions and I know there are many experts on this board.

I am an accountant and operate my own independant bookkeeping company. One of my clients is a CPA firm and I have a client thru them.

A company that I do monthly work for, is canceling their agreement with the CPA and wants to hire my company direct. However, I have a non-compete agreement with the CPA (unfortunately, it's strict and expensive and I should have read more carefully).

I terminated my agreement with CPA due to CPA's repeated non payment for services. They owe me several thousand from 2010 and have not paid due to the customer filing BK. My debt is with CPA and the not BK customer.

I used this as my right to terminate contract. CPA is stating that they are not in violation because I did not send demand for payment - eventhough I sent several statements indicating past due.

CPA paid me in full, today, but deducted $760 because they had asked for a discount a couple of months ago. It was a verbal request and I verbally agreed because CPA had paid for Quickbooks Proadvisor Program (worth $600). However, when CPA found that I had listed my own company on Proadvisor website, he complained that he owned the license and I must onlyu list his company. I argued that I only agreed to the discount because he had purchased the program but if I could not use my own company's name, I would not agree to the discount. I never issued anything in writing or a credit memo. I want my $760

Question:
1) CPA payment does not state payment in full on check but does state this in attorney letter to me. I want to cash this check but feel that this discount issue is a legal holdup - any thoughts?

2) Non-compete calls fro me to pay CPA 30% of any gross revenue for 2 years. Rediculous but I signed the contract. My question is that the customer that wants to hire my services is setting up a new LLC company and wants me to do work for both companies - must I pay 30% for both companies?

exact wording of contract:
Non-Compete: Contractor agrees that, during the term of this Agreement and for a period of one (1) year following the termination of this Agreement, Contractor shall not directly or indirectly compete with CPA by soliciting and/or taking any of CPA's clients. In the event Contractor breaches this provision and takes CPA's client(s) prior to the expiration of the one (1) year non-compete period which follows termination of this Agreement, Contractor shall reasonably compensate CPA by paying CPA 30% of all gross revenues Contractor receives from said client for a period of two (2) years from the date Contractor takes client from CPA. Contractor agrees not to act as an officer, director, employee, consultant, lender, or agent of any entity which is currently affiliated in any way with CPA during the term of this Agreement and extending one (1) year following the termination of this Agreement.

Any advice or comments would be greatly appreciated.

[red-beard]

On #2, it wuold seem if the LLC company terminates their contract first with thier present CPA, then goes "out for bid", you are not taking one of the CPA's clients.

But then I'm not a lawyer...

[Jim Bremner]

check pm

[schamp]

You need a California lawyer. Is California a right to work state? The fact you signed the non compete is material- but did you have to sign it to get the work?

[slodave]

California doesn't honor non-compete documents. I signed one with a previous employer, only to have a couple of lawyers tell me it was not worth the paper it was written on. That said, check with your lawyer.

[looneybin]

if the CPA says he owns the Quickbooks license, then he can't deduct it from your fees.

I've had clients ask for a fee discount, just because they ask doesn't mean they get one.
Also, anything verbal is not binding in Cali.

good luck

[Don Plumley]

A non-attorney opinion:

A non-compete and a non-solicit are two different things. In Cali, non-competes are pretty much unenforceable except in unusual circumstance. However, a non-solicit can be enforced so long as it does not preclude you from work. In other words, if you were an accountant for avocado growers only, it would be difficult to enforce the non-solicit - you must be able to work. But if you could be an accountant for any farmer, then the non-solicit is easier to enforce.

I've pulled non-competes out of all our contracts, but I have specifically put in non-solicits for customers or employees.

From my perspective, that clause is reasonable in a professional services environment - you can go be an accountant for anyone. Remember, just because it is not enforceable does not mean you can't be subject to a lawsuit and the attendant expenses.

If you can demonstrate breach of contract, then the non-compete (unless protected elsewhere in the contract) is moot. Frankly, I'd work on an agreement with the other party - pay him 10% for one year to put the matter to bed.

[Tidybuoy]

Originally Posted by looneybin

if the CPA says he owns the Quickbooks license, then he can't deduct it from your fees.

Thanks, but he dosent own the software - I do. The CPA paid for some courses that I took to get various licenses and then wanted a discount off my bill. Even though I never asked for these courses.

Originally Posted by Don Plumley

If you can demonstrate breach of contract, then the non-compete (unless protected elsewhere in the contract) is moot. Frankly, I'd work on an agreement with the other party - pay him 10% for one year to put the matter to bed.

Thanks. I am fine paying him something but 30% is excessive and my dumb fault for not reading more thoroughly. He's definately in breach of contract by not paying the bill. However, the contract states that non-compete exists for a year after termination (no matter the reason for termination - like his breach).

There is a non-solicit clause as well but I have not solicited anyone and don't intend to. The client fired the CPA and then came to me. We haven't signed any contract yet.

[slodave]

I signed one that was to last 16 months. It was not enforceable. I even mentioned that to the employer after I left and they admitted they knew it. It was just a scare tactic to protect their clients from being taken away. Which I did.

[RWebb]

does the K have a severability clause in it?

but, yeh, you need an atty in your own state to scrutineer the the thing

[Tidybuoy]

Thanks for all the advice. Several of you mentioned that you think non-competes are illegal in Calif and that never occured to me. So after some searching, I found that they are indeed illegal in CA with a few exceptions (none my case).

Good article about non-compete agreements:
California Supreme Court Nixes Most Non-Compete Agreements

Also, for purposes of this law, employees and independant contractors are the same.

The most ironic thing about this, is that I offered to renegotiate and pay him 15% of gross revenue for 6 months (for this particular client), and he "respectfully declined". Now I'm going to offer him Zero!

[dondarnell]

Free legal advice is worth what you pay for it. I am a lawyer in Michigan. Non-competes are generally enforceable as long as they don't unreasonably restrict a persons ability to work. Your non compete isn't really a non-compete - it's a contract that says you won't steal their clients. Somebody here called it a "non-solicite" clause - which is a term I have not heard - but makes sense in a practical sense.

Even without this clause you could be sued for tortious interference with an advantageous business relationship. I've been on both sides of litigation with lawyers, doctors, Etc. (dentists are the
worst). Get a good lawyer, take his / her advice. Proceed carefully.

[slodave]

Not exactly true in Cali. California encourages entrepreneurial activities, which is why non compete agreements are unenforceable here except in rare cases. Still wise to talk with a lawyer though.

[slodave]

One other thing... Sitting with my dad, a retired lawyer that knows this stuff. If the client came to you, the non-compete and non-solicite don't apply, since they came to you and you did not solicit them. Also, Non solicit covenants in Cali are generally unenforceable.

Good luck!

[Tidybuoy]

For the record: I did not solicit anyone. The client sent me an e-mail informing me that they had severed ties with the CPA and then asked if I would consider working for them direct (as an independent contractor). They also asked me to remove CPA's access to their accounting system.

Attached is a photo of the actual clause in my contract:

[slodave]

You're golden....

Of course your lawyer has to tell you that though..