TRACEY’S PRACTICAL EMPLOYMENT TIP
OF THE MONTH*

MAY 2007: NON-COMPETES: LEGAL V. PRACTICAL

When considering whether or not to sign a contract that contains limits on where you may work or what clients you may contact after your employment ends the question is not whether these “restrictive covenants” are enforceable but what effect will they have on your career.

Legally, and to many of my clients’ great surprise, non-competition and non-solicitation clauses in your contract are enforceable. Our legal system does recognize the right of your employer to protect its legitimate business interests from employees who would utilize their confidential information or trade secrets for the benefit of themselves or their new employer. However, an employer’s right to protect its business from “unfair competition” will be balanced against the right of an employee to make a living, the period of time the restrictions are in effect, the reality of whether the information sought to be protected is truly proprietary and confidential and the value of the employee to the former employer’s business (i.e., restrictive covenants are more enforceable against a CEO then an IT manager given their relative value to the company).

In most situations, so long as an employee leaves everything on his or her desk and does not engage in anti-competitive activity while still employed (e.g., taking company property such as customer lists), he/she will be successful in defeating his/her former employer’s attempts to enforce these restrictions. But, at what cost?

Practically, the real damage these restrictions impose is on your career. These restrictions make you less valuable when compared to others who you are competing with for a position but who are not similarly restricted. It is also very unlikely that you will be able to conceal from your future employer that you have signed such an agreement. Most employers ask their employees to sign some form of non-competition agreement so they know to ask whether you are subject to any such restrictions or require you to warrant that you are not before hiring you. In addition, it is extremely expensive to litigate their validity. Even if you chose that route, the time period would likely lapse before you got a favorable decision from a court.

Unfortunately, employers are in a superior position here as they can condition your hiring, or the continuation of your employment, on your agreement to these types of restrictions. If you are asked to sign a non-competition or non-solicitation agreement the best course of action is to have an attorney with experience in this area review it to determine the effect it may have on your future. An attorney with experience in this area will know that these agreements are negotiable because employers recognize that if they make the restrictions to broad they will not be enforceable. With a few simple adjustments to the language the legitimate interests of both parties can be usually be addressed. Even if the employer will not make the requested changes, you will have at least laid some of the groundwork needed to support a claim that the restrictions are not enforceable.

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* Disclaimer: The contents of this page are for informational purposes only and nothing herein is intended to constitute legal advice nor should anything contained herein be taken or relied on as such. Each individual executive and employee has a unique set of facts and circumstances that the general discussion set forth above may be wholly inapplicable to. Only through consultation with a lawyer from our firm in which all of the facts and circumstances of an individual’s unique situation are explored and considered can a true legal assessment of your rights and remedies be ascertained. Any use of this information is taken solely at your own risk.