Author Topic: Help with Non-compete agreement  (Read 5830 times)

mozar

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Help with Non-compete agreement
« on: November 04, 2014, 07:48:22 PM »
Hello,
I am looking for help on interpreting my non-compete agreement. I am assuming that it would be interpreted as widely as possible by my company.
For any XXX Company client that you perform work for, you agree not to perform any other work for that client, directly or indirectly, for a period of one year from the date of execution of this document or from your last day of employment with XXX, whichever is later.

First of all, how can this be enforced if I am an at-will employee and I can leave for any reason or no reason?
Say I worked for company Y for a week at project A as a sub-contractor from company XXX. Then it ends. Then company Y emails me and asks me if I would apply to company Y directly for project B. The person from company Y who contacted me was not aware that I worked on company Y at project A as a subcontractor. Would the non-compete interfere with this? What would be the consequences?

Zamboni

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Re: Help with Non-compete agreement
« Reply #1 on: November 04, 2014, 08:32:46 PM »
Is this something you already signed?

I would ignore it and just lay low if you end up working for a client or former client of XXX company.  Non-compete agreements are notoriously difficult to enforce.  Unless you are a sales guy using their roladex to steal all of their clients, they are going to have a hard time coming after you for anything.

Disclaimer:  this is not legal advice.

TrulyStashin

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Re: Help with Non-compete agreement
« Reply #2 on: November 04, 2014, 08:42:56 PM »
Being in an at-will state has no bearing on this.  It's a contract and contracts are enforceable.

Non-competes can be difficult to enforce because they are often drafted so broadly that they violate public policy -- it's good for trade/ commerce if people can compete so limits on competition are disfavored by courts.  A non-compete with really broad terms (example:  non-compete for the next five years and covering a radius of 200 miles from X location) would be very difficult to enforce.  A well drafted non-compete with limited/ reasonable terms would not be hard to enforce.

The way your non-compete is drafted and the laws of your state will determine the degree to which it is enforceable.  Nothing I've written here is applicable specifically to your case; it's not legal advice.  Aside from whether or not you're violating the contract, you also need to consider the consequences of breaking the contract.

Bottom line:  talk to a lawyer in your state who does employment law (a general practice lawyer is not a good choice for this).  Contact your city's bar association (a voluntary association) for a referral.

mozar

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Re: Help with Non-compete agreement
« Reply #3 on: November 04, 2014, 09:12:35 PM »
I signed it a few months ago. What does enforcement mean? Being sued?

fa

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Re: Help with Non-compete agreement
« Reply #4 on: November 04, 2014, 09:33:56 PM »
I signed it a few months ago. What does enforcement mean? Being sued?

Yes, it means being sued.  Enfoceability depends ont the laws of your specific state.

Non-compete litigation is not likely, but it could be serious.  Businesses have a legitimate interest is preventing an employee from simply switching to a competitor.  You have inside knowledge that could be very damaging to your current employer if your future employer is made aware of it.  It is probably not something you want to test, because if you are sued you may need to spend tens of thousands of dollars to defend yourself.  I know industries where non-compete contracts for employees are commonly used and are enforced.

On a side note:  if you voluntarily signed a legal and enforceable non-compete agreement, you really should abide by the terms of the agreement.  We all need to respect the terms of contracts we sign.  Our entire society is based on this principle.

ClaycordJCA

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Re: Help with Non-compete agreement
« Reply #5 on: November 04, 2014, 11:59:35 PM »
As stated above, you need to check with a lawyer in your state. The agreement may well be enforceable. If so, you could be sued and have to pay a lawyer to defend you and, if you lose, possible damages and the employer's costs (and possibly legal fees). 

BlueHouse

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Re: Help with Non-compete agreement
« Reply #6 on: November 05, 2014, 05:00:59 AM »
Think about what your employer was protecting  in your scenario, your employer lost more than you did. On top of losing you as a resource and having to find another, they also risk losing a billable position because presumably Compay Y will not have to contract for that position anymore.  So the harm you do to company xxx is permanent.
this happens quite often in my line and i usually ask myself whether i could defend the behavior if company xxx were your best friend in a bar.  If I can, then I don't have an ethical dilemma about it, then I move on to the next step: 
Tell the new company that you're restricted by a non compete clause and ask them to help you interpret it. They may be able to show you that it doesn't apply to new business or they may be willing to pay a fee to the other company to keep things kosher.

I'm a small independent contractor, so I routinely change the language in non-competes to limit restrictions to new, similar work found as a result of the placement so that if someone in a different branch finds me through another means, then I'm free to pursue  Or if new work pops up for the same group that is substantially different from my prime contractor's work then I can take it as my own. An example of this would be starting out as a quick books consultant for a software vendor to set up books and ending up getting hired as a staff accountant.  In this case, the company I subbed for didn't make its business off of staffing accounting positions so I wouldn't cut in to their potential business.

former player

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Re: Help with Non-compete agreement
« Reply #7 on: November 05, 2014, 10:36:24 AM »
If you want legal advice, you need to pay for it from a lawyer with the appropriate experience in your State.

If you want advice on how to behave, this is the place to come.  The thing you need to remember is that your future earnings depend on the reputation you have earned.  If you take this new contract without going through your own company or company xxx and are found out, your reputation with both of them will be trashed.  Whether or not they then take you to court is almost irrelevant: you have burned your boats with both of them as regards future working relationships.

My advice: go to your current manager at the company you signed the non-compete with, explain to them that you have had this offer to apply for project B with company Y, and that you are interested in applying but don't want to break the terms of your non-compete clause.

You might get a variety of answers.  Your company might say "this offer came to you independently, it's not something we are interested in, we will waive the non-compete on this occasion".  They might say "that's great, it's new business for us that we are interested in and the fact that you have had this offer makes you a more valuable employee to us.  We want to apply for it with you in the lead, and if we get it you will have a pay rise."  They might say "we don't want this business but we don't want you to have anything to do with it either, just get on with what we've already told you to do" - in which case you will need to make a lot of decisions about your future with that company.

I would just say that in my (professional) experience, litigation is expensive, time consuming, emotionally draining and leaves bitter feelings in its wake whatever the outcome.  In my view, if you can possibly avoid getting into a situation where litigation will follow, it will be worth it to you whatever the forgone opportunities.

TrulyStashin

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Re: Help with Non-compete agreement
« Reply #8 on: November 05, 2014, 03:05:22 PM »
If you want legal advice, you need to pay for it from a lawyer with the appropriate experience in your State.

If you want advice on how to behave, this is the place to come.  The thing you need to remember is that your future earnings depend on the reputation you have earned.  If you take this new contract without going through your own company or company xxx and are found out, your reputation with both of them will be trashed.  Whether or not they then take you to court is almost irrelevant: you have burned your boats with both of them as regards future working relationships.

My advice: go to your current manager at the company you signed the non-compete with, explain to them that you have had this offer to apply for project B with company Y, and that you are interested in applying but don't want to break the terms of your non-compete clause.

You might get a variety of answers.  Your company might say "this offer came to you independently, it's not something we are interested in, we will waive the non-compete on this occasion".  They might say "that's great, it's new business for us that we are interested in and the fact that you have had this offer makes you a more valuable employee to us.  We want to apply for it with you in the lead, and if we get it you will have a pay rise."  They might say "we don't want this business but we don't want you to have anything to do with it either, just get on with what we've already told you to do" - in which case you will need to make a lot of decisions about your future with that company.

I would just say that in my (professional) experience, litigation is expensive, time consuming, emotionally draining and leaves bitter feelings in its wake whatever the outcome.  In my view, if you can possibly avoid getting into a situation where litigation will follow, it will be worth it to you whatever the forgone opportunities.

+ 1,000.  Especially the first two sentences.

Jellyfish

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Re: Help with Non-compete agreement
« Reply #9 on: November 05, 2014, 03:14:43 PM »
I am not an attorney but work with non-competes frequently in my HR role.  As others have said the enforceability of yours will depend on its specific language as well as where you live and work (California, in particular, has state law that makes them more difficult to enforce). 

However in general, if you signed this agreement your employer will expect you to abide by the terms. If you leave the employer and expect to take work for a competitor you should seek to get a waiver in writing to protect yourself.  When we hire folks whose work for us might interfere with their existing non-competes we are very careful to ensure they obtain clear and written waivers.  Or of course, talk to an attorney. 

Vilgan

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Re: Help with Non-compete agreement
« Reply #10 on: November 05, 2014, 05:38:59 PM »
First of all, how can this be enforced if I am an at-will employee and I can leave for any reason or no reason?
Say I worked for company Y for a week at project A as a sub-contractor from company XXX. Then it ends. Then company Y emails me and asks me if I would apply to company Y directly for project B. The person from company Y who contacted me was not aware that I worked on company Y at project A as a subcontractor. Would the non-compete interfere with this? What would be the consequences?

Your scenario seems like a text book case of why non competes exist in professional services. Company XXX did all the initial work company Y to get the work and find people appropriate to do the work. Now you want to piggy back off of the work that Company XXX did and cut them out of the process. Will you get caught? No clue. The risk of "bad things" is nonzero.

Not a lawyer advice: You have 3 options imo:

1) Ask Company XXX for a waiver. They might say yes depending on how much they care about this opportunity. Lots of companies have more work than they can staff and keeping a good relationship with potential subcontractors/people in general can be worth it.
2) Involve Company XXX in the process. Feel free to negotiate in a manner that is more favorable to you since it is Company Y's impression of you (presumably) that is creating this opportunity.
3) Inform Company Y that you are bound by a noncompete until date XYZ unless Company XXX is willing to waive the noncompete. If Company XXX refuses to waive the noncompete when you request it, they very well might if Company Y requests it.

Really the only bad way forward (imo) is to hide everything from the 2 companies involved and hope they don't figure it out.

Good luck!
« Last Edit: November 05, 2014, 05:41:55 PM by Vilgan »

mozar

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Re: Help with Non-compete agreement
« Reply #11 on: November 05, 2014, 08:11:09 PM »
Thanks for all the advice everyone. I'll have to come back and re-read all the legalese. Company Y called me out of the blue, it has nothing to do with my company XXX (but is similar work), and Company Y calls me every couple of years anyway, to see what I am doing.

Company Y would actually not be hiring me for project B but as a full time employee that could work on any project B C or D. Company Y may or may not be looking for sub contractors from company XXX from project B, C or D, so XXX probably wouldn't see it as losing an opportunity.

In my industry it's common for a company (like company y) to pay another company (ex. XXX) a penalty to release someone. But when I spoke to company Y they didn't seem open to that. If I went to XXX they would probably say "we don't want this business but we don't want you to have anything to do with it either, just get on with what we've already told you to do", as stated by another poster.

I don't think company Y will call me back because I don't have a certificate they want, but I was talking to company Z today which would be a similar situation.
You all are right that my reputation is extremely important. I literally have to sign things saying I am honest all the time. I could not care less about ethics, integrity (because companies shit on me all the time, but I generally abide by contracts if they are non-abusive), but if I were to turn down company Y on principle, they would probably be impressed. Then I can tell XXX about how great I am for following the non-compete (not now but when I leave). I think I will wait a year, get some good, desired experience, then find a company where I won't have to be a sub-contractor, wait another year, at which time Co. Y will come calling me again.
« Last Edit: November 05, 2014, 08:51:06 PM by mozar »

mozar

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Re: Help with Non-compete agreement
« Reply #12 on: November 05, 2014, 08:51:58 PM »
It can be either Washington DC, Maryland or Virginia.

dividendman

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Re: Help with Non-compete agreement
« Reply #13 on: November 05, 2014, 09:43:26 PM »
Unless you're a high level executive nobody is going to spend the money enforcing a non-compete. Why? Because the cost is high, the publicity is bad, and they might lose. You probably have friends at work and no employer wants the reputation of suing a former employee for leaving unless it's really costing them big. It's bad for the company in so many ways so getting 100k from you or whatever damages they can show (assuming they win) won't be worth it.

Also, depending on the entire employment document, as others have stated, the non-compete itself could be tossed out by a judge.

Most of the time it isn't just that the company has to show you went to a competitor (thereby technically breaking the agreement) but they have to show damages from that. Anyway, it varies state to state so if you're really worried talk to a lawyer.

Most people have recommended taking the "high road" of discussing with with them in the hopes they waive the restriction. I say do the cost-benefit analysis and break the contract if need be and DON'T talk to them about it since they can use that in the very unlikely chance they decide to sue you. I don't know all of the particulars of your situation, but if the pay was good enough etc. I would break it. I don't think this is unethical. Why? Because this is a business decision. Businesses break contracts all the time when they believe it will help their bottom line - and they DO get sued frequently for breach of contract but factor it in when they are going to break a contract.

Also civil contract judgements are public record, so see if you company has EVER sued anyone (never mind winning) for violating a non-compete or ask a lawyer to check - I bet the answer is no (and I don't even know the company).

dividendman

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Re: Help with Non-compete agreement
« Reply #14 on: November 05, 2014, 10:41:19 PM »
I say do the cost-benefit analysis and break the contract if need be and DON'T talk to them about it since they can use that in the very unlikely chance they decide to sue you.

Richard Posner would likely approve of this approach. He uses the term "efficient breach".

Wow, neat-o. I didn't realize someone had formally documented this. Very interesting! Although I don't subscribe to all of Posner's views... :)