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A while back I asserted that certain parts of employment
contracts are not enforceable, but I didn't have written references
to back myself up. I now have some additional information
in the form of a summary of findings and some web references,
plus some recommendations on how to position yourself both
in signing employment agreements and if you find yourself
in a dispute.
This isn't a definitive work, but if you're interested it
gives you an orientation to the issues and places to get started.
Be sure to follow up on your local and state laws.
Happy trails,
John
Disclaimer
I am not a lawyer and this posting is not intended to be legal advice.
I assume no liability of any sort for the use of this information.
Consult a lawyer before signing any contract or taking any legal action.
Summary/Recommendations
- Common law generally does not support the enforcement of
noncompete clauses, because it constitutes restraint of
trade. State laws provide some enforcement of them, but the
employer usually must show significant material loss of some
sort to make it stick (trade secrets, special training, client
lists). The losses usually must be actual, not anticipated.
1. Do not accept noncompete clauses in contracts.
If you don't want to abide by a stated noncompete clause,
scratch through it on the employment agreement and initial it.
If your employer won't accept the modified contract, consider
working elsewhere.
2. To sue successfully for violation, a company usually has to
demonstrate material loss, *depending on the state laws*
where you did business with the company. If you find yourself
being pursued by a company, one of the best defenses is to write
(or have a lawyer write) a rejection of their claim of contract
violation, citing state law and evidence that you do not
fit under the law. This may prevent the company from suing
(since they see that you know the law and are prepared to defend
yourself) and at least kick it to mediation.
3. Remember that most employment lawyers work for companies, because
companies have more money than you. It may be hard to find a good
employment lawyer to represent you, so it's best to avoid being
sued in the first place--don't sign contracts that contain terms
that you disagree with.
4. Companies do have a legitimate right to protect their interests,
including investments made in you. Be considerate of them, and
be aware of working conditions that expose you to liability under
the noncompete clause.
5. You have a basic right to pursue your occupation without restriction.
If someone attempts to keep you from working (through noncompete
conditions) AND they do not pay you, they may be guilty of
restraint of trade under common law. Again, KNOW YOUR STATE LAWS
that modify or supercede common law.
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Origin
Noncompete agreements were originally intended for higher-level
employees, especially executives in areas where trade secrets and
client lists were important to the viability of a business.
Employers are pressing to expand the scope of noncompete agreements.
Litigation in this area of the law is increasing rapidly. [1]
1. Common Law
Common Law historically does not hold up the enforceability
of noncompete agreements. "Under the common law, all contracts
that hindered one's right to practice a trade or business and
support one's family were considered invalid as against
public policy."[1]
Common law is modified or superceded by state law.
2. State Law
2a.
Florida considers noncompete agreements to be legitimate
between employers and contractors or employees, but they
are heavily restricted: there has to be proof that the employer
loses something by your working for someone else--client contacts,
trade secrets, the benefits of special training that they provided
to you, etc. A pending "safe harbor" law proposes that agreements
specifying a period of less than 6 months be presumably enforceable
and agreements specifying a period of greater than 24 months be
presumably unenforceable.
3. Trial History
3a. Summary Judgments in US Eastern District Court involoving
Borg-Warner Communications and Guardsmark. The court upheld the
enforceability of a 12-month noncompete agreement with contract
security guards. However, Guardsmark easily fulfilled the
"investment in employee" consideration: they invested in selection
(extensive application and selection process, including drug
testing and reference checking) employee training (including
exams and on-site training), and the employees' tenure (first two
weeks were free to the client). [2] The issue of noncompetition
was secondary to the case--basically Borg-Warner was trying to
hire Guardsmark-trained guards away, causing Guardsmark to respond
in court.
==============================================================
References
(1) http://www.steelhector.com/writrev.htm
THE WRITTEN WORD IN EMPLOYMENT RELATIONSHIPS: OFFER LETTERS, EMPLOYMENT
AGREEMENTS, WORK-FOR-HIRE AGREEMENTS, CONFIDENTIALITY AGREEMENTS ,
NONCOMPETITION AGREEMENTS, AND RELEASES
Abigail C. Watts-FitzGerald, Mark R. Cheskin, P.A., Lisa R. Askowitz
Labor & Employment Relations Group, Steel Hector & Davis LLP,
Chairperson: Elizabeth J. du Fresne
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