Non-Competes
“Noncompete agreements have risen their heads to a point where it’s harder and harder for new employees to be offered a position without the company asking for their signature. These days more and more companies of all sizes and in all industries are using noncompetes in an attempt to protect their trade secrets, employee ranks, and customer bases. What’s more, in an age of frequent job hopping, companies are finding that they need to enforce those agreements more often than ever. This from an article written by Christopher Caggiano, published in Inc. Magazine.
According to David Barmak, a lawyer with Sherman Meehan Curtin & Ain, with headquarters in Washington, D.C., “both interest in and litigation over noncompete agreements have been increasing recently. Unfortunately, he says, “noncompete agreements have proliferated faster than knowledge about them has. Misconceptions abound. “I’ve even heard lawyers tell people that noncompete agreements are not enforceable,” says Barmak. “And that’s just wrong.” What is true, however, is that a noncompete can be difficult to enforce. To improve your odds, “you have to show it’s necessary to protect some legitimate business interest, such as trade secrets,” he says.
Even if an agreement is well crafted, it still might not hold up in court. That’s because the “reasonableness” of a noncompete resides entirely in the eye of the presiding judge. According to Mel Jager, a lawyer with the Chicago-based law firm Brinks Hofer Gilson & Lione, “courts tend to bend over backward to achieve equity in these cases, because leaving someone without the means to make a living is tantamount to economic capital punishment.” Remember, if a judge suspects you’re using noncompetes merely to erect competitive barriers, you may be in trouble. Public policy in most states dictates that you can’t cause former employees undue hardship and you can’t completely prevent them from changing jobs.”
Depending on where you live, some states all but prohibit noncompetes, some states are likely to enforce, and some states are reluctant to enforce. According to Scott Westcott, of Inc. Magazine, February 2008 issue, a rough guide includes:
Unlikely to enforce: California bans nearly all employee noncompetes; a company can be sued for forcing employees to sign one. Georgia’s and Wisconsin’s laws are nearly as strict–if a single item in an agreement is overbroad, the whole thing gets tossed. Other states in which noncompetes rarely fly include Colorado and Oregon; the latter passed restrictive legislation that went into effect January 1, 2008.
Reluctant to enforce: In most states, courts will enforce noncompetes–but only if the agreements are narrowly drafted to protect trade secrets or customer relationships. Some states allow the courts to “blue pencil” the agreement, which means scratching out an unenforceable term. Other states allow the courts to revise an agreement to make it more reasonable. “Reluctant” states include New York, Massachusetts, and Illinois.
Likely to enforce: Florida law makes noncompetes presumptively enforceable. Other states more likely to enforce noncompetes include Texas, Michigan, and New Jersey.
