Noncompetes --Nuisance or Nemesis?

Whether you're an employee facing the prospect of separating from your current employer and are gearing up to search for a new job, or if you have an employment offer in hand and are wondering whether to accept it, you may find that noncompetes (a.k.a. restrictive covenants or covenants-not-to-compete) are a key issue in today's job offer and acceptance negotiations. This is especially true for those in the fields of sales, marketing, engineering, scientific research & development, and management. If you're looking for work, a noncompete you signed with your previous employer may determine which industries, or employers, you can and can't seek out, or what you can and can't do if you do get a new job. Even if you have no noncompete now, odds are a new employer may try to get you to sign one as part of your new employment offer (sometimes the noncompete provisions are contained in a separate document called a "confidentiality" agreement, so if your offer says acceptance is contingent upon you agreeing to and signing a confidentiality agreement, make sure you ask for a copy to review in advance of your first day at work.) It makes good sense to spend some preventive time with an employment attorney before you sign a noncompete by exploring the bottom-line question of: to what extent might this piece of paper eventually preclude you from moving on to a better position in your areas of expertise when you leave the company you are preparing to join? Your goal is to get the restrictive provisions drafted as narrowly as possible in terms of scope, duration and restrictiveness. Of course, the power of the noncompete depends on its enforceability, and this may vary dramatically according to a number of factors. The two main factors affecting whether or not a noncompete will be enforced are: (1) Which state's laws apply to interpreting the noncompete, and (2) What are all the facts of the case in question. Noncompetes are governed by state law, and each state is allowed to have different standards for reasonableness - and, hence, enforceability. For example, under New York law, the reasonableness of a noncompete generally will be determined according to its duration and geographic scope. Other states, such as Pennsylvania and New Hampshire, consider whether the restriction will last longer than it will take the employer to effectively replace the departing employee. Still other states, including Washington and West Virginia, assess reasonableness by balancing three potentially competing interests: those of the employer, the employee, and the public at large. Each state will look at whether or not there is good consideration to support the enforcement of any noncompete agreement -- although every state is allowed to define good consideration differently. States also vary as to whether the enforceability of a covenant not to compete may be affected by the nature of the separation. For example, under Pennsylvania law, employers generally won't succeed in enforcing a covenant-not-to-compete against an at-will employee terminated for poor performance or without cause. Under Delaware law, covenants likely would be unenforceable against an at-will employee terminated for no cause or for bad cause. Still another approach and, specifically, the one adopted by New York, Maryland, South Carolina, and Missouri is that the covenant-not-to-compete will be unenforceable if the employer breaches the contract of which it is a part. Cases often turn on the facts. Noncompetes are enforced against some types of employees, but not all, depending upon what type of work each does, and how much of a competitive threat the employee could pose to the employer. For instance, noncompetes are not enforceable against attorneys, so even if an attorney enters into a noncompete with his employer today, the law firm at which he works likely will be powerless to prevent him from joining a competitor tomorrow. Noncompetes are often sought to be enforced against those perceived to pose a competitive threat to an organization's trade secrets, intellectual property, or customer base -- in other words, to its bottom-line. Non-competes can be confusing, and I don't recommend you ever sign one under the naive impression that "it won't be enforceable anyway". Look before you leap, and try to negotiate reasonable changes before you sign on the dotted line. It's a lot less expensive to fight noncompetes before you sign them, versus once you get into litigation. For more information about noncompetes, see www.robinbond.com. For information about employment attorneys in your area, consider checking www.nela.org, the web site of the National Employment Lawyers Association.