Non-compete agreements, in the employment context, are meant to protect the interests of the employer. When a company shares its ideas and business practices with its employees, which is inevitable, a non-compete agreement prevents the employees from later using those ideas and practices for the benefit of a competing business. Often, though, non-compete agreements end up creating a nearly insurmountable obstacle for employees seeking subsequent employment.
An example of a non-compete nightmare
An attorney in New York described in his blog a case he handled which involved not one, but two non-compete agreements, which essentially ruined his client's career. His client (whom he referred to only as Joe) was a salesman who had worked for his first employer for 5 years. Another company, which sold the same products, wanted to hire Joe to be their salesman. The second company offered to double his salary.
The problem was, Joe had signed a non-compete agreement with the first company, so he was prohibited from, among other things, selling "competitive products." Joe discussed the non-compete agreement with the new company, and was assured that the products they sold were different and the agreement should not be a problem. Joe did not have his own attorney review the agreement, but relied on what he was told by the lawyers for the second company.
Joe resigned from the first company and took the position with the second. He signed an employment agreement with the new company, which contained yet another non-compete agreement. You can probably guess what happened next. Joe's first employer sued him in federal court, as soon as they received notice that he was selling competitor products. His new employer refused to defend him in the lawsuit, despite their assurances that he had not violated the prior agreement.
Not wanting to be involved in, or burdened with, Joe's legal woes, the second company terminated Joe and replaced him with another salesman. Unfortunately, because Joe signed a new non-compete agreement with the second company, he now found himself jobless and bound by two agreements that prevented him from working in that industry at all. No other companies wanted to hire him with the non-compete agreements hanging over his head.
How could this nightmare have been prevented?
Unfortunately, Joe has not legal recourse at this point. He was an employee at will and the second company was free to terminate his employment. But, what could Joe have done to prevent this predicament?
Joe should have retained an employment law attorney in his area, to review the first non-compete agreement before accepting the job with the second company. He should have also had his attorney help him to negotiate his employment agreement with the second company. He could have negotiated for a clause requiring the second company to defend any legal actions regarding the non-compete agreement.
If you need assistance in negotiating an employment agreement, or if you have any questions regarding your employment rights, please contact Wrady & Michel, LLC, either online or by calling us at (205) 265-1880.