An Example of Non-Compete Agreements and Their Consequences

A Non-Compete Agreement or Covenant Not to Compete, in the employment context, is an agreement to refrain from entering into or starting a similar trade or profession that would be in competition against the employer. The use of these agreements is usually premised on the possibility that when an employee is terminated or resigns, he or she may begin working for a competitor or start their own business and gain a competitive advantage.

That advantage would presumably come from exploiting confidential information gained while working for the former employer. Information regarding the former employer’s operations, trade secrets, sensitive information, etc., are meant to be protected by such agreements, as well as confidentiality and non-disclosure agreements. What happens if your employer believes you have violated one of these agreements? A recent case out of Houston demonstrates some of the issues that can arise from employer non-compete agreements.

Houston business sues former employee and his competing business

A restaurant service company out of Houston has accused a former employee of opening a competing business while he was still employed. They alleged, understandably, that this competing business interfered with its business relationships. According to the allegations, the former employee not only ignored calls for service from his employer’s customers but also contacted those to encourage them to sign with his new company. Essentially, he was stealing customers and undermining his current employer’s business.

The Houston business sought a restraining order to prevent the employee from diverting its clients and using its trade secrets. The company also requested monetary relief up to $200,000. Certainly, if the facts prove to be as the company alleges, this employee is guilty of several unlawful acts including business interference.

Are Non-compete agreements valid in Alabama?

Non-compete agreements are standard in employment contracts within certain industries, such as sales positions. However, the enforceability on a noncompete agreement must be determined on a case-by-case basis. The law of the state governing the employment contract will determine the enforceability, along with the terms of the agreement itself and the relevant factual circumstances.

Generally speaking, Alabama law says that “contracts restraining business,” like non-compete agreements, are void. However, there are so many recognized exceptions that many non-compete agreements are valid if they are reasonable. In Alabama, an “employee may agree with his employer to refrain from carrying on or engaging in a similar business and from soliciting old customers.” This particular case out of Houston alleges actions by an employee that go well beyond carrying on a similar business and soliciting old customers, primarily because the alleged actions occurred while the employee was still working for the business. As odd as this seems, it is more common than you might think. A takeaway for employees is to never solicit customers while you are still employed, even if you believe your future business will not violate a non-compete agreement. There are still many other issues that can put you at risk for liability.

If you have questions about non-compete agreements or any other questions regarding your employment rights, please contact the experienced employment law attorneys at Wrady & Michel, LLC. You can contact us either online or by calling us at (205) 265-1880. We are here to serve you!

Categories: Non-Compete Agreement
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