Non-Compete Agreement – Valued Employee or Indentured Servitude?

A non-compete agreement is a contract signed by an employee in which he or she agrees they will not engage in certain employment within a certain geographic area for a certain period of time after their employment is terminated. Non-solicitation agreements preclude a terminated employee from contacting the employer’s customers or remaining employees after leaving employment.

Non-compete agreements are becoming more common and generally employees are asked to sign one (1) at initial employment (2) to termination as a condition to receive a severance package and (3) during employment generally when there is a significant promotion. When it comes to any non-compete agreement, it is important for you to understand your legal rights and to consult with an attorney who can address important issues such as whether it is reasonable or too broad, what exactly it means to agree to have a certain state law applied, whether you are getting a salary and health insurance during the entire non-compete period, whether the non-compete is effective if the company lays you off or terminates you without cause and whether you must comply with the entire non-compete period even if you had a very short period of employment.

As you can see, the purpose of the non-compete and non-solicitation agreements are to protect the company’s business interests after you leave their employment. They do not protect the former employee’s interests. You must be concerned about yourself, your career and how you will meet your obligations during the post-employment.

Unfortunately, when an employee is asked to sign non-compete and non-solicitation agreements, they fear they will lose their job if they do not sign. Most employees feel they have little or no bargaining power and sign these contracts with little thought, review or negotiation. This situation is even more egregious when the employee works for a very large company that dominates the industry.

Once you sign the non-compete and non-solicitation agreements you must be prepared to live with it as written unless you are willing to initiate a court action to attack these agreements. An employee always has the right to race to the courthouse and asked for relief based upon, among other things, the unnecessary and unreasonable restrictions imposed upon them, the undue burdens caused by their inability to work, a company monopolizing the industry and the well-established public policy that an individual has a right to work.

Many employees wrongly believe that such contracts are unenforceable or assume the non-compete won’t really affect them. It is usually when the employee realizes they can significantly improve their career and compensation by going to work for a competitor or supplier that they begin to feel like an indentured servant. They feel they are unable to quit their job because their non-compete agreement prohibits them from making a living and they have no other means of support during the non-compete period; they fear underemployment or unemployment unless they endure the cost and inconvenience of relocation.

First, understand that you are not an indentured servant. It is important that you maintain contact with a recruiter like JK Consultants. Your company block emails and telephone calls so that JK Consultants cannot keep you informed as to other career opportunities that may interest you. It is important that JK Consultants has your personal contact information and can help you advance your career. Reach out to JK Consultants today.

Second, it is important to be forthright and transparent during the interview process and honestly disclose your non-compete and non-solicitation agreements, the scope of your past and current responsibilities as well as your time and geographic restrictions. Your new employer may have a way for you to work that will not interfere with your non-compete agreement.

Third, even when your non-compete agreement seems so harsh that you are restricted from working in your chosen profession in the entire United States, there is still hope. Your former employer may be willing to meet with you and your new employer and discuss your specific facts, identify the business interest it intends to protect, identify the specific proprietary information, reasonable time and geographical limitations and the undue burdens.

Generally, the non-compete and non-solicitation agreements should be reasonable and confined in scope to the time and geography no larger or wider than necessary to protect legitimate business interests and may not impose an undue burden on the employee. Each non-compete agreement is analyzed by a court of law considering the unique factual circumstances and courts always have wide discretion to render judgements that are fair, equitable and unpredictable. Courts, even in states that strictly enforce non-compete agreements, have discretion to strike out provisions that are too broad or too restrictive.

When deciding whether or not to act in good faith and work to reach an amicable compromise with a former employee, it may be prudent for a company to consider the time and expense it will spend to enforce the non-compete agreement in a court action, the unpredictability of the outcome, potential damages for a claim for tortious interference with employment and, depending upon the size of the company, monopolizing an industry. On the human side, the company should consider the burdens upon an individual who depends on making a living to support their families and many times are unable to relocate because they must care for elder parents or will suffer great financial hardship in selling their home.

On the business side, the company that attempts to handcuff employees to their chairs with non-compete agreements may suffer with the loss of the employee goodwill, decreased moral, difficulty recruiting new employees and the potential loss of customer goodwill when they find they may be legally restricted from doing business with whom they choose.