Noncompetition clauses are often difficult to enforce
DEAR J.T. & DALE: A lot of people have left my company for a competitor. Our management just gave us all noncompetes to sign. Is this legal? — Connie
J.T.: As an at-will employer, management can ask you to sign and, if you refuse, they can let you go. Here’s the thing, though: These often are tough to enforce, especially in some states. Get a lawyer to review it — you might opt not to sign and instead start looking for a new job.
Dale: That’s wise advice. But Connie’s question made me curious: What happens if she does sign the noncompete and then has a chance to land a great new job? So I turned to our favorite employment attorney, Scott Gordon, of Rodey Law in Albuquerque and asked how things might go if Connie signs with her current employer — let’s call it “CurrentCo” — and later wants to leave for a better job with XYZ Corp.
Scott: Let’s call this Scenario One: CurrentCo learns that Connie has joined a competitor. It sends her a “demand letter” reminding her of the noncompetition agreement and warning that, if she continues to work for the competitor, CurrentCo will seek a temporary restraining order, and then a preliminary injunction, to stop her. Dale: Scary. Scott: Further, CurrentCo might send a copy of the demand letter to XYZ. This puts Connie’s new employer on notice that it may be improperly interfering with CurrentCo’s contract with Connie. At that point, XYZ might terminate Connie’s employment in order to avoid being dragged into the legal battle. Or, if she’s really worth fighting over, XYZ might fund her defense and oppose the preliminary injunction. The two employers, and Connie, then litigate over whether the noncompetition agreement is enforceable. This can get expensive. It tends to happen when the employee has valuable talent.
J.T.: Well, if that’s Scenario One, let’s hope Scenario Two is more appealing.
Scott: It is. Before the court issues a preliminary injunction, the parties could reach a compromise. They might agree, for example, to limit the
functions the employee will perform for the competitor, or limit the territory in which the employee will work. This would prevent the risk and expense of having the court decide.
Dale: But, as a practical matter, unless Connie has unique skills, a prospective employer, aware that she has a noncompete, isn’t going to want to get involved in a potential legal battle. It would just pass on her, right?
Scott: Maybe not. Many companies would turn to an employment attorney to advise them on how concerned to be. There are states, like California, where noncompetition agreements have been declared void. Or the agreement might clearly be unreasonable and thus unenforceable.
J.T.: Good to know. Our thanks to Scott for his insights, as always.
Dale: Yes, and it leads me to conclude, Connie, that you not only should get legal advice, but also should get your colleagues to join you. That way, you’ll all have more leverage to negotiate.
Dear J.T. & Dale: My co-worker heard that our company is about to be sold. I asked my boss and she denied it, but she wasn’t convincing. If we get bought, we’ll likely get laid off. Should I look for a new job now, or wait? — Corrine
J.T.: I definitely would get your résumé ready and your LinkedIn profile optimized. I’d also start a bucket list of companies you’d like to work for and start following them on social media. It doesn’t hurt to be proactive and get the job search going. You just may find a better opportunity that you can’t pass up. But, more importantly, you won’t be starting from scratch if you do suddenly get let go.
Dale: Absolutely. Remember this rule: A.B.L. That’s “Always Be Looking.” Thriving in the New Economy is like running through traffic: You keep looking both ways, watching for openings, and the whole time you understand that standing still is itself a danger. However, speaking of openings, your company being bought could be an advancement opportunity. If you work with customers and they feel a special trust connection, you increase your odds that you’re one of the assets being acquired.