I recently got out of my franchise agreement, but I want to keep working in the same business, just not as a franchisee. I would like to open another shop and do the same type of work, just under a new name. The agreement I signed says that I can't work in this business for 1 year. Can I just open a shop tomorrow, but not charge my clients for the 1st year I'm open? Would this be legal for me to do?
The fact pattern you suggest likely is not adequate to escape a non-compete clause. Even if you gave product and services away for free you would be taking business away from their operation. There are other arguments that may be more effective to defeat the clause. If you got out of the franchise agreement because of they breached the agreement then the non-compete may not be enforceable. The party breaching a contract releases the other party's performance. Noncompete agreements must also be reasonable in duration, scope of activity prohibited and geographical area. Each of these issues will require review of the actual document. When the agreement was signed can be material. If it was years ago when you started the business it will not be as useful to them as a recent document. If the non-compete was part of the separation agreement, it will likely be enforceable. If they were to pay for the agreement and failed to pay it likely lets you off the hook. Noncompete agreements are a restraint on trade. As such they are not favored by the courts. The Texas legislature and Texas Supreme Court has been waging a battle over the issue for decades. Washington State tends to favor them more. Every state will be unique and the fact patterns and contract terms will be unique. Accordingly, you should talk with a local litigation attorney familiar with the subject.
You have asked us to state an opinion based upon stated facts. You have not provided us with any documents, pictures, witness statements or other admissible evidence. The opinions stated are based upon general principles of law unless otherwise stated, which may or may not be applicable in your jurisdiction. Controlling law is also subject to change or reversal at any time. Any such changes may be retroactive and could significantly modify the statements and opinions expressed herein. Similarly, any change in the facts and assumptions upon which this opinion is based could modify the conclusions. We opine only as to matters expressly set forth, no opinions should be inferred as to other matters or to treatment of matters not specifically addressed. This opinion represents our best judgment as to the probable outcome of the issues discussed and is not binding on the courts or upon your adversaries. We can give no assurance that an adversary would not challenge our conclusions and prevail in the courts in a manner to cause adverse consequences. With respect to some of the matters discussed in the opinion, existing legal precedent may provide very little legal guidance. Although the opinions and views expressed are based on our best interpretations of existing law and what we believe a court would probably conclude if presented with the applicable issues, we can give no assurance that our interpretations would be followed if the issues became the subject of judicial or administrative proceedings. Realization of certain benefits described is subject to the risk that a tenant may challenge the treatment and that a court may sustain the challenge. Because you may bear the burden of proof required to establish a fact, the opinions expressed assume the you will undertake the effort and expense to present fully the case in support of any matter that you have asserted and an opponent might challenge. None of the advice provided here may be used to avoid tax liability, interest or penalties. If you want that level of assurance you will need to allow us to perform the full opportunity to explore the facts and law applicable to your specific circumstances. I provide answers here to allow people to see the style of communication and type of analysis applied to factual statements.
Employment / Labor Attorney
This creates obvious problems of trust. I doubt in this sceptical world you would be able to convince many you were providing free work for a year, and as the other attorney said, you might take work away from your former company. I'd have to reviewe your agreement because any out for you would have to be that the franchise agreeement does not specifically cover your situation.
2 lawyers agree
As the other attorneys said, competition is competition. And if you're not going to charge for your services, you would be REAL competition! What's better than free?? If you're hoping there's a loophole in the law of noncompetes in Pennsylvania that exempts you if you don't charge, I honestly don't know the answer to that, although I'm not real optimistic. But it's possible that the courts have considered that type of case and in some circumstances there may be an exemption. Someone could research that point to give you a definitive answer.
There is one more thing to look at, however. Noncompetes in PA have to be reasonable in "scope AND duration." So in addition to the 1 year time frame, look at the scope -- the geographic limitations of the noncompete. Does the noncompete have a reasonable geographic boundary? For example, are you only forbidden from competing in, say, Philadelphia, Bucks & Montgomery Counties? If so, maybe think about opening up in Chester, Delaware, Camden, or Burlington County. Or maybe look to see if the geographic area is unreasonably large, in which case you might be able to convince a court to limit the territory that's covered by the noncompete. Note that in some internet-based or specialty businesses, it is considered to be reasonable to have a larger restricted territory because of the way that particular market operates.
Of course, I can't give you specific legal advice without seeing the actual document and knowing more about the type of business and its operations. Please note that, while AVVO has me labelled as a "divorce attorney," I have considerable experience in noncompetition agreements.
If my answer was helpful to you, I would appreciate if you would mark it either "helpful" or "best answer" if you feel that applies, as AVVO gives us rating points based on feedback. Thank you! Please note that the above answer is not to be construed as legal advice. It is my personal opinion based on your question, and it was given without obtaining the detailed information that I would normally request in order to render comprehensive legal advice. I advise you to consult with a local attorney of your choosing to obtain specific legal advice. The fact that I answered your question does not create an attorney-client relationship between you and me.