I am consultant at company V which provides services and staff to its client (company C).
I am accepting an offer from company C. Company V is upset about this and states that I am violating their non-compete agreement that I signed.
The terms state that I cannot work with a "Restricted Party" if I terminate my relationship with company V. Here is their definition for Restricted Party.
"Restricted Party" shall mean any business in direct or indirect competition with "Company V" or a Client that Employee was assigned to.
I interpret that ambiguous definition as I should not be working for a competitor of Company V or a competitor of its client. Is this interpretation valid?
Can they enfore an ambiguous definition like that in court to their interpretation?
I agree with the prior answer. To piggy-back on the back and forth comments with the prior answer: the employer would prefer that you don't go to work for a client that you were previously assigned to because you could go do the same work in-house for that client and your prior employer would lose that business. The non-compete agreement is used to keep you, the employee, from competing with the employer after employment is terminated. Whether the Client competes directly with your prior employer doesn't necessarily matter in this context.
If you want a more thorough opinion on whether the non-compete agreement is valid and enforceable, you should consult with an attorney to review the exact terms of the agreement.
The only good argument you probably have in this case would be if you were not "assigned" to company C. In other words, if you provided consultant services to other clients of company V and company C heard about your good work through the industry and made you an offer, then you might be okay. If, as I suspect is the case, you were actually assigned to company C and working with that company while at V, the non-compete is probably enforceable. There are lots of factors to weigh, however, when deciding whether a non-compete is really enforceable. It might be worth talking to an attorney with the complete agreement in hand and an opportunity to explain in more detail exactly what sort of consulting you do, for whom and what the other terms and conditions are.
The Blue Pencil Doctrine
“Blue penciling” occurs when a court decides not to enforce certain sections of a non-competition agreement that it considers too broad, but still enforces the rest of the agreement. Instead of declining to enforce the entire agreement altogether or rewriting unenforceable provisions, the court will literally cross out gramatically severable, unreasonable provisions but keep the rest of the agreement intact “It’s illegal to prevent someone from getting a job.” Yes, but getting a job where? A non-compete agreement that is reasonable in time and distance is enforceable. So, what’s “reasonable” you ask?
It depends on the employer’s geographic customer base. Let’s say that you sell shoes in St. Charles, Jefferson and St. Louis counties. Could you enforce a non-compete in those counties for the sale of shoes, i.e. prevent your former salesman from being employed as a shoe salesman in those counties? Yes, absolutely. Does it prevent your former salesmen from getting a shoe sales job outside of those three counties ... no. Protecting your customer base in those counties is not preventing your former employee from gainful employment in the rest of Missouri and 49 other states …. and that’s reasonable under the law of non-competition.If you want to know the effect of a noncompete clause, you need to see a lawyer. The differences between one state's laws and another's can significantly affect the answer. And which state's law applies is a separate issue entirely, one that must be addressed in multi-state arrangements.
The particular facts of your case may help you or hurt you, and even minor variations in your employment arrangement can affect the legal situation.
In this article, we examine some of the issues employees should be aware of when trying to get out of a noncompete contract. Next week, we'll take the employer’s perspective. If you’re a manager, what do you need to consider if you want your staff members to sign a noncompete?
Confidential information is protected
First, you have to look at what, exactly, is being limited by your contract. The scope of prohibited work is what’s important. That description may mean the difference between whether your noncompete will be upheld by the courts or thrown out.
If the noncompete contract discusses prohibited trade secrets or confidential business information, perhaps you can work in a related area as long as those items are not compromised.
Knowledge about existing customers might be the key. You may have agreed not to solicit or go to work for current customers of the company.
The more closely the scope protects special, proprietary aspects of your employer's business, the more likely it will be that you can’t get out of it. Even in states with laws that disfavor noncompete agreements, the courts will more likely uphold the agreement if it’s written in a narrow way to protect proprietary information.
However, if the scope of the prohibited work is too great or too ambiguous, courts sometimes will view that noncompete as unreasonable. A ruling may find that a broadly written contract is against the public interest of competition in the marketplace or that it's in excess of legally permitted limits.Here’s where it gets tricky: What is a “reasonable” restriction? Most of these agreements broadly restrict “practice of chiropractic.” In regard to time period, in most cases, two years or less would be considered a “reasonable” time to prohibit you from practicing.
The distance restriction is more problematic, since it depends on the area. In an area that has a lot of people, such as a suburb, the area of restriction might be no more than five miles. In a rural area, the restriction might be as much as 25 miles.
Non-compete agreements are written based on the concept of “restraint of trade.” If the non-compete unreasonably restricts the former employee’s ability to practice (that’s restraint of trade), it isn’t going to be upheld.
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