Non Compete Clauses: Valid or Not?
I've had people tell me they're not worried about non competition clauses in employment contracts because they figure they can never be enforced anyhow, but they call me "to check". On the other end of the spectrum, I've had companies ask me something like this:
"You can write us a non competition agreement to keep workers from ever working in the business again after the company teaches them everything, including trade secrets, can't you?"
The way the questions are asked shows the two competing concerns that courts look at when these issues blow up. Public policy encourages free trade and discourages covenants not to compete. People have a right to earn a living. On the other hand, companies have a legitimate interest in protecting trade secrets, confidential data and good will. Balancing those two concerns, the courts will enforce a non-compete clause if it is "reasonable, given the particular circumstances."
What does that mean? What is reasonable? Employment restraints are reasonable only where they are no harsher than required to protect the employer's legitimate interest, without imposing undue hardship on the employee. Two key questions are: (1) how long does the restriction last, and (2) how far in terms of geographical area does the restriction prohibit subsequent employment?
In the 1990's a physician worked for a professional practice group with three Hampshire offices, including one in Concord. When he was hired, the doctor signed an employment agreement containing a covenant not to compete. The orthopedic physician agreed not to practice orthopedic medicine within twenty-five miles of any of the company's offices for two years if anything happened. When the company changed its deferred compensation plan, the doctor left and started his own office. He petitioned the court to rule the covenant not to compete unenforceable. He lost. All the way up to the New Hampshire Supreme Court, the physician was restrained from practicing orthopedic medicine within twenty-five miles of Concord, Peterborough, and New London. (Forbes v. Concord Orthopedics, 1997).
The concepts are pretty universal. Massachusetts courts also hold that non-competition clauses are enforceable when they are reasonable and not wider than necessary.
Non competition agreements often creep into TV and radio contracts. A famous Boston radio talk show host had a contract prohibiting him from working at other area stations for at least three years if he left the station without permission. When he left, the contract had been expanded to prohibit any employment in radio, TV, or advertising, anywhere in New England for five years. He went to Chicago, where he was fired just less than three years later. His station there changed format. Sure enough, he returned to Boston and went to work for one of his old radio station's competitors.
Jerry Williams went on to become a famous opponent of seat belt laws and an outspoken critic of the ill fated "big dig" boondoggle that spent 15 Billion to put a couple of mils of expressway underground. The Mass. Supreme Judicial Court said the old station could not prohibit Williams from using skills he may have developed during his earlier employment. But, part of the court's analysis was that there was no evidence that the old company had lost advertisers since Williams returned to the Boston area. The court also considered the employer's legitimate interests, deciding that Williams did not possess any of the old company's trade secrets or confidential information. (Richmond Bros. v. Westinghouse, 1970.) Before college, I worked on a loading dock. We had a saying about spiteful ex employees who left the warehouse and "took everything that wasn't nailed down." Common sense is woven into this area of the law. Don't take stuff that isn't yours. Rely on your own skills, and you can make a clean, legal break.