The purpose of this article is to explain why analysis of a non-compete clause can be legally complex and what you can do to void or avoid a non-compete clause so as to expand future employment opportunities.
The validity of a non-compete clause in an employment contract is a common question faced by employees either when thinking about leaving a job or after leaving a job. Many times, the mere existence of a non-compete clause can interfere with future employment opportunities. While questions about the validity of a non-compete clause are common, the answer often requires a detailed legal analysis of a variety of laws. Even if the validity of the non-compete clause is questionable or unenforceable, prospective employers may shy away from hiring someone subject to a non-compete clause for fear of legal repercussions. This is why you may want to consider hiring a lawyer to help challenge the validity or application of a non-compete clause. If you are subject to a non-compete clause in your employment contract, the first thing you need to do is determine the legal strength of the non-compete clause and then determine a strategy to either void the non-compete clause or avoid the application of the non-compete clause. [See Case Study below] What follows are some general legal issues and concerns related to non-compete clauses:
JURISDICTION :There is no Federal or uniform law regarding non-compete clauses in employment contracts. This means each State has its own laws and regulations regarding the validity of non-compete clauses. Some States have detailed statutes and regulations on the scope and duration of a non-compete clause. Other States have no regulations on non-compete clauses but rather rely on prior case law decisions regarding the validity of non-compete clauses. A few States prohibit non-compete clauses with some exceptions related to bona fide trade secrets while others hold that certain jobs cannot be subject to non-compete clauses. Every State is different regarding its validation of a non-compete clause. So, the first step in analysis is determining which State law applies to the non-compete clause. While this may seem simple enough, this determination can be very complex. Many times, an employment contract will have a “Choice of Law” clause wherein it is declared what State laws will apply to the employment contract. Yet there are certain restrictions on the use of Choice of Law clauses in contracts. Generally, a nexus or connection between the parties and the State is required. If the Choice of Law clause is not valid or there is not one in the employment contract, the next analysis is what State’s law may apply. If the employer and employee are both in the same State, then the law of that State would apply to the analysis of the non-compete clause. But if the employer has its principal place of business in another State and the employee is a resident of another, then determining which State’s law may apply may require a factual analysis. With that said, generally, if an employment contract is going to “cross State lines” or involve multiple jurisdictions, it will have a Choice of Law provision. So, the first issue faced when trying to determine the validity of a non-compete clause is what State law is applicable to the contract analysis.
APPLICATION OF LAW: Most States that regulate non-compete clauses require some limitation on the duration and geographic scope of the non-compete clause. In other words, how long it can last and what is the breadth, or geographic reach, of the non-compete agreement. Once the applicable law is determined then an analysis of the terms of the non-compete clause must be done. Specifically, does it comply with the applicable legal requirements. The factual construction of the terms of the non-compete clause and the applicable law may provide areas of differing interpretations and hence call into question the validity of the non-compete clause.
VOIDING OR AVOIDING THE NON-COMPETE CLAUSE: After an analysis of the applicable law and the terms of the non-compete clause has been done then the most critical step is either voiding the clause or avoiding the clause. To void the clause will most likely require legal action either in an appropriate Court of law or through the contractually mandated Arbitration procedure. This process will cost significant money in legal fees and expenses. While this may sometimes be done via a class action lawsuit, litigation and high legal fees are not your main objective. The objective is simply to develop a strategy to avoid the non-compete clause to prevent it from being a hindrance to your future employment. The best-case scenario is to present the employer with a well-presented legal argument for avoidance of the non-compete agreement. In other words, you’re not trying to force the employer to “void” the non-compete clause completely for all your co-employees but rather simply getting them to agree that in your case it will not be enforced. Most of the time this process involves several communications with the employer and its legal team to help establish a communication channel with the appropriate person or department. Before a Request to Avoid is submitted, you need to make sure it is going to someone within the company that has the appropriate authority to void the clause or limit its enforcement. Once an agreement is reached, it needs to be put into writing with all applicable terms such as confidentiality. With the agreement in writing, you can truthfully tell future employers that you are not subject to a non-compete clause.
RECENT CASE STUDY: Jonathan was terminated from his employment with Company X as a sales representative for alleged under performance. A fact he strongly disputed. He was subject to a one-year non-compete clause in his employment contract. Jonathan immediately began seeking new employment, but every interview included the question, “are you subject to a non-compete clause?” Jonathan later said, “they didn’t ask me anything about the details of the non-compete clause, rather it was like the mere existence of the non-compete clause was a strike against hiring me.” After four months of having the employment door slammed in his face, Jonathan hired Attorney Mark Wolfe of Boteler Richardson Wolfe to develop a strategy to avoid the non-compete clause. His employment contract dictated what State law would apply. After reviewing the applicable law, Attorney Mark Wolfe noted the clause did not comply with the applicable laws of the State of jurisdiction AND the State of jurisdiction recognized a tort claim for wrongful or improper termination. With this analysis completed, Attorney Mark Wolfe then helped guide Jonathan through a series of emails with his former employer. After a series of emails from Jonathan, as guided by Attorney Mark Wolfe, the company agreed in writing not to enforce the non-compete clause in Jonathan’s employment contract. Without this encumbrance, Jonathan was able to find a sales job in his field within six weeks!
CONCLUSION: An experienced lawyer can help you determine the validity and strength of the non-compete clause in your employment contract and he or she can help you develop a strategy to avoid the negative impact a non-compete clause can have on your future employment opportunities. If you would like a free initial consultation about a non-compete clause in your employment contract, please contact Mark Wolfe at 251 410-7761 or by email at email@example.com, please reference “Non-Compete ?” in the subject line.
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