So you’ve secured a terrific job with a new company, but then you get a cease-and-desist letter in the mail. Your former employer claims that you are working for a competitive company in violation of the non-compete agreement you signed, and threatens to seek an injunction to prevent you from doing so. What are your options?
A non-compete agreement requires you to pledge not to work for a competitor firm after leaving the employer. Your ongoing employment was a legitimate factor for enforcing this guarantee. However, don’t think that since you signed the agreement, you have no way out. The following are five strategies for challenging a Non-Compete Agreement.
1. The employer violated the terms of the contract.
If your employer initially violated a significant clause of the employment contract, a court may refuse to enforce the non-compete agreement. Determine if your employer breached any contractual responsibilities, such as failing to pay all remuneration due (e.g., salary, bonuses, benefits, and unused but earned vacation money) within the time limit specified in the contract. Even if your employer did not violate any of the contract’s stated provisions, you may be able to establish a violation of implied conditions, such as a requirement under your state’s labour legislation.
2. The constraints are very wide.
In general, courts will refuse to enforce a non-compete agreement that imposes excessive limits on time, territory, or activity. A 10-year ban or a prohibition on “selling advertising,” for example, would most likely be unfair and overbroad. Check your state’s non-compete legislation, since there is likely a maximum number of years permitted. An inappropriate geographic restriction is one that extends beyond the areas where you really worked.
3. The employer lacks a genuine commercial interest.
In order to enforce a non-compete agreement, your employer must demonstrate a genuine economic interest that goes beyond ordinary competition. Trade secrets, significant sensitive business or professional knowledge, considerable ties with particular clients, goodwill connected with a continuing business, or specialised training are all examples of legitimate commercial interests. You may be able to demonstrate that there was no genuine business interest if you just signed the non-compete agreement as part of regular practise for all workers. You may also use public availability as a defence against trade secrets or sensitive company information. You may, for example, utilise internet merchants to access the same “secret” client lists as your bosses.
4. The boss has filthy hands.
Someone “who seeks the help of equity must do so with clean hands,” according to a well-known legal tenet. Essentially, courts do not look favourably on a party that engages in unfair and illegal behaviour related to the subject matter of the case. An employer may have dirty hands if he or she orders an employee to participate in illegal or fraudulent conduct, or if the employee is unjustly discriminated against. Withholding remuneration and retribution against the employee for whistleblowing are two further instances. In practise, an employer may choose to halt litigation just to safeguard the skeletons in its closet.
5. Non-compete agreements are not permitted in your state.
The attitude of courts to non-compete agreements varies by state, so verify your state’s non-compete legislation. Non-compete agreements are illegal in a few jurisdictions, including California, save under restricted situations. Non-compete agreements are permitted in Virginia, although they are favoured by the employee.