non-compete question

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TRC
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non-compete question

Post by TRC »

Hi Everyone,

I work for a software company and am in field sales. I was required to sign a non-compete last year and I am looking to leave and potentially go to a competitor covering a completely different region. I'm currently selling in a completely different region (mid-west) and the new role would be New England. From what I gather, a non compete is only valid if:

1. It Must Be Supported by Consideration
2. It Must Protect the Employer's Business Interests or Trade Secrets.
3. It Must Be Realistic and Reasonable in both time and space.

Re: #3, the way my noncompete is written is extremely broad. It says "regardless of the reason for the termination, Employee shall not, directly or indirectly, anywhere in the world, where the Company conducts or has a legitimate business interest…."

Is "the world" considered reasonable for space? I'm planning to speak with an employment attorney, but figured I'd pose the question here.
Gropes & Ray
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Re: non-compete question

Post by Gropes & Ray »

Very state specific question, but you seem to have a good broad description of the rules. I think "where the Company conducts or has a legitimate business interest…" is the significant limiting language here, rather than "the world." In some states, they would have to show that you, individually, have some knowledge about their business in New England. In some, you would have to actually use your former employer's confidential information against them. In others, it's enough to show that you're going to work for a competitor, regardless of your individual circumstance. You're wise to consult an attorney in your state.

In my limited experience, employers who fail to successfully enforce a non-compete most often fail for lack of consideration. I used to work in a county where the senior judge just hated non-competes and would kill them for any reason.
brianH
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Re: non-compete question

Post by brianH »

The lawyer is a good, and necessary, step. While my legal understanding (met with lawyers about this topic but IANAL) of NCs is similar to yours, you can be sued by the 'damaged' company, even if they don't have a snowball's chance of collecting. Not only would you be forced to pay to defend yourself, but your new company may not want the risk and preemptively fire you even before an injunction.

For most positions, NCs are almost unenforceable, as they won't pass the "can't prevent you from earning a living" test, but outside of places like CA, they can and do get upheld by the courts regularly. I know in my case, I took the chance with Damocles' sword because of the short period (1yr), and my ability to be secretive about what I was doing.
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gunn_show
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Re: non-compete question

Post by gunn_show »

Gropes & Ray wrote:Very state specific question, but you seem to have a good broad description of the rules.
+1 would help to know what state you are in. CA for example basically gives 0 validity to non-competes. New Jersey on the other hand is more difficult.
FWIW I am in the same field/position as you and have never had a problem changing jobs in CA.
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hicabob
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Re: non-compete question

Post by hicabob »

gunn_show wrote:
Gropes & Ray wrote:Very state specific question, but you seem to have a good broad description of the rules.
+1 would help to know what state you are in. CA for example basically gives 0 validity to non-competes. New Jersey on the other hand is more difficult.
FWIW I am in the same field/position as you and have never had a problem changing jobs in CA.

Even in CA non-competes can be valid if you received something of value, such as selling a company and receiving $$.
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JonnyDVM
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Re: non-compete question

Post by JonnyDVM »

TRC wrote:Hi Everyone,

I work for a software company and am in field sales. I was required to sign a non-compete last year and I am looking to leave and potentially go to a competitor covering a completely different region. I'm currently selling in a completely different region (mid-west) and the new role would be New England. From what I gather, a non compete is only valid if:

1. It Must Be Supported by Consideration
2. It Must Protect the Employer's Business Interests or Trade Secrets.
3. It Must Be Realistic and Reasonable in both time and space.

Re: #3, the way my noncompete is written is extremely broad. It says "regardless of the reason for the termination, Employee shall not, directly or indirectly, anywhere in the world, where the Company conducts or has a legitimate business interest…."

Is "the world" considered reasonable for space? I'm planning to speak with an employment attorney, but figured I'd pose the question here.
Lesson here is don't sign a ridiculous non-compete. As previously mentioned they are very state specific. To me that reads as never being able to work again in your field which would be considered overly restrictive and thus probably not valid. My understanding (at least in my line of work) is that when legally challenged most non-competes get deemed overly restrictive get thrown out. Trouble is it would be a real pain to have to go through court to get there. Is there a time frame tied to this- like 6 months? How likely is your employer likely to peruse you legally if you move to the NE and continue a similar line of work for a different company? Does your new employer have their own employment attorney that be willing to examine that clause of your current contract?
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Meg77
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Re: non-compete question

Post by Meg77 »

First of all, it doesn't matter whether or not non-competes are considered legally valid. It only matters if your former company is willing or likely to come after you if you leave. I've had employment attorneys tell me that there's no way any non-compete in the state of Texas would hold up in court if it was argued all the way up; but employers still use them as a retention tool and a scare tactic. Just be aware that even if you are convinced you aren't violating it, that won't necessarily prevent you from getting sued and spending a year plus in depositions and racking up legal fees.

Regarding your move though, I can't imagine your employer would bother with the cost of hassle of suing if you really won't be competing with them. Go back and read your contract; usually it will detail exactly how many miles around the company headquarters (or all company locations) where the non-compete is valid. The contracts I've seen have specified 50 mile radius.

Also just know that non-competes don't matter at all unless they matter to your new employer. Just be honest that you've got a contract, hand it over to them for review, and if they hire you anyway then you can generally rest easy. If you get sued the new employer will pay for you an attorney and/or fight the suit on your behalf (or fire you...you should ask the hiring manager which is more likely before taking the job). At least that's how it works in banking in Texas and Oklahoma where I have worked. Almost everybody has non-competes when they leave one place to work at another, and it's usually not a huge issue. Many people actually just abide by them; my boss spent his first year at our company making sure not to avoid his; he didn't call on any of his old clients at all even socially. Others are so low on the totem pole that their former employers don't really care they left and don't come after them at all. Still there are other companies that ALWAYS sue EVERYONE who leaves with a non-compete. An attorney told me it's a bullying technique to make sure the employees left behind know that it'll happen, to discourage them from leaving. Also all the local employers know it'll happen if they hire away one of those bankers. But it doesn't stop people from leaving when they want to; it just costs the other employers more money to hire those people (via legal fees).
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downshiftme
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Re: non-compete question

Post by downshiftme »

Lesson here is don't sign a ridiculous non-compete.
I have usually found this advice to be impractical. Companies who present a non-compete agreement to be signed are NOT offering a choice. You either sign or you are out. Even if it's not explicitly stated that way, it's always been clear that anyone who refuses will be let go, if not immediately then as soon as possible. Simply not signing is not an option that works if you want to stay employed.

I am currently bound by a non-compete with my current employer. It is very broad geographically, but very specific in naming a small number of individual competing companies that I have agreed not to work for, for a limited time. Although it is worldwide, I expect it would be enforceable because of the specific limited number of directly competitive potential employers and the two year time limitation. A non-compete which basically bars me from working in my profession would be non-enforceable, but by putting specific limiting details, this seems both enforceable and a reasonable restriction.

I have in the past been asked to sign non-compete agreements that were so broad that they would prevent working for any company that uses computers in any capacity, virtually every company, any where in the world for three years. Unless this was compensated with three years of wages, I do not believe this would have been enforceable, and that employer never did take any action against any ex-employees. I suspect that sometimes lawyers who draft these are trying to impress their clients, not necessarily create effective and enforceable documents. But no matter how extreme and over the top the provisions of the proposed non-compete, I have never seen anyone refuse to sign and remain employed at that company for more than a year.
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TRC
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Re: non-compete question

Post by TRC »

JonnyDVM wrote:
TRC wrote:Hi Everyone,

I work for a software company and am in field sales. I was required to sign a non-compete last year and I am looking to leave and potentially go to a competitor covering a completely different region. I'm currently selling in a completely different region (mid-west) and the new role would be New England. From what I gather, a non compete is only valid if:

1. It Must Be Supported by Consideration
2. It Must Protect the Employer's Business Interests or Trade Secrets.
3. It Must Be Realistic and Reasonable in both time and space.

Re: #3, the way my noncompete is written is extremely broad. It says "regardless of the reason for the termination, Employee shall not, directly or indirectly, anywhere in the world, where the Company conducts or has a legitimate business interest…."

Is "the world" considered reasonable for space? I'm planning to speak with an employment attorney, but figured I'd pose the question here.
Lesson here is don't sign a ridiculous non-compete. As previously mentioned they are very state specific. To me that reads as never being able to work again in your field which would be considered overly restrictive and thus probably not valid. My understanding (at least in my line of work) is that when legally challenged most non-competes get deemed overly restrictive get thrown out. Trouble is it would be a real pain to have to go through court to get there. Is there a time frame tied to this- like 6 months? How likely is your employer likely to peruse you legally if you move to the NE and continue a similar line of work for a different company? Does your new employer have their own employment attorney that be willing to examine that clause of your current contract?
I agree, but I was held over a barrel by saying "you won't receive your commissions (that were owed to me from previous deals) if if you don't sign". To answer some other questions:

- I reside in MA. The Company that I work for is in MA.
- I did not receive any extra consideration for signing the non-compete. There was no extra bonus, cash, etc.

I just briefly spoke with an attorney for a free consult. He said at a high level, it sounds non-enforceable based on the space and lack of consideration. But he also said that if they want to be jerks, they could serve me an injunction and I would have to pay expensive attorney fees just to represent myself. He said they could also serve an injunction to the new employer as well. He said they could do a thorough review of my non-compete for $1,000 :(
Gropes & Ray
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Re: non-compete question

Post by Gropes & Ray »

$1,000 is a little steep unless he plans on doing research and producing a written memo specific to your situation.
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BolderBoy
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Re: non-compete question

Post by BolderBoy »

TRC wrote:Employee shall not, directly or indirectly, anywhere in the world, where the Company conducts or has a legitimate business interest…."
Talking with an attorney is a good idea. I'm not one. But one of the basics in contract law is that the terms of the contract cannot be "unconscionable".

"anywhere in the world"?

Yeah, right.
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Re: non-compete question

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (non-compete agreement).
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JonnyDVM
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Re: non-compete question

Post by JonnyDVM »

downshiftme wrote:
Lesson here is don't sign a ridiculous non-compete.
I have usually found this advice to be impractical. Companies who present a non-compete agreement to be signed are NOT offering a choice. You either sign or you are out. Even if it's not explicitly stated that way, it's always been clear that anyone who refuses will be let go, if not immediately then as soon as possible. Simply not signing is not an option that works if you want to stay employed.

I am currently bound by a non-compete with my current employer. It is very broad geographically, but very specific in naming a small number of individual competing companies that I have agreed not to work for, for a limited time. Although it is worldwide, I expect it would be enforceable because of the specific limited number of directly competitive potential employers and the two year time limitation. A non-compete which basically bars me from working in my profession would be non-enforceable, but by putting specific limiting details, this seems both enforceable and a reasonable restriction.

I have in the past been asked to sign non-compete agreements that were so broad that they would prevent working for any company that uses computers in any capacity, virtually every company, any where in the world for three years. Unless this was compensated with three years of wages, I do not believe this would have been enforceable, and that employer never did take any action against any ex-employees. I suspect that sometimes lawyers who draft these are trying to impress their clients, not necessarily create effective and enforceable documents. But no matter how extreme and over the top the provisions of the proposed non-compete, I have never seen anyone refuse to sign and remain employed at that company for more than a year.
Perhaps our fields are different, but I've been able to negotiate down time and radius on a non-compete. I also told an employer that I wasn't willing to sign one at all and was hired anyway. If presented with a contract that obviously would completely destroy my livelihood and essentially force me into a different field if I decided I didn't want to be with the company any more, I just wouldn't sign it. OP is moving across the country and is concerned he might be violating his non-compete. Absurd.
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Bacchus01
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Re: non-compete question

Post by Bacchus01 »

TRC wrote:
JonnyDVM wrote:
TRC wrote:Hi Everyone,

I work for a software company and am in field sales. I was required to sign a non-compete last year and I am looking to leave and potentially go to a competitor covering a completely different region. I'm currently selling in a completely different region (mid-west) and the new role would be New England. From what I gather, a non compete is only valid if:

1. It Must Be Supported by Consideration
2. It Must Protect the Employer's Business Interests or Trade Secrets.
3. It Must Be Realistic and Reasonable in both time and space.

Re: #3, the way my noncompete is written is extremely broad. It says "regardless of the reason for the termination, Employee shall not, directly or indirectly, anywhere in the world, where the Company conducts or has a legitimate business interest…."

Is "the world" considered reasonable for space? I'm planning to speak with an employment attorney, but figured I'd pose the question here.
Lesson here is don't sign a ridiculous non-compete. As previously mentioned they are very state specific. To me that reads as never being able to work again in your field which would be considered overly restrictive and thus probably not valid. My understanding (at least in my line of work) is that when legally challenged most non-competes get deemed overly restrictive get thrown out. Trouble is it would be a real pain to have to go through court to get there. Is there a time frame tied to this- like 6 months? How likely is your employer likely to peruse you legally if you move to the NE and continue a similar line of work for a different company? Does your new employer have their own employment attorney that be willing to examine that clause of your current contract?
I agree, but I was held over a barrel by saying "you won't receive your commissions (that were owed to me from previous deals) if if you don't sign". To answer some other questions:

- I reside in MA. The Company that I work for is in MA.
- I did not receive any extra consideration for signing the non-compete. There was no extra bonus, cash, etc.

I just briefly spoke with an attorney for a free consult. He said at a high level, it sounds non-enforceable based on the space and lack of consideration. But he also said that if they want to be jerks, they could serve me an injunction and I would have to pay expensive attorney fees just to represent myself. He said they could also serve an injunction to the new employer as well. He said they could do a thorough review of my non-compete for $1,000 :(

The smart thing is to get an attorney. I have always had attorney's review my non-competes. I have never paid more than $250. $1000 is too much.

A few things that I have been told by the attorney that ring true here. By continuing to allow you to stay employed, you have in essence been given consideration. That may not stand up in every state, but it is generally accepted. But even regardless of that, you signed the document. That created an agreement. You could have not signed it, and in the past I have not signed them without any ill-effects, or I've had them modified to my liking.

Sales is the most OFTEN defended non-compete in my opinion. You are going to a competitor, and regardless of territory I would expect your old company to take you to court. It will be FAR more expensive for you than them even if they lose. They very well could make an example out of you. I would and have in the past.
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ram
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Re: non-compete question

Post by ram »

My employer routinely uses 2 years and 25 miles in its non compete clause and goes behind violators.
Ram
desiderium
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Re: non-compete question

Post by desiderium »

A negotiated solution is one option, but you will need an attorney's advice for your state.
Some non-complete clauses include a "liquidated damages" settlement
This can sometimes be negotiated down, especially if enforcement of the noncompete is questionable
Your new employer may be willing to reimburse such a fee.
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Re: non-compete question

Post by Gropes & Ray »

Bacchus01 wrote:A few things that I have been told by the attorney that ring true here. By continuing to allow you to stay employed, you have in essence been given consideration. That may not stand up in every state, but it is generally accepted. But even regardless of that, you signed the document. That created an agreement. You could have not signed it, and in the past I have not signed them without any ill-effects, or I've had them modified to my liking.
If continued employment is considered sufficient consideration in your state, that would make it by far the outlier, not the other way around. Non-competes usually have to be made a condition of employment before employment actually starts (or be accompanied by an actual cash payment like a bonus). That often means they have to tell you about the non-compete when they offer you the job, before your first day. Edit: 30 seconds of Google research suggests that MA is indeed an outlier, with a low threshold for consideration.

I am referring to non-competes with employees. Different rules apply to people selling a business or entering into another type of agreement.
Last edited by Gropes & Ray on Wed Mar 11, 2015 9:32 am, edited 1 time in total.
Jack FFR1846
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Re: non-compete question

Post by Jack FFR1846 »

Hire a lawyer who will commit to a maximum fee if you are sued. Massachusetts will absolutely uphold non competes and added consideration is not required here. I am also under a non compete and have considered spending a year working at Home Depo for a year just to let the year expire.

Californa doesn't recognize the type of non compete we are under by the way their charter is written. I believe 4 other states also consider non competes unenforceable.

Good luck. I will never sign a non compete again

Look at work by professor Matt Marx of MIT who has studied non competes and actively promotes bans of them by states. He also advises new MIT grads not to take a job if a non compete is required

People often confuse a non disclosure with a non compete. They are not the same
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Confused
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Re: non-compete question

Post by Confused »

[Blanked for privacy]
Last edited by Confused on Fri Nov 06, 2015 12:44 am, edited 2 times in total.
Gropes & Ray
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Re: non-compete question

Post by Gropes & Ray »

Confused wrote:
Bacchus01 wrote:You are going to a competitor, and regardless of territory I would expect your old company to take you to court.
How would the former employer even find out?
LinkedIn, Facebook, Google, word of mouth, industry conferences, shared clients, magic crystal balls... It's not easy to keep a secret.
Bacchus01
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Re: non-compete question

Post by Bacchus01 »

Confused wrote:
Bacchus01 wrote:You are going to a competitor, and regardless of territory I would expect your old company to take you to court.
How would the former employer even find out?
Seriously? That would be extremely easy.

And when you don't give a name of the new company, they will be particularly suspicious and follow through. Plus, people talk. Everyone will know within days.
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Re: non-compete question

Post by Confused »

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Re: non-compete question

Post by Jack FFR1846 »

Confused, I beg to disagree

As someone who spent years in the field, I can tell you with certainty tha sales and field apps engineers know where other people have gone hours after they leave. We all talk with each other in the field. I have met competitor's faes and reps for coffee or lunch hundreds of times over the years. If you are in the field and stay there, everyone knows where you are.
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Epsilon Delta
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Re: non-compete question

Post by Epsilon Delta »

Confused wrote:I sincerely doubt that people often get together and talk about a third-party person. Especially not to talk about some random schmuck who changed jobs.
I think you underestimate the power of gossip. People do get together and talk about third-parties. They also get together and mention everybody they know looking for people they know in common. Unusual people, such as people who don't use Facebook and don't tell people how old they are, are particular grist for the mill.
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