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Legal Question, Non Compete Agreements
Old 06-18-2012, 07:48 AM   #1
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Legal Question, Non Compete Agreements

A good friend of mine is trying to get out of, or void a non compete agreement on the grounds that the company who bought out the original company has marginalized his employment by reducing sales commision, salary, etc. How common is this and from a legal standpoint is this kosher ?

Thanks in advance for any and all replies.
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Old 06-18-2012, 08:12 AM   #2
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For my two cents, as with any legal agreement, it is all about who can legally afford to enforce or defy the agreement. I am going through another round of negotiation (AGAIN!) because someone has offered to buy my business (again!). First thing was a NDA (non disclosure agreement). Which makes you, as the seller, feel protected. Until you stop and think... hmm.. if they screw me and blab to someone, can I afford to sue a multi-national... probably not. So your friend should say to himself... hmm... if I go back out into competition with these people.. do they have the means / ability / temperment to spend money going after me legally ? As with many things that have to do with commercial Law, it is less about doing what is "right" as doing what one can afford to do.
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Old 06-18-2012, 08:34 AM   #3
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A lot of the answer with this would depend upon the situation. 1st each state has a slightly different interpretation of non compete agreements and they vary with the type of job that they are being applied to. Asking local advise in the state he resides would be advised. Some companies try to say the law in their state applies - not the law in the state where the employee resides - again interpretive to each state...

If your friend would take current clients with him then the agreement would stand and would not be arguable (this would be a key to your answer). If your friend left and acquired all new clients and was not using inside information from his old employer then the company would not have a leg to stand on... If he approached clients that he knew his old company was working on acquiring - at the time of departure or he knew what they were using to attract them - that could also go against him (loosely interpreted and very situationally defined).

No non compete agreement - no matter how well it is written - can stop you from seeking employment, but if you leave and in a way damage or attempt to damage the old company then that is a different matter. If you are leaving to a company that will use your knowledge from the previous company - again a fine line. I have worked under very stringent agreements and in some cases the new company will want to review your old agreement (my last employer did)... I had one that tried to claim the entire industry - did not fly..., but clients and subsidiaries of clients will hold up... In my case - I was in no way allowed to work or advise on any competitions that were in my old clients areas...
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Old 06-18-2012, 08:36 AM   #4
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Generally speaking, changing employment conditions up to and including firing your friend does not discharge his obligations under a non-compete agreement. There is no constructive discharge of non-compete agreements. There should be some kind of a time limit and usually a specific geographic limit or industry limit, otherwise an overly broad non-compete would bar your friend from any employment ever, essentially making him completely dependent on his current employer. This has been generally found to be against public policy and such agreements are void, but properly restricted non-compete agreements are definitely enforceable.

As for whether an ex-employer would attempt to enforce a non-compete agreement, that likely depends on the people involved and situation. Do they have a history of doing so? If so, do they pursue only executives, or any sales person? Do they have certain competitors they will sue to block employment with? Most employers do not attempt to enforce non-compete agreements in most cases, but certain egregious actions such as taking customer lists or poaching ex-coworkers can goad them into doing so.

What is the goal here?
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Old 06-18-2012, 09:01 AM   #5
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... "1st each state has a slightly different interpretation of non compete agreements"...

Your friend should seek a legal opinion- laws vary state to state. As an alternative, s/he might consider contacting the state attorney general office and ask for an opiniomn, though that perhaps might not be able to be relied on.
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Old 06-18-2012, 09:38 AM   #6
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My friend is wanting to start up his own business in the same industry. He has sought legal counsel and said something about the attorney wanting to get some type of summary judgment in advance of starting the business. Would he be dealing with old clients, most definitely as it is a commodity type business.
BTW the non compete agreement is for a two year period.
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Old 06-18-2012, 06:45 PM   #7
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Your friend wants to leave his current employer and start a new business competing head to head against the current employer. Not only would his new business compete directly with the current employer, it would call on his old clients.

This seems like exactly the kind of activity that non-compete agreements are supposed to prevent. Legal counsel familiar with your state laws and the specific agreement is the only way to know for sure, but I think your friend could get into deep trouble doing this.
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Old 06-18-2012, 07:06 PM   #8
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The question asked is impossible to answer here. Non-compete law varies significantly between states so no general answer is possible.

Even if we knew the state that was involved we still couldn't give an answer that was valuable because we don't know the details of the contract or the factual background.

Basically, the only answer that matters here is the one that your friend gets from an attorney well versed in the applicable law who is representing your friend.
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Old 06-18-2012, 09:44 PM   #9
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Second, third, etc. the advice that the law on noncompetes varies a lot from state to state. Some states are very hostile to such contracts -- an equal number embrace them. Then, the actual case to enforce the contract in that state is greatly affected on how business-friendly or employee-friendly the judge and jury are.
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Old 06-19-2012, 11:31 AM   #10
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I think it also is how he approaches starting his new business....

Way back when... I worked at a big 8 firm (tell how old I am)... and we had partners leave all the time to start their own small firm.... usually they would do a mass mailing stating that they would be leaving the firm etc. and did not directly contact any of their old clients...

Now, the clients knew to call up their old partner and move their business if they wished... and the non-compete was not broken... at least the firm did not pursue it....
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