Non-Compete

Employers often have new employees execute non-compete agreements upon hiring.  As their name implies, these agreements serve to discourage employees from learning about a business, including its customer list, then leaving to work for or start a competitor.

The Nebraska Supreme Court ruled that non-competes must be “reasonable in scope”, or the Court will simply invalidate the entire agreement.  (Non-competes are not subject to “savings clauses”, which state that if one provision of a legal document is invalid and unenforceable, the remaining provisions remain valid and enforceable.)

If Dick signs a non-compete with his new Company that states, “If Dick terminates his employment for any reason, he may not compete against Company for the rest of his life anywhere on the planet.”  That’s overbroad and therefore invalid and unenforceable.

So what’s “reasonable in scope”?

How about this:  “If Dick terminates his employment for any reason, he may not compete against Company for a period of two (2) years within fifty (50) miles of Company’s principal place of business by contacting Company clients with whom he had direct contact during the course of his employment with Company.”  That non-competition provision is “reasonable in scope”, valid, and enforceable.

That ends today’s fireside chat.  Speaking of fire, please flame away at my legal analysis if I mis-typed.

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4 Comments on “Non-Compete”

  1. manutd1711 says:

    If the principal place of business is Chicago, but DK worked in the Omaha office — and never worked in Chicago — but was offered a position in Chicago with a competitor, I’d argue that provision is not reasonable.

    I got your back, DK.

  2. SAR says:

    In 2001, I lived/worked in Gurnee, IL for a company owned by my parent company at that time. The Illinois based company was slated to be sold to the world’s largest overhead crane company. I was named as one of three (3) key assets in that company. My cooperation and continued employment was encouraged. I was to get a $3,000 bonus if I signed a 3-year non-compete clause (hereto forth NCC) as well as a 3-year non-termination clause. I indicated I did not want to sign a NCC even with a non-termination; especially one that appeared overly-broad. The acquiring company was aghast by this and offered to bring both down to 2-years. Still, I would not sign. I informed my parent company and asked for legal counsel. To-date it is the best legal counsel I have ever received.

    NCC enforcement varies from state-to-state. A NNC can provide a roadblock in hiring should you opt out (especially if backed by a 800-lb Gorilla of a company). Today’s law permits exceptions, but generally enforces NCCs to the extent necessary to protect the employer.

    Counsel: “SAR are you planning to quit the acquiring company and work for a competing enterprise?”
    SAR: “No. However, companies in my industry in general (primarily material handling and overhead cranes/hoists) might be considered competing enterprises.”

    He then simplified the matter in terms of marriage:

    Counsel: “Do you plan on getting married.”
    SAR: “Ummm sure.”
    Counsel: “Marriage is a contract. Do you plan on breaking that contact? If so, don’t sign that contract.”
    SAR: “Makes sense.”
    Counsel: “Don’t get married if you plan on cheating on our spouse. If you do cheat, don’t get caught. If you do cheat, it better not be pre-meditated and better be the best Vegas weekend ever. What I am saying SAR, is that intent is the key. You have the right to quit and do other things. You havea right to support you and your family. Overly-broad NNCs are hard to enforce. My advice to you is not to sign the NCC. Stand firm and get them to wave it.”

    I stood firm. However, the legal ink was about dry and the only way out at that point (without screwing up the deal) was to not sign it and give a 60-day leave notice. I was heavily involved for 30-days. I was re-approached to stay-on and not leave. I said that I prefer to runout my 60-day period. I was escorted off the grounds at Day 45. Within 5-days I was back in Omaha working for the parent company as if I never left. Winning!

  3. The DA Blog says:

    A win’s a win, baby.


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