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non-compete Agreements

Flute Maker

Cast Iron
Joined
Feb 17, 2007
Location
Needham, MA
Hi folks,

I searched through the archives for previous threads about the success, or failure of non-compete agreements, but didn't find very much. And what i did find is several years old. Has anyone hired people, and been successful when there was an agreement in place?
We do a non-disclosure, but that's all. Is it always about spawning?

I look forward to any and all experiences.

Thanks,

Payson.
 
You need to define the context.

I have experience with non-competes, but I have no clue what you are talking about.
 
Are you looking to hire someone who has a previous non-compete in effect? Or are you looking to put a non-compete in your employment agreement to prevent poaching?

A lot of this depends on the state you are in, but I can tell you that even in a state where non-competes are not allowed I have seen successful litigation against former employees. I wouldn't hire someone with a non-compete. If you want freedom to go to another position don't sign one - even in a state where they are disallowed.

Personally I don't agree with non-competes in almost all situations. Non-disclosures should be standard. If you don't want your employees poached keep them happy.
 
Question: The company that issued the non-compete - Are they going to invest the time & money to enforce it, should an employee leave & go to a competitor...?

If it's a deadbeat company that issued the non-compete, then I wouldn't sweat it too much. If it's a place with their own in-house legal department, then I'd take it more seriously.



Just my two cents. That is certainly not legal advise.
 
non competes for 'regular' people, while getting more common, are pretty unenforceable, state courts are starting to question them
For principals, it is another thing
 
I was told that NC's can only be enforced if the person had some ownership in the company they are leaving. If you're just an employee they can do nothing to keep you from going out and competing with them.
 
I was told that NC's can only be enforced if the person had some ownership in the company they are leaving. If you're just an employee they can do nothing to keep you from going out and competing with them.

that depends on the state, and in many high tech companies stock is used as payment, even thought it may be worthless
 
I was told that NC's can only be enforced if the person had some ownership in the company they are leaving. If you're just an employee they can do nothing to keep you from going out and competing with them.

Most of this is dictated by state law. The bottom line is that if you have signed something (or are knowingly hiring someone with a signed non-compete) you should be prepared to honor it or end up in court.

I have friends who lived and worked in a state that explicitly bans non-competes and lost their job. They had no choice but to take work at a competitor as their field was very specialized. They ended up in court, spent months and more than $100k to eventually lose the case.

Going to court is no fun. It will dominate your life for months and cost you ridiculous amounts of money. Ask yourself if that is worth the risk? Not in my book.
 
NCA's are (as noted by others) in many cases unenforceable (people can't be prevented from working without being compensated), however -- If you are hiring someone with such agreement in place with a previous employer, you do need to look carefully at what this person brings to your business. If they have proprietary knowledge from the previous employer, that can be a liability if you are in the same product biz as the previous employer. That situation can put you in some degree of jeopardy, at some future point, perhaps. In general, though, unless that potential employee is a principal in previous employer's business, or has advanced knowledge highly specific to their product or business, you can hire them without too much worry. Just don't use trade secret information about the competitor's product that the employee might offer, or give up on request.
 
Non-compete agreements must be reasonable in the time period and the area covered. For example, if the agreement stated that the person may not compete in the US or protectorates forever, it would be unenforceable in court because it would be unreasonable,

On the other hand, if it were for a limited period of time in a small town and was negotiated with lawyers on both sides, it could be iron-clad.

There are all sorts of these agreements but the longer the period and the larger the area, the more difficult to enforce them. It all depends.

I wouldn't ever sign one myself unless there were some consideration involved.
 
MA is one of the states that seems to allow non-competes to be pretty aggressive. But seems like the state legislature wants to change that:

Compromise may be near on restricting ‘noncompetes’ in Mass. - The Boston Globe

Keep in mind that in most states, non-competes are not practically enforceable against hourly labor. In order to enforce one, you would need to file a (costly) lawsuit. If you get to the point where you are actually in front of a judge, both parties would have likely have to spend multiple tens of thousands in legal fees. Then, once you're in court, I can't imagine that most judges would be partial to an employer forcing a former employee to spend that much in legal fees and trying to enforce a non-compete against a $15/hr employee.

If you're talking about a business partner or high-paid executive, (e.g. someone who likely gets hired with an employment contract) it might make more sense...

If you're worried about a new hire absorbing your training budget and running off to a competitor, you'd probably be better off having some sort of tuition provision where they have to pay back any training costs if they leave before a certain length of employment.
 
MA is one of the states that seems to allow non-competes to be pretty aggressive. But seems like the state legislature wants to change that:

Compromise may be near on restricting ‘noncompetes’ in Mass. - The Boston Globe

Keep in mind that in most states, non-competes are not practically enforceable against hourly labor. In order to enforce one, you would need to file a (costly) lawsuit. If you get to the point where you are actually in front of a judge, both parties would have likely have to spend multiple tens of thousands in legal fees. Then, once you're in court, I can't imagine that most judges would be partial to an employer forcing a former employee to spend that much in legal fees and trying to enforce a non-compete against a $15/hr employee.

If you're talking about a business partner or high-paid executive, (e.g. someone who likely gets hired with an employment contract) it might make more sense...

If you're worried about a new hire absorbing your training budget and running off to a competitor, you'd probably be better off having some sort of tuition provision where they have to pay back any training costs if they leave before a certain length of employment.

While the idea sounds good, it's dangerously close to "indentured servant" status.
 
Could you elaborate please?

Let me help. If you sign an Agreement not to compete at any time before leaving your company, you will be bound by it. If as mentioned it is a particularly aggressive one, it could actually prevent you from working in the same trade within your local area and for a specified period of time. Thus, you would in effect be indentures to your old employer in that he would control your right to follow your former trade.

It all depends upon the contract and the parties involved, but say you were a top quality programmer, you might be kept out of the trade. I'm just sayin'.
 
Let me help. If you sign an Agreement not to compete at any time before leaving your company, you will be bound by it. If as mentioned it is a particularly aggressive one, it could actually prevent you from working in the same trade within your local area and for a specified period of time. Thus, you would in effect be indentures to your old employer in that he would control your right to follow your former trade.

It all depends upon the contract and the parties involved, but say you were a top quality programmer, you might be kept out of the trade. I'm just sayin'.

No help at all. None of that shit has anything to do with indentured servitude.
Indentured servitude - Wikipedia
 
No help at all. None of that shit has anything to do with indentured servitude.
Indentured servitude - Wikipedia

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Originally Posted by tdmidget

While the idea sounds good, it's dangerously close to "indentured servant" status.

I guess you were wrong then.:popcorn:
 
Non-compete agreements must be reasonable in the time period and the area covered. For example, if the agreement stated that the person may not compete in the US or protectorates forever, it would be unenforceable in court because it would be unreasonable,

On the other hand, if it were for a limited period of time in a small town and was negotiated with lawyers on both sides, it could be iron-clad.

That's how I understand it. My grandmother was a partner in a real estate company. She sold her interest and part of the deal was a non compete covenant for the local area for 2 years. She waited it out and went right back to work for herself.

I believe the agreement did not prevent her from working as a realtor for another local company. That would be unreasonable. It just prevented her from starting her own company.


I was asked to sign a non compete agreement as an independent contractor. I declined. In fact, it's my understanding that you cannot ask a contractor to sign a non compete, that would take away the "independent" part of the relationship.
 
There is a huge difference between noncompete and nondisclosure agreements in content and enforcement and yet in a practical sense are considered synonymous by many.

The nondisclosure agreements are quite straightforward in their content and enforcability. Gets back to trade secret issues.

The noncompete agreements usually are applied to principals and salaried employees. Depending on the state, these are usually unenforceable for hourly employees unless the nondisclosure boundary is crossed which usually is quite apparent.
 








 
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