By A.X. Jones
If you’re thinking of changing jobs or even doing some moonlighting, you might have to wrestle with that noncompete contract you signed.
Can you get out of it? The short answer is—maybe. It depends on several factors.
If you want to know the effect of a noncompete clause, you need to see a lawyer. The differences between one state's laws and another's can significantly affect the answer. And which state's law applies is a separate issue entirely, one that must be addressed in multi-state arrangements.
The particular facts of your case may help you or hurt you, and even minor variations in your employment arrangement can affect the legal situation.
In this article, we examine some of the issues employees should be aware of when trying to get out of a noncompete contract. Next week, we'll take the employer’s perspective. If you’re a manager, what do you need to consider if you want your staff members to sign a noncompete?
Confidential information is protected
First, you have to look at what, exactly, is being limited by your contract. The scope of prohibited work is what’s important. That description may mean the difference between whether your noncompete will be upheld by the courts or thrown out.
If the noncompete contract discusses prohibited trade secrets or confidential business information, perhaps you can work in a related area as long as those items are not compromised.
Knowledge about existing customers might be the key. You may have agreed not to solicit or go to work for current customers of the company.
The more closely the scope protects special, proprietary aspects of your employer's business, the more likely it will be that you can’t get out of it. Even in states with laws that disfavor noncompete agreements, the courts will more likely uphold the agreement if it’s written in a narrow way to protect proprietary information.
However, if the scope of the prohibited work is too great or too ambiguous, courts sometimes will view that noncompete as unreasonable. A ruling may find that a broadly written contract is against the public interest of competition in the marketplace or that it's in excess of legally permitted limits.
Careful legal analysis is required to determine whether the scope is narrow or broad. If it's a close call, or if your particular situation is unique or new, you might end up in court. A court battle may also be a tactical bid by a former employer to limit your effectiveness in competition against them.
You also need to look at the geographic limitation on non-competition clauses. As with the scope of the competition limit, too great or unreasonable a geographic limitation may be found unenforceable. The absence of a geographic limit might be construed as a worldwide ban; if that's found unreasonable, then the noncompete might be void.
On the flip side, if the geographic reach is small, the noncompete will be more likely to be upheld. However, under those circumstances, you may be able to take a job within a reasonable commute and not be in conflict with your noncompete.
Time limits placed on the provision will impact the noncompete contract as well. How long must you wait before you can get back to work?
In many cases, one-year and two-year time limits have been found enforceable. But in the fast-changing world of IT, that time frame may be considered unreasonable.
The history of these cases does not provide a hard-and-fast rule. There have been some special cases where courts have upheld five-year limitations written into noncompetes.
However, asking for too long a term, or having no term limit at all, has typically led to noncompetes being found unenforceable.
Questions to ask
Here’s a list of possible questions your attorney is likely to ask when determining if you will win your battle against a noncompete.
- What is the time/distance/scope of job limitations? Could you still get work?
- What trade secrets, confidential information, or special business information might be at issue or at risk?
- What has the employer done to enhance your job or your job skills, such as providing you with training and education?
- What did you receive in exchange for signing the noncompete clause?
California promotes freedom
As we mentioned earlier, laws vary significantly between states. In some states, you must receive something in exchange for signing a noncompete clause, such as a new job, a promotion, or some other benefit.
If you want to get out of a noncompete, you may have a better chance of doing so if you live in California. There is state legislation on the books that does not favor non-competition clauses.
“Except as provided for in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade or business of any kind is to that extent void,” according to California Business & Professional Code Sec.16600.
However, the phrase “Except as provided...” should alert you to the details that can be so devilish—both by statute and also by common law made by the courts. Under California law, agreements relating to confidential information or company customers may be enforced.
A different take in Texas
IT workers in Texas may find it more difficult to leave their company if they’ve signed a noncompete.
Texas provides by statute the criteria for an enforceable noncompete agreement. Employees must honor a noncompete clause if the clause places reasonable limitations on the employee.
The limitations may cover the length of time the employee is prohibited from working for a competitor after leaving his or her current employer. A person’s particular employment situation is taken into account when determining what is a reasonable restriction.
East coast examples
Many states have not passed general legislation dealing with this issue. The law has been left to the courts to develop, sometimes with gaps in the law where a particular set of facts has never been before the courts in a state.
New York courts have upheld the enforceability of noncompete agreements in a number of situations, including in some cases where an employee provides unique and extraordinary services to the employer.
In Massachusetts, the courts have found some agreements relating to a business’s good will—its relationships with customers—to be enforceable.
Find an attorney
The extent to which a state court will act for you or against you can't be predicted. Even if your case is seemingly identical to a coworker's case last month, a judge can make an entirely different determination.
Good legal advice can help you plan what to do if you want to fight a noncompete agreement. But the best advice is to receive legal advice before you sign a noncompete.
This article is for informational purposes only; it discusses legal principles in general terms and not as they would apply to any particular person's situation. It is not legal advice, nor does it create any kind of an attorney-client relationship. No warranty as to the accuracy or correctness or sanity of this information is made, expressly or implicitly. Each person's legal situation depends on the particular laws that may apply and on that person's unique factual circumstances. See your lawyer. Take her to lunch. Send him a holiday card. The amazing diversity and complexity of the system of justice, a great strength, also means you need a guide you can trust.
What does your noncompete ask for? Is it worth it to fight against this agreement? Post a comment below, or send us some mail. We may use your comments in an upcoming article. Names will remain confidential.