Is The Grass Really Greener? : Non-Compete Agreements

by | May 15, 2012 | Contracts

These days, a lot of companies want their employees, especially those in key positions, to sign non-compete agreements.  They want to be sure that if their employees leave, thinking things may be better somewhere else, they won’t be allowed to call on the company’s customers or take business over to a competitor.  For years, just having signed agreements in place was enough to keep employees from going over to a competitor, but current economic conditions have caused both employers and employees to test the enforceability of these agreements.

In one recent case, a company holding a  signed non-compete sued its ex-employee as well as the company the ex-employee went to work for.  It argued that the non-compete agreement was supported by legitimate business interests and was valid and binding.  The former employee was a senior staff member with access to lists of existing and potential customers as well as to a database rich with information on customer references and profitability – information not generally available to the public and surely desired by the company’s competitors.

The employee, who said he had resigned when the company instituted a new commission structure and didn’t pay him what he was owed, believed the company’s actions canceled out his obligations under the agreement. The company, he thought, had treated him improperly and therefore lost its ability to enforce his non-compete.  He was wrong.  The court found that his agreement not to compete was not impacted by these other issues.  The existence of any claim against the company, even if valid, would not overcome the enforcement of the non-compete.

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