Can your previous employer stop you from getting a new job? Possibly, if you signed a noncompete agreement.
Noncompete agreements—legal documents that bar employees from working for competing businesses for months or years after leaving an employer—have become increasingly common in this weak economy. Companies that cannot afford raises and bonuses are using noncompete agreements to prevent employees from jumping ship. New hires are told that they must sign these agreements if they want jobs…and existing employees are told that they must sign to keep their jobs or qualify for benefits.
But signing a noncompete could significantly inhibit your career, preventing you from landing appealing positions in this challenging job market. Here’s how to prevent a noncompete from damaging your career…
GROUNDS FOR CHALLENGE
Eight strategies that can be effective in noncompete agreement challenges, either in negotiations with former employers or in court…
Show that the new position would not violate the precise terms of your noncompete agreement. Give the agreement a very close read—the human resources department should be able to supply a copy if you don’t have one. The terms might not be as limiting as you expect.
Example: A man wished to take a job with his current employer’s competitor despite a noncompete agreement. He discovered that his noncompete barred him from working only for an employer that used “the same or similar technology.” The competitor used a significantly different technology.
Show that your employer engaged in illegal or dishonest behavior toward its clients. Employers don’t want former employees discussing corporate misbehavior in court, so they usually agree to waive noncompete agreements when former employees tactfully raise these matters.
Example: A saleswoman left her employer because it was intentionally overcharging clients and she did not wish to participate. The employer agreed to her request to free her from her noncompete agreement.
Show that your former employer lacks a “legitimate business interest” for enforcing the noncompete. Noncompete agreements are supposed to protect companies’ trade secrets and business relationships. If your role with the company did not give you access to trade secrets or clients, you should be allowed to take a job with whomever you like.
Show that the noncompete agreement is unreasonably broad in terms of time, geography or activities. If your current employer does business in only one state, your noncompete should not prevent you from taking a job with a company that does not do business in that state. If your former employer is in just one market niche, your noncompete should not bar you from working in the entire sector. If your insider knowledge of the company’s plans extends only to the end of the current fiscal year, your noncompete should not ban you from working in the industry for five years.
Example: A New York judge ruled that the online business world changes so fast that Internet-sector insider knowledge usually is out-of-date within one month. By that standard, almost any noncompete is unreasonably long for Internet-sector workers.
Show that the employer breached the terms of your employment contract. If your employer did not live up to the terms of its contract with you, you likely cannot be forced to live up to your noncompete agreement with it.
Example: A struggling Los Angeles lingerie company could not afford to pay an executive the lump-sum severance package promised in her contract and instead paid the severance in several installments. The courts ruled that this breach of contract was sufficient to void her noncompete agreement.
Show that the employer tricked you into signing the noncompete by making promises that it did not live up to.
Example: An employer verbally promises an employee that a noncompete will not be enforced unless he tries to join one particular competitor—then enforces it when he tries to work for a different company.
Helpful: If verbal promises were made to you regarding limits to the enforcement of your noncompete and/or the benefits you would receive for signing it, send an e-mail requesting clarification. Save the e-mailed response—it could be important evidence if you later need to challenge the noncompete.
Show that you were terminated without cause. The courts are inconsistent on this point, but in some cases, they have ruled that employers cannot enforce noncompetes when employees are let go without doing anything wrong, as in mass layoffs.
Show that the noncompete agreement was never signed. Don’t assume that your former employer has a valid noncompete agreement. If you don’t recall signing, ask to see a copy.
Example: Employers occasionally assume that they have noncompete agreements in place because they required all employees to sign them. But employees sometimes ask to consult with their lawyers before signing, then never get around to turning in the agreement.
MAKING YOUR CASE
If possible, approach your former employer to challenge your noncompete agreement before you start applying for new jobs. You might not even need to hire a lawyer. Begin by sending an e-mail to a decision maker at your former employer using one or more of the reasons listed above to explain why you think your noncompete agreement is not valid…or why you think it does not preclude you from taking a specific job or type of job you have in mind.
If this decision maker promises that the noncompete will not be enforced, save this message to show any potential employers who ask about prior noncompete agreements.
If your former employer insists on holding you to the noncompete agreement, hire an attorney who specializes in employment law to write a letter to the former employer. This should take only an hour or two of an attorney’s time. If the employer still does not back down, you might have to go to court to challenge the noncompete. This could lead to thousands of dollars in legal fees, but it usually is not necessary. Employers generally prefer to negotiate before these cases get to court.