Question for Our Legal Experts

How binding are non-compete agreements?

I've done some research online and it seems that most courts seem to side with the employee if they're breached, but figured I'd see what the BGP legal minds had to say.

Basics of it are when my wife was hired on to her current employer, they had her sign a non-compete for any other like company in the United States. It runs for 1 year after she would leave her current company. She wants to start looking for other jobs, but most of what she can find in her field are in the same industry.

She works for a global company, and is a pretty entry level employee, so my personal two cents are that they aren't going to waste their time with her, and that they simply have the NCAs in place to avoid high level employees who deal with clients and customers from poaching clients.

Any insights?

How binding are non-compete agreements?

 

I've done some research online and it seems that most courts seem to side with the employee if they're breached, but figured I'd see what the BGP legal minds had to say.

 

Basics of it are when my wife was hired on to her current employer, they had her sign a non-compete for any other like company in the United States. It runs for 1 year after she would leave her current company. She wants to start looking for other jobs, but most of what she can find in her field are in the same industry.

 

She works for a global company, and is a pretty entry level employee, so my personal two cents are that they aren't going to waste their time with her, and that they simply have the NCAs in place to avoid high level employees who deal with clients and customers from poaching clients.

 

Any insights?

Fifth Third used to enforce them with vigor, so don't be too sure. Even if a court sides with you, legal fees will make it feel like you did anything but win. Most companies that I am aware of have gone to having employees sign non-solicitation agreements where they agree not to call on their old customers for a period of time.

When I was in the sales world, they would enforce them. This appeared to me to ensure they kept their customers.

Not sure how it would outside of that world.

Be sure you read the fine print as to exactly what the terms of the non-compete are. Is it just related to current client relationships, or is it very broad? My experience in sales is they don't enforce them unless you are attempting to bring over anyone in your client base, or potential clients that are in the pipeline. The other area that usually gets you in trouble is technology platforms, or product ideas. It might be worth having an attorney look over the NCA.

Be sure you read the fine print as to exactly what the terms of the non-compete are. Is it just related to current client relationships, or is it very broad? My experience in sales is they don't enforce them unless you are attempting to bring over anyone in your client base, or potential clients that are in the pipeline. The other area that usually gets you in trouble is technology platforms, or product ideas. It might be worth having an attorney look over the NCA.

I totally agree. It would be a good investment to have an attorney look over the NCA. Might save you a bunch of trouble in the long run.

Everything I have seen and situations I know about, most companies will enforce them vigorously and the companies usually win. They are tough to overcome.

However, if your wife is entry level and not in a situation that customers will follow her to a new company, and your wife is not privy to confidential client data and/or trade secrets, then you may be right that she would not be pursued.

Regardless, I absolutely would consult with an attorney before making a move.

If a suit is filed to enforce the agreement, often the new employer is brought in as defendant on the theory that it is tortiously interfering with the contractual rights of the old employer. During the interview process prospective employers frequently ask whether there is a non-compete involved and, if there is, they will back off because they don't want the hassle.

Short answer: yes, they’re enforceable in Kentucky and employers will absolutely enforce them if they’re so inclined.

Less short answer: These things are tricky and sometimes employers are not so careful about how they put them together. Things to look out for are items like “Did she sign it after she had already been working in that capacity for a while?” or “Does it cover a broad range of potential employment situations that it attempts to exclude her from?” Most importantly, if she’s thinking about making a decision that she’s already worried violates a non-compete, then it’s already time to consult an employment/contract attorney.

If a suit is filed to enforce the agreement, often the new employer is brought in as defendant on the theory that it is tortiously interfering with the contractual rights of the old employer. During the interview process prospective employers frequently ask whether there is a non-compete involved and, if there is, they will back off because they don't want the hassle.

That's been the big issue. Every time she goes to apply for a job, that question comes up and she never hears back. My thought is, if it's pretty much making it impossible to gain employment elsewhere, it wouldn't be enforceable, but that's my completely uneducated guess on it. :idunno:

Short answer: yes, they’re enforceable in Kentucky and employers will absolutely enforce them if they’re so inclined.

 

Less short answer: These things are tricky and sometimes employers are not so careful about how they put them together. Things to look out for are items like “Did she sign it after she had already been working in that capacity for a while?” or “Does it cover a broad range of potential employment situations that it attempts to exclude her from?” Most importantly, if she’s thinking about making a decision that she’s already worried violates a non-compete, then it’s already time to consult an employment/contract attorney.

Does it make a difference that she works in Ohio?

That's been the big issue. Every time she goes to apply for a job, that question comes up and she never hears back. My thought is, if it's pretty much making it impossible to gain employment elsewhere, it wouldn't be enforceable, but that's my completely uneducated guess on it. :idunno:

That's why it's important to have a lawyer review the NCA. If she can show how much latitude she has in regards to the agreement, it could go a long way in alleviating the fears that her potential employers may have.

Does it make a difference that she works in Ohio?

Again, you'd have to look at the language specifically written in her NCA. I've known of some companies that the NCA pretty much just covered the metro area they were in. So, if you moved across the country, they wouldn't stand in your way of gaining employment there. However, if her company is more of a regional/national/global nature, then the NCA probably covers a larger area.

Does it make a difference that she works in Ohio?

The specific terms of the agreement should provide how broad it is in terms of territory and time, e.g., a "100 mile radius of 4th and Walnut for a period of one year." If the Court considers it too broad in either aspect, then either or both can be reduced while still keeping the rest of the agreement in effect. I believe Kentucky law now provides that continued at-will employment is not sufficient consideration given by the employer to make the agreement enforceable against her....as opposed to signing it when the employee is first hired - which is enforceable. In other words, the employer cannot just say "sign this or we will fire you." For an employee who is already working for the employer, the employer must give her a raise or some other measurable benefit for there to be good consideration to make the agreement valid.

This ain't necessarily gospel but it is my understanding of how it works.

The specific terms of the agreement should provide how broad it is in terms of territory and time, e.g., a "100 mile radius of 4th and Walnut for a period of one year." If the Court considers it too broad in either aspect, then either or both can be reduced while still keeping the rest of the agreement in effect. I believe Kentucky law now provides that continued at-will employment is not sufficient consideration given by the employer to make the agreement enforceable against her....as opposed to signing it when the employee is first hired - which is enforceable. In other words, the employer cannot just say "sign this or we will fire you." For an employee who is already working for the employer, the employer must give her a raise or some other measurable benefit for there to be good consideration to make the agreement valid.

This ain't necessarily gospel but it is my understanding of how it works.

The agreement covers the entire country.

The agreement covers the entire country.

That seems quite broad unless your wife is selling all over the country to national accounts or something similar.