Non-Compete Agreement Lawyers
Enforceability of a Non-Compete Agreement
Clients often ask this question: “I want to leave my employer and change companies or go into business for myself, but I signed a non-compete agreement. If I do this, will my employer be able to enforce my non-compete agreement against me?”
The answer is the classic lawyer’s response: It depends. In fact, it depends on a host of factors, both legal and non-legal.
Enforceability Factors in Non-Compete Agreements and Clauses
In general, these kinds of agreements are not favored by judges, as they fly in the face of our whole economic system, which relies on largely unfettered competition in the marketplace. Having said that, judges will enforce non-competition agreements to the extent they have been carefully tailored to address an employer’s legitimate business interest in safeguarding its goodwill and restrict a former employer from stealing business. While restricting a former employee from entering the marketplace, in general terms, may not be enforceable, restricting the employee from leaving with the company’s clients may well be.
Maryland Non-Competition Clauses
The general rule in Maryland is that a restrictive covenant not to compete will be upheld if the restraint is confined within limits which are no wider as to area and duration than are reasonably necessary for the protection of the business of the employer and do not impose undue hardship on the employee or disregard the interests of the public. Ruhl v. Bartlett Tree Co., 245 Md. 118, 123-24 (1967)
A typical case might involve an executive or professional. The non-competition limitation in the employment contract might restrict the employee for a period of one (1) year from engaging in competition, “directly or indirectly”, with the employer within a radius of fifty (50) miles from the company’s office. Leaving aside what is meant by competing “indirectly,” the question as to enforceability would focus on whether the 1 year/50 mile restriction was reasonable, whether the restriction would impose an undue hardship (some hardship being a given) on the employee (meaning an undue restriction on the employee’s ability to earn a living), and whether the public interest would be harmed by enforcement of the non-compete agreement (i.e. by restricting a doctor from providing medical services).
These questions cannot be answered in the abstract, but require a careful analysis of the specific language of the agreement, the employee’s job responsibilities (the more responsibility, the more likely that a court will find such restrictions reasonable), the employee’s future job prospects in light of the restriction, and the harm to the public. As you might expect, these cases are highly fact-specific.
Employer Enforcement of Non-Competition Clauses
Beyond the legalities (and there are more legal issues than have been listed here), there are the strategic issues.
- How likely is it that an employer will file suit to seek enforcement of the non-competition agreement?
- Does the employer have a history of bringing actions to enjoin former employees who compete in violation of a non-compete agreement?
Such lawsuits cost thousands of dollars. Nonetheless, some employers may welcome the opportunity to bring such an action, to send a message to other employees that they will come down hard on those employees who try to take clients with them when they leave. Such employers will see the expense as an investment in keeping everyone else in line. In many instances, the agreement will provide for a recovery of attorney’s fees against a breaching former employee, thus incentivizing the employer to bring an action against the former employee and raising the stakes for the former employee.
Other employers may be more cognizant of the pitfalls in bringing an action against a former employee, especially if the restrictions are vague or broad in terms of time and geography. They may not want to take the chance that their agreement – perhaps signed by many other employees — will be invalidated by a judge who thinks the restrictions are unreasonable, thus opening the door to unfettered competition from other departing employees in the future.
Contact Our Non-Compete Agreement Attorneys For Help
Non-compete clauses raise a number of issues and require careful analysis. If you have signed a non-compete agreement and are concerned about its enforceability, call the attorneys at Zipin, Amster & Greenberg to set up a consultation. It is always wise to understand your rights and potential limitations on your future before the agreement is tested.