“Are my relatives and friends legally obligated by a non-compete agreement I signed?”

Question: Are my relatives and friends legally obligated by a non-compete agreement I signed?

Bristol, Tennessee

Answer: Dear Mary: Don’t take it personally, but your question sounds so simple, it sort of sounds almost like a “trick” question. Is it possible that “something else” is going on?   

1. Only the person who signed a non-compete agreement is bound by its terms. Any agreement is enforceable only by the parties to it. For others to be bound, they have to somehow – in writing, by their conduct, or on an audiotape or videotape – agree to be bound by it.

2. Sometimes people try to “get around” the terms of a non-compete agreement by having a relative or friend act in their place until the time period of the non-compete agreement has expired. Many times people have said to me words to the following effect: “I plan to have my brother open up a competing company, and I will show him what to do and how to do it, in order to get around the non-compete agreement. Nothing will be in writing with my name on it. After the non-compete restriction expires, I will become an official employee or an official owner.”

This would violate the terms of most non-compete’s, most of which say “I will not directly or indirectly compete.” This would also violate the spirit of non-compete agreements.

3. In my experience, those who try to “skirt” a non-compete in this way usually get caught. It’s a “small world,” and most industries are sort of a “small club.” Most everyone in a certain industry knows most everyone else in that industry. When a new competitor arrives on the scene, it is usually noticed. It is especially noticed when the new competitor has no known experience in the business. It’s amazingly common that, sooner or later, someone always seems to say, “Hey, isn’t that Mary’s brother, Joe?” Or, a customer may see you in the office, or something like that, seems to inevitably happen.

4. Don’t get me wrong: people can violate agreements if they wish, but it is important that they understand and appreciate the risks of doing so. I don’t tell people what to do. Instead I counsel them on the potential risks and rewards of taking certain actions, and often help them do what it is they want to do. Taking risks is the essence of business, and I encourage people to take risks, if and when they have considered the potential implications. But I do not pass judgment on those who take risks, even the risk of violating a non-compete agreement.

Just in case you do have a problem, Mary, we offer a Model Letter entitled “Response to an Attorney’s Cease-and-Desist Letter Demanding You Stop Violating a Non-Compete.” To obtain a copy, just [click here.]

Thanks for writing in, and I hope this helps.   

Al Sklover

Don’t forget: we offer
Model Letters, Memos, Checklists and Form Agreements
for almost every workplace issue. Just [click here.]

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© 2012 Alan L. Sklover, All Rights Reserved.

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