Question: Can a company pick and choose who they go after and make sign a non-compete agreement? Is there any precedent if a company pursues one person, while not pursuing others in similar circumstances?
Answer: Dear Jay: As is so often the case, the answer is a kind of yes-and-no, depending on the facts and circumstances, and what may be in the hearts and minds of the employer’s decision-makers. Here’s the story:
1. As a general rule, employers are free to make their own choices of every kind. Those who make the laws (that is, legislators) and those who interpret and enforce the laws (that is, judges) are always reluctant to tell others what they must do, or not do. So, the presumption is always – unless there is a very good reason to do otherwise – employers are free to impose whatever obligations, restrictions and conditions they choose upon their employees, and that includes those related to non-competition agreements.
2. The basic reason for the wide latitude afforded employers is the acknowledgement that legislators, judges and juries simply don’t know the in’s and out’s of every business, or every employment relation. An employer may feel that only one of its employees needs to sign a non-compete, because it is only that one employee who (a) could possibly “steal” away valuable customer relations; (b) could possibly understand the value of a secret formula he or she is dealing with; or (c) could even attract other employees to work for a competitor. That is a business judgment, that might not make sense to others, but only to that employer.
The employer may be right, the employer may be wrong, but we have an equal opportunity in this society to succeed or fail, based on our judgments.
3. Don’t feel it is unfair, because employees generally have the exact same freedoms in how they deal with their employers. Yes, yes, I know, it doesn’t seem at all “equal” or in any way “a level playing field.” Employers seem to have the upper hand. As an employee advocate my entire life, I know that. But as an employee advocate for over 30 years, I have also seen many, many employees have the upper hand, too, and so I see the employment relation as one that is not an easy one, but one that can be successfully “navigated and negotiated.”
In fact, I have seen employees prevail in negotiating non-competition agreements when they have (a) refused to sign it, (b) insisted on limits on it, or (c) demanded extra payment for it. It all comes down to what “perceived value” the employee has to the employer.
4. The “general rule” of considerable employer freedom regarding non-compete agreements does, though, have limits set in the law. As with every freedom, there are limits. You’re free to go fishing, but there are usually limits on the number or size of fish you can catch. You’re free to marry someone, but not six people at once. You’re free to take a walk, but not in the middle of busy traffic. Every freedom has limits. So, too, with an employer’s freedom regarding non-compete’s.
An employer cannot choose who must sign a non-compete on the basis of age, religion, disability, race, gender, military status, national origin, in some places sexual orientation, and other “protected categories” of people.
An employer cannot choose who must sign a non-compete agreement by who is willing to engage in criminality, dishonesty, non-consensual sexual relations, or other kinds of prohibited conduct.
An employer cannot choose who must sign a non-compete in violation of an agreement it has entered into by which it has agreed not to do so.
An employer cannot choose who must sign a non-compete by who it believes is incompetent to understand what they are signing.
An employer cannot choose who must sign a non-compete in certain places in violation of “public policy,” which is commonly considered “the general welfare.” This might be the case where there is a severe shortage of doctors, and an agreement limits the ability of a doctor to work in that area.
And there are lots and lots of other limits on this freedom too, depending on the facts and circumstances, and what is in the hearts and minds of those who are making the decisions about who must sign a non-compete.
Jay, so often I wish I could give a simple “yes” or “no” answer. And so often I simply cannot. Life is so often just not “that way.” That said, I hope this clarifies things about non-compete’s for you.
P.S. One of our most popular “Ultimate Packages” of forms, letters and checklists is entitled “Ultimate Non-Compete Package” consisting of five Model Memos and Letters, that assist in navigating and negotiating non-compete agreements, and our 185-Point Guide and Checklist to Non-Compete’s. To obtain a complete set, just [click here.]
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© 2012 Alan L. Sklover, All Rights Reserved.