“If an employee’s position is eliminated is a non-compete still enforceable?”

Question: The company I worked for eliminated my position, and gave me a severance package. My title was Manager of Customer Service and Collections. I’m now seeking a position with a direct competitor of that company.

This prospective company asked me if I had a “non-compete” provision in my severance agreement. It didn’t exactly, but it did say (a) I have to continue to follow the Employee Handbook, (b) I must maintain confidentiality of the company’s trade secrets, and (c) I can’t try to take their employees away from them for one year.

This is my question: Since my position was eliminated, and I was severed from the company, can they enforce any non-compete clause? If they can, how could I ever work again in this industry? Thank you.

        Phoenix, Arizona         

Answer: Your question has three answers, all three of which should please you:

First, there is no reason whatsoever that your “confidentiality” clause should pose a problem for you. By law, every former employee – even if they did not sign anything – cannot share or use any of a former employer’s “trade secrets” after leaving a job, or being let go. That’s because “trade secrets,” which are bits of information that the company has put together through expenditure of time and effort, that gives it a business advantage, are private property. The most common one: a list of its customers. Just as you can’t take the employer’s computers when you leave, you can’t take their trade secrets either. I see no reason at all that this should be a concern for you.

Second, there is no reason whatsoever that your “non-solicitation of employees” clause should pose a problem for you, either. This simply restricts you from trying to lure employees of your former employer to resign, and come to work for your future employers. In 27 years in this work, I’ve never once heard of an employee who had to take another employee with them to a new employer. I see no reason at all that this should be a concern for you.

Third, it is rather unusual for an Employee Handbook to contain legal provisions that would be a problem for you in the future. While sometimes employers “bury” or “hide” non-compete provisions in employee handbooks, it’s pretty unusual. However, it should be a simple thing for you to email the Head of HR at your former employer with this message: “Hello. I used to work for the company. I understand the Employee Handbook might contain things I might have to remember and honor. So, would you please send me a copy. Thank you.” It should be that easy to get a copy.

These things are NOT non-compete agreements. A non-compete agreement says, in effect, “I won’t work for a competitor for a period of time.” So, you should feel free to respond to your prospective employer, “No, I did not sign a non-compete agreement. I am totally free to work for you.”

As a final comment on your question: In most states (and though I am not admitted to practice before the Courts of Arizona) and I believe that includes Arizona, even when your position is eliminated, or you are laid off, non-competes are enforceable. It is wrong, and I am considering trying to lead an effort to make them as illegal as slavery, but as of today, that is the law.

So, all in all, that should “make your day.” Thanks for writing in. Hope you are enjoying our blog, and that you’ll tell your friends about it.         

Have you received a letter from your former employer’s attorney demanding you “Cease and Desist?” Are you concerned you might receive one? We offer a Model Letter entitled “Response to Attorney’s ‘Cease and Desist’ Letter Alleging Non-Compete Violation.” It shows you “What to Say, and How to Say It.™” To obtain a copy for your adaptation and use, just [click here.] Delivered by Email – Instantly!

Best, Al Sklover  

© 2010 Alan L. Sklover, All Rights Reserved.

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