“Is a non-compete agreement enforceable after being let go without cause?”

Question: I signed a non-compete agreement when I was hired that said that “for six months after employment ends, for any reason” I cannot work for a primary competitor of my employer.

I was suddenly let go on Monday, for business reasons, that is, “without cause.” Is my non-compete enforceable?

John C.   
New York, New York

Answer: Dear John: I really wish I could give you a straightforward answer to your rather straightforward question, but I cannot. New York has no clear rule on this question, and in many other states this is so, as well. This is due, in good part, to the nature of court decisions in New York – and in many other states –  regarding non-compete agreements: they are what many of us lawyers describe as “all over the map.” 

a. When faced with non-compete agreements, courts look to many different factors when deciding whether they should be enforced. As examples: (1) Is it really necessary to protect the legitimate interests of the employer that the employee be kept out of work?; (2) Has the employer honored the same contract it is now seeking to enforce?; (3) Are the limitations reasonable as to time, scope and geography?; (4) Does the non-compete act to force a forfeiture of the employee’s vested benefits?; (5) Is the employer providing the terminated employee with severance through the non-compete period?; (6) Has the employer been fair throughout this process, or has it engaged in improper or unseemly behavior? 
b. For this reason, it’s often difficult to figure out which one factor, or factors, were the deciding factor(s) in any legal case. For this reason, the law in non-compete cases is truly unsettled, with an unusual degree of differing opinions reached by courts, many of which are inconsistent with one another. For this reason, too, we lawyers cannot provide clear guidance to people facing this predicament.   

c. The only “safe” presumption is enforceability of non-competes, but you can try to “navigate your way” through the problem. Those faced with your situation – in which most competitors will not hire you until the non-compete period is over – should either (1) ask your former employer, in writing, to either waive or limit your restriction, (2) avoid any competitor for the length of the non-compete period, (3) consider asking your former employer’s competitors if they would take the risk of hiring you, or (4) seek guidance by an employment attorney experienced in these matters, with whom you should share your unique set of facts.

d. If these don’t work, it may be wise – although expensive – to challenge the restriction in court. Our firm recently proceeded into court to challenge a non-compete agreement, in response to which the former employer agreed to drop its claim to enforceability. We are now in court seeking further damages against the employer. It’s aggressive, it’s bold, and it’s a bit risky, but in the right circumstances it’s the right thing to do. 

Sorry I couldn’t be more helpful, but this area of law – dependent on unique facts and factors of each case – makes that impossible. On this one, you’ll need to consult an attorney experienced in these matters in New York who can review your unique facts and factors with you.

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Best, Al Sklover

© 2011 Alan L. Sklover, All Rights Reserved.

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