Published on February 6th, 2013 by Alan L Sklover
Question: Alan: What is your experience with non-compete agreements in cases like mine where my former company (based in Massachusetts) terminated me without cause? It was a layoff and my position was eliminated.
The term of my non-compete agreement is 24 months, and it does not seem fair that my former employer can restrict me from gaining new employment in my field of expertise. I have 20 years of experience in a niche area, and in fact that is why my former employer hired me six years ago. Now that they do not need me anymore, they want to enforce my non-compete agreement so that I cannot work for another, new employer that I have an offer from.
The new company I am trying to go to work for is not considered a direct competitor and maybe once or twice in the past 4-5 years have the two companies competed for similar business. The new company will not hire me until I have a signed release but my former employer refuses to provide this. What should I do?
Answer: Dear Steve: The dilemma you face is an exceedingly common one, and a shameful waste to our society of valuable time, effort, expertise and energy, so often for no good purpose. I have a lot of experience helping people in your situation. Here are my thoughts:
1. The wisest analysis of non-compete agreements starts with the understanding that they are “enforced” in three different ways. Those who regularly read our blog know that I believe that “life is larger than the law.” By that I mean that most situations in life, while they often have legal implications and consequences, are just one aspect of our lives – no more. Though lawyers, and often Judges, seem to think that the world revolves around the law and the legal system, this sense of self-importance is way, way overblown. Employers know that the law is just one part of life, too, and with this in mind they deal with non-compete’s with the understanding of their “three-way” enforcement. So should you.
Non-compete agreements confuse a lot of people. Our 185-Point Master Guide and Checklist for Non-Compete’s is like nothing else available elsewhere to educate you to what you need to know. To obtain a copy, just [click here].
2. The first way – and most common way – non-compete’s are enforced is by “Prospective-Employer Fear,” which seems to be operative in your life at this time. That is, your “prospective employer” is too afraid to hire you with the risk of a non-compete law suit hanging over your – and its – head. For your prospective employer’s own protection, its Human Resources staff or Hiring Manager no doubt asked whether you had signed a non-compete agreement, and no doubt you wisely told them “Yes,” or perhaps even showed it to them. On that basis, it is your prospective employer’s fear that is actually enforcing your non-compete agreement with your previous employer. I often refer to this as “self-enforcement.”
However, some prospective employers are willing to say to valuable prospective employees in your circumstances, “I believe in you, and I believe what your previous employer is doing is wrong and indefensible, and I will stand up for you and by you, at least until a Judge tells me I cannot.” I particularly love “stand-up” employers, as I love any “stand-up” people, because the world would surely be a better place if it had more “stand up” people, or at least a few more people who were a little less afraid to stand up.
You know, Steve, simply ignoring a bully is often the best way to deal with a bully. That is, to call their bluff. Sure, you may end up with a “bloody nose,” or even a “black eye,” but then again, you may just scare the bully off entirely. And, anyway, before too long everyone recovers from a “bloody nose” or a “black eye.”
By gaining the support of a prospective employer by, among other things sharing with them your potential defenses to the non-compete, you defeat the first way non-compete’s are enforced: prospective employer fear.
We offer a Model Letter you can use to try to encourage your prospective employer to stand up for you. It is entitled “Model Letter to Your Next Employer Disclosing Your Non-Compete and Requesting Their Support if a Dispute Arises.” If you would like to obtain a copy for your use and adaptation for this purpose, just [click here.]
In my experience, this is a very attractive option, as it works more often than you might imagine. This is because most such “threats” are more bark than bite. It is also because most “bullying” former employers fear going to Court as much as you do, mostly because they know that most Judges will either not enforce a non-compete, or limit the enforcement of a non-compete to just a few months. (See section 4, below.) And, hey – you may not even hear from your former employer at all. Yes, most threatening employers simply “go away.”
3. The second way – and less common way – non-compete’s are enforced is by a lawyer’s “Cease and Desist Letter” addressed to you and/or to your new employer. This would represent a “final warning” that, unless you stop working for your new employer, you and your new employer may get sued.
This way of “enforcing” a non-compete takes a bit more courage to face, because it is an actual threat. That said, it is also an opportunity of sorts, as it gives you a chance to respond to it “in kind,” that is, with your own potential “defenses” to your non-compete, and thereby effectively stand up to this threat. There are several potent defenses to the enforcement of a non-compete. Among others, they include that (a) the employer, itself, has engaged in some sort of wrongdoing (sometimes called the “unclean hands” defense), (b) the employer did not honor its promises to the employee, and (c) the non-compete promise of the employee was “fraudulently induced.”
Of course, your response to a “Cease and Desist” letter must be in writing, and is best sent by email, because email makes a permanent record of (a) exactly what you said, (b) exactly when you said it, (c) exactly how you said it, and (d) exactly to whom you said it. This is also an opportunity to “make a record” of both your employer’s point of view, and your defenses, and your advising your employer of your defenses to the non-compete agreement you signed.
You might want to review a blogpost I wrote entitled “How to Defeat a Non-Compete – 10 Good Defenses.” To do so, just [click here.]
By responding to a threat with a spirited defense, you may well defeat this way of “enforcing” a non-compete you have signed.
We also offer a Model Letter entitled “Response to Attorney’s Cease and Desist Letter Alleging a Non-Compete Violation.” To obtain a copy for your adaptation and use, simply [click here.]
4. The third way – but by far the least common way – of enforcing a non-compete agreement is for the employer to take you, and possibly your new employer, to Court. I know this is easy for me to say, but the word “lawsuit” should not make anyone tremble, because – unless you have stolen secrets or contacted customers before you left your job – the most such non-compete “lawsuits” usually seek is an Order stopping you from working for the competing employer, and such Orders are not all that often granted. (While monetary “damages” are often alleged, they rarely exist, and are exceedingly rarely provable.)
Your home state of Massachusetts, like many states, may or may not enforce your non-compete agreement based on the fact that you were laid off, and did not resign or commit misconduct. Massachusetts Courts, like the Courts of most states, look to the overall “equity” or “fairness” of the matter. In most states, as in Massachusetts, there is no clear rule that says, “If laid off without cause, you are free from a non-compete agreement that you signed.” That said, most Courts in most states do not “enforce” non-compete agreements when an employee is laid off, without a new job, holding no secrets, and not having engaged in any “bad conduct.”
While most Courts are reluctant to keep any employees out of work without income unless given a good reason to do so, they are also reluctant to overturn a signed agreement (a) without a very good reason, and (b) thereby to possibly give the employee an unfair advantage if that is what is going on. So, the Courts generally require that they be given all of the facts of a situation before ruling, to ensure that what they do is “equity” or “fairness,” and they depend on the unique facts of each case in making their decisions.
I can tell you that in any non-compete battle, if you were laid off without having committed any kind of misconduct or “cause,” those facts are clearly in your favor. On the other hand, such a legal fight will undoubtedly cost some money. Yet still, the most likely outcome is that, at most, you would have to remain out of work for a few months, and the Judge might Order your former employer to pay you in the meantime.
5. A possible suggestion: (In writing, or course) you might also consider offering your former employer a “compromise” of sorts, for example, a negotiated limitation on your restrictions, such as “It only applies to Competitors A, B, and C,” or “It does not apply to any Competitors unless their sales are in New England, with revenues over $10 million.” I once represented an employee of a very large “personal care” products company, with worldwide sales in the billions. She had a job offer with a “competitor” that had annual sales of approximately $1 million, and sold just one product.
She made a written request directly to the CEO of the “mega”-company to be permitted to work for its “mini”-competitor – which was passed down to some lower-level attorney. The request was granted. The advantages of this course of action are twofold: first, it might just work, as it did for my client; second, if the suggested “compromise” is not granted, the employer’s refusal to show any reasonable degree of flexibility can be quite helpful when later shown to a Judge, as it just reeks of unfairness.
I almost always suggest clients proactively seek a resolution of their non-compete (or non-solicit) disputes with former employers before a legal dispute arises. We offer a “Model Letter: Proactive Attempt to Prevent a Potential Non-Compete Dispute” that you can adapt for your non-solicit agreement, that shows you “What to Say, and How to Say It.”™ To get your copy, just [click here.] Delivered by Email – Instantly!
6. A second possible suggestion: With 24 months of the “threat” from your former employer hanging over your career, consider initiating a “lawsuit” of your own. I say this because the combination of facts that you have presented, namely (a) experience in a “niche” area, (b) layoff without any misconduct on your part, (c) a job offer with a barely-competitive company, and (d) facing 24 months of unemployment, heavily weigh the “equities” or “fairness” in your favor, and most Judges would either (i) force a compromise, such as a 3 month or 6 month restriction conditioned on your being paid during that time, or (ii) ruling that 24 months is just too much, and thus voiding the entire agreement. As noted above, being able to show the Judge you were flexible and honest with your former employer, and that they showed no flexibility or good faith, would also weigh heavily in your favor. Other than the legal expense, which admittedly is not “fun,” it seems you have little to lose, if the other approaches to regaining your freedom do not work.
As you may well imagine, we also offer a Model Letter for this purpose. If this is of possible interest to you, just [click here.]
Steve, there is no magic solution to the problem you face. However, non-compete’s work on fear, and in every aspect of our lives, “Faith Overcomes Fear.” Always does. Always will. I urge you to go forward with faith that the “right thing” will come your way, so long as you step forward to greet it with faith and in good faith. This is not based on mere conjecture, but a lifetime of doing this sort of thing, and seeing what works. Faith just has a way of making the “sun shine,” although you may hear some “thunder” and get a bit “wet” before you begin to hear the “bluebirds” chirping.
My Best to You,
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