Non-Compete & Non-Solicitation Agreements
Non-compete and non-solicit provisions, so-called called restrictive covenants, are restrictions on an individual’s employment both during and after employment. These restrictions sometimes are stand-alone agreements but are more typically included in a variety of employment-related contracts. They can prevent an executive or professional from working in his or her own industry for a period of time after employment ends, or from soliciting employees, clients, or customers after leaving employment. In some cases, these restrictions can also prevent an individual from starting a new business or hiring employees of the former employer even if there has been no solicitation.
Signing a non-compete is often a condition of a job offer or formation of a partnership. In addition, employees are sometimes asked to sign a non-compete during the course of their employment for a variety of reasons, such as a condition of receiving stock grants, stock options or other forms of incentive compensation. Finally, employees who are leaving a job might be asked to sign a non-compete in exchange for receiving severance benefits to which they would not otherwise be entitled.
The law requires that a non-compete be narrowly tailored to serve the legitimate interest of an employer, typically to prevent a former employee from using the company’s confidential information acquired during the course of his or her employment. Furthermore, to be enforceable, the restriction must be reasonable in length of time and geographical scope.
In other words, non-competes should be used to prevent unfair competition, but not to prevent a former employee from earning a livelihood. The reality, however, is that many non-competes are overly broad, ambiguous, and/or too clumsily drafted to be enforceable. Thus, courts carefully scrutinize non-compete language.
For this reason, the executive or professional should consult counsel before signing a non-compete or before starting a new job or venture that might violate the terms of an already executed non-compete. GardnerFrankhouser has the experience and expertise to advise the executive or professional on the enforceability of a non-compete and/or to defend a departed employee who is the target of a meritless action to enforce an overly restrictive non-compete.
Non-solicitation provisions prohibit former employees from soliciting employees of their old company to work in a new company or venture. Employers often ask employees to sign non-solicitation provisions without also asking them to execute a non-compete.
Disputes arising out of non-solicitation provisions frequently involve situations where it is unclear whether the employee of the former employer was solicited, or, alternatively, left to join the new company or venture without any urging whatsoever from the former employee who is subject to the non-solicitation restriction. There is a difference between a no-hire agreement, which prohibits employment in the new company or venture whether or not there was solicitation, and a non-solicitation provision, which requires evidence of an attempt to recruit a former employee.
If you are subject to a non-solicitation restriction and your new employer wants to hire an employee from your old company, we can help you take the right steps to prove that no solicitation took place. Getting the right legal advice might spare you the trouble and expense of unnecessary litigation. If litigation is unavoidable, we have the experience and expertise to defend you from a meritless claim that you have violated the terms of your non-solicitation agreement.