Tuesday, July 15, 2014
Well, this – the issue of enforceability - is true in states in the U.S. where state laws permit Covenants-Not-To-Compete (CNTC.)
Time for a bit of "Legal 101" from "Reprographics 101"…..
During my reprographics career, I agreed to (i.e., accepted and signed) two CNTC’s; the first, when we sold Rowley-Scher Reprographics in 1988; the second, when we sold National Graphic Imaging (NGI) in December 2007. Both of those CNTC’s provided for 5-year time periods. And, I fully honored both. Why? Well, because I agreed to! It’s as simple as that! If you agree to something, then why in the world would you not want to live up to what you agreed to?
This past weekend, while I was doing some Google-Search research – completely unrelated to the issue of CNTC’s – I came across a Court decision that prevented an employee, who had recently resigned from employment with one of the country’s oldest reprographics companies, from going to work for a competitor. After I read the court’s decision – which granted an injunction in favor of the employer – I found a ‘case summary’ document – about this lawsuit – on the web-site of a law firm that deals with employment/labor law.
Here’s the beginning of the ‘case summary’ article I found:
EMPLOYER-EMPLOYEE; NON-COMPETITION — To receive judicial protection under the non-competition provision of an employment agreement, the information that an ex-employer seeks to be protected to enforcement of the agreement does not have to rise to the level of the useful trade secret and could even be publicly available if the information is highly specialized, current, not generally known in the industry, and created and stimulated by the environment furnished by the ex-employer.
An employee with an employment contract resigned to join a competing company. The contract had a non-competition clause for the purpose of protecting the ex-employer’s confidential and proprietary information. The ex-employer sued both the departing employee and the competing company. It claimed that the employee, as one of its top executives, had received “unfettered access” to its business strategies and goals, and would violate the non-competition clause if he worked for a competitor. It sought to enjoin the executive from being employed by the competing company.
Should you care to read it, here’s a link that will take you to the complete ‘case summary’ article:
A well-constructed CNTC agreement is necessary for employers who may later need to exert their rights. In this particular case, that was done. That’s not always the case. Attorneys who specialize in labor/employment law are the ones to go to for this type of agreement. If you have a poorly constructed CNTC agreement, it probably won’t hold up in court.
If you are an employee and are asked to agree to and sign a CNTC agreement, don’t sign it until you’ve read it. If you don’t understand it, seek legal advice. Once you do sign it, be prepared to honor it, completely. Just a heads up, but, if you sign a CNTC agreement and, later on, don’t live up to the terms and conditions of the agreement, it could cost you thousands of dollars in legal fees/expenses.
For those of you who like to read legal documents (there’s always lessons to be learned by doing this), here’s a complete copy of the decision the court rendered in this case:
Posted by Joel Salus at 8:16 AM