Is a Five-Year Non-Compete Agreement Enforceable in Maryland?
The Law Firm of J.W. Stafford | December 11, 2017
Non-compete agreements have become an increasingly popular way for employers to maintain control over their former employees. Also known as “restrictive covenants,” non-compete agreements limit a former employee’s ability to work for another employer in the same industry or geographic area. Obviously, such agreements tend to heavily favor the employer, and consequently, Maryland courts will only enforce restrictive covenants if they are reasonable and do not impose an “undue hardship” on the former employee.
Federal Judge Rules Non-Compete Agreement Would Impose “Undue Hardship” on Former Employee
A Maryland federal judge recently refused to enforce a non-compete agreement precisely because it would impose an undue hardship on the defendant, a former employee of the plaintiff. The defendant previously worked as an engineer for the plaintiff and temporarily served as its leader during the CEO’s temporary absence.
After the defendant’s employment ended, the plaintiff sued to enforce a purported non-compete agreement. The plaintiff did not produce the actual contract for the court but rather offered a “summary,” which the defendant did not dispute. According to this summary, the defendant agreed not to “[p]rovide or engage in any way business of a similar nature…to the business of the Plaintiff” or to “[d]irectly or indirectly engage in any similar business” with the plaintiff’s past, present, and future clients for a period of five years after leaving the company.
The defendant argued this non-compete agreement was too broad and unenforceable under Maryland law. The judge agreed. As the court explained in an order dismissing the employer’s complaint, this particular non-compete agreement was not “narrowly tailored to protect customer goodwill that the employee cultivated during his employment,” which is a legitimate business interest, but rather to simply “prevent the employee from working for the employer’s competitors,” which is not. Of note, the ban on working for “future clients” is not qualified and could conceivably apply to anyone who might seek the plaintiff’s services.
In addition, the judge found the duration and scope of the non-compete agreement were inconsistent with Maryland law. Indeed, the judge said there is no record of any Maryland court ever upholding a five-year non-compete agreement, and the plaintiff here failed to “explain why five years were reasonable or necessary in its industry.” Similarly, the absence of any geographic limitation on the non-compete agreement was “not reasonable.”
Ultimately, the judge said the non-compete agreement, or at least the summary provided to the court, would give the plaintiff “total control” over the defendant’s “ability to make a living in any field even similar to what he did” for the plaintiff. That would create an “undue hardship,” and thus the non-compete agreement “violates public policy” in the State of Maryland.
Need Advice on a Maryland Non-Compete Agreement? We Can Help.
The case above should not be construed to mean that all non-compete agreements are unenforceable in Maryland. A narrowly tailored non-compete agreement that is limited in scope and duration may be upheld by a judge. For this reason, if you have signed a restrictive covenant–or have been asked to sign one–you should speak with a qualified Baltimore non-compete attorney who can advise you of your rights. Call The Law Firm of J.W. Stafford, L.L.C., at 410-514-6099 or contact us online if you need advice on how to deal with a non-compete agreement that affects your ability to earn a living.
(image courtesy of Samson Duborg Rankin)