Non-Compete Agreement FAQ
The Law Firm of J.W. Stafford | March 6, 2018
All too often, prospective clients come to us after having signed a non-compete agreement with their current employer that has absolutely no protection for them if they decide to leave. To the uninitiated, this may be shocking that really talented individuals would sign these extremely lopsided agreements without ever negotiating or demanding that their current employer put in place some protections for them if they decided to leave or were terminated. But as employment lawyers, we know the games that many employers play with these agreements. Indeed, some unscrupulous employers will play on the desperation of individuals for employment or dangle a small bonus in front employees to convince them to sign these lopsided agreements.
And yes, these non-compete agreements are some of the most lopsided agreements you will ever sign. For example, we see non-compete agreements where an employee making less than $50,000 a year has agreed to pay the attorneys’ fees for a multi-million dollar employer if the employer decides to enforce the non-compete agreement. We also see non-compete agreements that are overly broad in scope, which makes it extremely difficult to determine which new employment opportunity would be outside of the non-compete agreement. To say that these employees have buyer’s remorse is an understatement.
You may very well be one of these employees who is looking to leave their current employer for one reason or another but is subject to a non-compete agreement. If so, here are some questions that we are often asked about navigating these tricky waters:
Question: I’ve been approached by other companies to join their team, but I’m not sure how my non-compete agreement will impact whether they will extend me an offer of employment?
Answer: In today’s workforce, companies should routinely be asking any prospective new hires whether they are subject to a non-compete agreement. If your prospective new employer has not asked you about whether you are subject to an existing non-compete agreement, you should inform them of this before accepting their offer. Inevitably, they will ask their legal counsel to review the non-compete agreement. At the same time (if not before), however, you should be consulting with your own legal counsel to get guidance about the existing non-compete agreement.
Question: I was not a high-level employee so my former employer is not likely to enforce the non-compete agreement, right?
Answer: The answer is, “maybe.” Oftentimes, employers are more focused on your new employer and whether that new employer is attempting to take business away from them than on you. Unfortunately, however, you are often in the middle of a fight that has very little to do with you. If your new employer is a major competitor with your former employer, it is likely that the former employer will want to send a message to your new employer through initiating litigation regarding the non-compete agreement. Essentially, your former employer likely would want to make it clear that they won’t tolerate unrestrained poaching of talent from their company. Another thing that may cause your former employer to be motivated to enforce their non-compete agreement is if they see their current clients moving to your new employer. That certainly will motivate your former employer to take legal action, which can be extremely costly and time-consuming for you.
Question: My new employer told me that their legal counsel does not believe the non-compete agreement is enforceable and that I have nothing to worry about. That means I have nothing to worry about, right?
Answer: Absolutely not. Unless your new employer has agreed, in writing, to indemnify, defend and hold you harmless, you have a lot to be worried about. We preach religiously to prospective clients that their new employer is somewhat conflicted with them as it relates to their pre-existing non-compete agreement. For example, if your former employer sues to enforce the non-compete agreement, they are unlikely simply to sue just you, the individual employee. Instead, they are likely to sue both you and your new employer. Once that happens, your new employer is likely to do everything possible to paint you as someone who never informed them of your non-compete agreement, a rogue actor who (of course, without their knowledge) was taking clients from your former employer, etc… Your new employer is likely to take this position because it protects them from liability. Knowing this, why would you rely solely on their “legal guidance” and not consult with your own attorney? We don’t know either. Get your own lawyer.
Question: I just received a cease and desist letter. What should I do?
Answer: The cease and desist letter from your former employer is the “shot across the bow” that should get your attention. If your former employer has sent you a cease and desist letter, the first thing you need to do is consult with legal counsel (self-serving, I know). However, this is a critical point in time for you. If legal counsel is engaged soon enough, a line of communication may be opened up between you and your former employer that can avoid the next step in the process: full-blown litigation.
We have tons of information on our website about non-compete agreements in Maryland, so use it. We counsel prospective clients on these issues all of the time and look forward to helping you. Feel free to give us a call at 410-514-6099 or contact us via our website so that we can schedule a time to meet with you confidentially.