War Stories: My Favorite!

I promised war stories!  Friday seems like a good time to share these and I thought I'd begin with my favorite one.  I like this one for a lot of reasons, but the primary reason is because it's a great example of why "one size fits all" non-compete agreements don't work.

 

My client was working as a sales manager for a medical supply distribution company until she could no longer stand her boss's bad behavior.  After she resigned, she joined a new company that also distributed medical supplies.  But my client's role with the new company was distinct from what she did for her prior employer: she would service different clients in a different geographic location.   

 

My client's previous employer sued her for breaching the non-competition provision in her employment agreement.  The agreement provided that for two years after her employment ended, she would not "directly or indirectly ... accept employment with ... any business that is competitive with" her previous employer. 

 

At first blush, this may seem like an open-and-shut case.  Two medical supply distribution companies obviously are "competitive" with each other, right?  Wrong.  

 

The law authorizes non-competition agreements only to the extent they protect a prior employer's legitimate business interests.  Simply preventing competition is not a legitimate business interest.  Rather, the agreement must protect the prior employer from a departing employee  gaining an unfair competitive advantage at her new place of employment.

 

The problem with the agreement in this case is that it simply prohibited competition, without regard for the type of work my client would be performing at her new job or the types and locations of the customers she would be serving.  The trial court agreed with my argument that such agreements are unenforceable and invalidated the non-competition provision in my client's employment agreement.

 

This was a big win for me.  It occurred during my sixth year out of law school and I was opposing a lawyer who had been in practice since before I was born.  I'd like to think this lawyer learned two valuable lessons from the  case.  The first is to NEVER, EVER call a younger, female attorney "young lady."  (Yeah, he did that.  And yeah, I reacted poorly.  But I digress.)

 

The second, more important lesson is that  form non-compete agreements, which this one clearly was, have little chance of being enforced.  Non-competition agreements need to be specifically tailored to an employer's business, as well as to the work being performed by the employee.  Non-competition provisions should focus on restricting a departing employee as it relates to a particular product, service or customer.      

 

And I think my client learned something valuable too: retaining a lawyer who is a specialist in this area saves big bucks.  The nine-month case cost my client $20,000 and she walked away without any restrictions and without paying her former employer a dime.  My client's former employer spent $80,000 on its lawyer and walked away a loser.

 

Liza Favaro

Non-Compete Counsel   

* Disclaimer: The ideas and opinions shared on this site are my own and are not attributable to my employer.  No amount of interaction on this site will create an attorney-client relationship.  If you have a legal question and you ask it here, I will also answer it here (if I can), but such answers do not guarantee results and do not create an attorney-client relationship.  If you wish to contact me directly, you may do so at efavaro@gmhlaw.com.