Thursday, January 9, 2014

The Right Side of the "V": Why I'd Rather Bust Non-Competes

On which side of the “v” do you prefer to sit?  For business and employment litigators, we usually don’t have a preference.  By the time the parties decide to litigate, everyone has a complaint and a party’s designation as “plaintiff” or “defendant” is really just a question of timing: he who gets to the courthouse first is the plaintiff.
 But when it comes to non-compete cases, I am decidedly more comfortable on the right side of the “v.”  Call me lazy, but I find defending former employees and their new employers to be a far easier task than representing the party seeking enforcement of a non-competition agreement.  Here’s why:

Most Non-Competes Are Sloppily Written. 
Sloppily?  Yes, that’s the word I choose to use in this instance because, quite frankly, there is no other way to describe it.  So often non-competes are borne of bad cut-and-paste jobs from the internet.  As I explained in this post, this is a very, very bad idea. 
Non-competes should be narrowly tailored or they are invalidated.  A sloppy non-compete will contain a three-year duration, when one year will suffice.  A sloppy non-compete might include a world-wide geographic restriction even when a ten-mile radius will do just fine.  A sloppy non-compete can literally prohibit a former employee from making a living.  Good luck enforcing that. 
Sloppiness can go the other way, too.  Consider this scenario: a home healthcare agency’s non-compete provision prohibits contact with patients, but not referral sources.  This makes zero sense.  Home health care agencies operate off of referrals.  It seems unfair for a former employee to contact a referral source on behalf of a new employer and suggest patients be referred to the new employer, doesn't it?  But without a contractual prohibition against contacting referral sources of the former employer's, the plaintiff’s case becomes far more difficult.  After all, non-compete agreements must be express agreements.  And I have yet to see a common-law unfair competition claim stick. 

Most Employees Are Not That Important. 
Employees - particularly mid-level employees - are fungible.  Unless a former employee is the lifeblood of a business (a key salesperson with personal relationships with your biggest customers or the inventor of your product), chances are that the employer seeking enforcement of a non-compete is not really trying to protect a business interest, but is instead trying to send the former employee (and current ones too) the “don’t mess with me” message. 

I once represented one such employer.  The defendant-former employee sold heavy manufacturing equipment on my client's behalf and left to go work for a manufacturer of similar (but not identical) equipment.  The customers the former employee serviced in his new gig were different from those he serviced with my client, but my client insisted on suing him anyway.  My client wanted to send a message to employees that violating employment agreements is not without consequences. 

The judge's denial of my motion for a preliminary injunction was not surprising, but his reasoning was: he simply could not see how a lowly salesman who wasn’t using his customer contacts from his previous employer could possibly pose such a threat that he had to be put out of work.  Seriously.  In the judge’s mind, the former employee wasn’t important enough for my client to worry about (and, truth be told, the judge was right).  I’ve since used this argument several times and it has worked remarkably well, given the right set of facts.  Remember, a non-compete must protect a legitimate business interest.  It can’t just prevent competition.   

The Economy Sucks (Still). 

I know many of us don't view judges as human, but I promise you they are.  And because they are human, I have seen many of them bend over backwards not to put someone out of work.  Michigan – where I practice – has the third highest unemployment rate in the United States.  And it just became a right-to-work state.  These two forces have created a perfect storm for employers – as long as their departing employees haven’t done anything inherently bad (read: steal confidential information), it’s likely that a judge will find some way of enabling that employee to keep working, even if it’s for a perceived “competitor.”
So Where Does This Leave Us?
I want to make myself perfectly clear: a well-crafted, narrowly tailored non-compete agreement can and should be enforced.  But the facts have to line up just right for this to happen.  My War Stories posts set up a nice contrast in this regard.  But rare is the occasion that a client proactively puts a solid non-compete agreement in place.  Such measures are the key to a successful suit to enforce a non-compete, are they not? 
What is your preference: employer or employee?  Which side of the “v” are you on?
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




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