Non-Compete Agreements
Posted: 22 September 2008 02:09 PM   [ Ignore ]
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Is anyone using non-compete agreements for employees separate from service?

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Posted: 22 September 2008 02:11 PM   [ Ignore ]   [ # 1 ]
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Sorry…not sure I understand the question.

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Patrick Della Valle
Employment Law Information Network
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Chinchilla, PA 18411

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Posted: 22 September 2008 02:14 PM   [ Ignore ]   [ # 2 ]
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We have a sales person who will be leaving us and as consideriation of a more generous severance package we want to create a non-compete agreement.

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Posted: 22 September 2008 02:25 PM   [ Ignore ]   [ # 3 ]
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Sounds odd to me.  If she’s leaving to join a competitor, then she wont sign it.  If she’s not going to work for a competitor, then you’re wasting your money (unless she plans on quitting within a few months).  I guess she could be leaving without having another job.  The non-compete could help protect you, but if she doesn’t have a job before she leaves, how much damage could she do?

As always, keep in mind that this issue is governed by state law, so you might not be allowed to enter into a non-compete in this situation.

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Patrick Della Valle
Employment Law Information Network
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Chinchilla, PA 18411

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Posted: 23 September 2008 04:24 PM   [ Ignore ]   [ # 4 ]
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I have dealt with this issue on both sides—both as the former employer and as the employer seeking to hire somebody who is subject to a non-compete. Usually it’s sales types (high level) or media/entertainment types.  In a downsizing or other situation where you are offereing an enhanced separation package, but you don’t want the person going off to work for a competitor, it can be done, but beware state laws that make the non-compete unenforceable (California).  Best way to do it is to structure the benefits so that the employee continues to receive either cash or other benefits throughout the period of the non-compete agreement. If the employee breaches the agreement, then you cut off the payments/benefits. Once you have paid the cash, it’s hard to get it back based on a breach of a non-compete agreement.  The litigation is a pain, and there are usually good defenses.

When structuring the non-compete, make sure it is as narrowly limited both in duration and geography as possible in order to seek enforcement. Make sure that the contract recites that the harm to the departing company will be irreparable and impossible to reduce to money damages and that both sides acknowledge that a court can issue an injunction to block a breach.  Also good idea to include liquidated damages amount, which gives you a number to claim as your damages in the even of breach even in addition to injunctive relief.  And remember to include a provision that the former employee will pay your attorneys fees in the event that you successfully obtain relief for his/her breach of the agreement. All this will serve as a deterrent to breach, even if the agreement itself is not technically enforceable.

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Posted: 23 September 2008 04:30 PM   [ Ignore ]   [ # 5 ]
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Thanks a bunch.  Exactly what I needed.  You are correct in that it is a sales position.

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